China: New Regulatory Requirements for Imported Food Products

In brief

On 12 April 2021, the General Administration of Customs of China (“GACC“) issued Order No. 248, which sets out new requirements for the registration of qualified foreign food producers that are allowed to export food products to China, effective from 1 January 2022. This Order represents a significant move toward tightening up the regulation of foreign made food products imported into China.

The key changes

The key changes as applicable to foreign food producers under the Order include the following:

1. Notably, Order No. 248  expands the scope of food products subject to registration requirement from limited categories of food products (e.g., meat, dairy, aquatic, etc.) previously defined by a government-issued catalogue to all foreign made food products.
2. The registration procedures under the new scheme bifurcate between (i) the 18 types of food products of which the foreign producers can only register through recommendation of the GACC’s counterpart in the country of export (“the 18-type category”), and (ii) those of which the foreign producers can directly register with GACC by making an online submission (“all others category”).
3. The Order imposes a new labelling requirement for all food products imported into China to include the registration number on the label of the inner and outer packaging of the food products, which China Customs would examine and verify at the border prior to granting customs clearance. Depending on the relevant category of food, the foreign parties involved in the supply chain required to be registered and identified on the label may include those conducting farming, manufacturing, storage and/or transportation outside of China.

Comments

As the date of coming into force of the Order is fast approaching, one of the key challenges faced by foreign food producers is in ensuring that the registration process can be completed in a timely manner so that they have sufficient time to take transitional actions such as reprinting of product labels with the relevant registration number under the new scheme.

In this regard, we observe that certain corresponding authorities of China’s trading partners in the food industry have already completed the first round of application collection from its local food producers of the 18-type category. However, it remains unclear, whether the necessary negotiations between the GACC and its respective foreign counterparts are completed. Such negotiations are critical, especially for the 18-type category of food, for which the required producer registrations cannot be obtained without a bilateral protocol between the in-charge authorities to facilitate document exchange and alignment on the critical criteria for food safety. The delay in the completion of such negotiation process may require the GACC to designate a “grace period” for the smooth transition to the new regulatory scheme. It is worth noting that although a number of China’s trading partners have requested and urged China to delay the implementation of the Order to allow for sufficient transitional time to comply with the Order with a view to avoiding supply chain disruption for businesses, at the time of writing, there has been no suggestion that a delayed implementation or grace period will be granted.

With the new scheme slated to become effective on 1 January 2022, we highlight below a number of areas that may warrant attention and specific consideration as businesses make necessary adjustments to comply with the Order:

1. The term “food products” for the purpose of Order is not clearly defined, although it expressly excludes food additives. It is likely that GACC will interpret the term broadly to cover, primary agriculture products and alcoholic and non-alcoholic beverages, in addition to health food, infant formula and dairy, which are expressly referred to as the 18-type category of food. Such interpretation will impact the immediate actions required from foreign suppliers of the relevant products to ensure the sustainability of their supply chain after 1 January 2022. In this respect, further scope clarification and discussion with GACC may be necessary.
2. An increasingly large share of food imports into China are now made through the cross-border e-commerce (“CBEC”) regime, which waives most licensing and registration requirements for ordinary imports. Therefore, an important consideration with respect to the Order is whether the CBEC will continue to be a “safe harbour” against trade restrictive measures, especially those arising from the recent trade frictions involving China. It may be worth noting that CBEC’s status as a trade “safe harbour” has already been challenged recently, as China is now subjecting Australia wines imported through CBEC to anti-dumping and countervailing duties resulting from a trade remedies action decided in December 2020.
3. There are concerns that the Order may give rise to non-trade barriers for imported food products. In fact, a number of countries including Australia, Europe, United States, Canada, South Korea and Japan have raised concerns at a WTO SPS Committee meeting in July 2021, stating that the new registration requirements may be overly onerous in expanding the scope of control beyond high-risk food products to cover a greater scope of imported food products. Other concerns raised include unclear implementation processes and rules as well as the short timeline for the coming into effect of the Order. Given the wide implications arising from the implementation of the Order, it will be interesting to see whether the concerns raised by the WTO members can be adequately addressed by the Chinese government, or whether the new rules might face further challenges at the WTO level.
4. In view of the evolving trade relationships involving China, there are also concerns that the Order may become a tool in the toolbox employed by the Chinese government to address geopolitical or trade tension, as the broad provisions and lack of detailed implementation rules could potential allow room for the exercise of discretion in the practical implementation of the Order. On the other hand, it would be interesting to observe how the Chinese government will balance the overall compliance regime for foreign food producers with American food producers covered under the Phase One Deal between China and the United States which provides for higher transparency and certainty with respect to non-tariff trade barriers for U.S. origin food and agriculture products, including the registration of U.S. factories listed by U.S. Food and Drug Administration (FDA) in its list of qualified producers forwarded to GACC.
5. Last but not least, notwithstanding the controversy surrounding the justifiability of the new Order under the multilateral or bilateral trade frameworks, the Chinese government is obviously looking to expand its scope of supervision over food supply chains to include operations outside of China. As a result, insofar as the Chinese market is concerned, the compliance strategy for multinational food suppliers should also address the China law compliance risks and challenges involved in such pre-importation operations. Nonconformities in the products discovered at the import clearance or local distribution stage (e.g., nonconforming product labelling) may not only have legal implications for the Chinese importer and distributor, but also potentially impact the credential or registration status of the foreign parties involved in the supply chain. A more stringent and comprehensive compliance program would be necessary to ensure the sustainability of the overall supply chain.

To conclude, businesses involved in the export of food products to China should carefully consider the requirements of the Order and keep abreast of developments with respect of the same to ensure continuous compliance and non-disruption of its supply chain.

* * * * *

Frank Pan is a senior counsel and Tina Li is an associate of FenXun Partners who is a premier Chinese law firm. FenXun established a Joint Operation Office with Baker McKenzie in China as Baker McKenzie FenXun which was approved by the Shanghai Justice Bureau in 2015. 

Baker & McKenzie FenXun (FTZ) Joint Operation Office is a joint operation between Baker & McKenzie LLP, an Illinois limited liability partnership, and FenXun Partners, a Chinese law firm. The Joint Operation has been approved by the Shanghai Justice Bureau. In accordance with the common terminology used in professional service organisations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

This client alert has been prepared for clients and professional associates of Baker & McKenzie FenXun (FTZ) Joint Operation Office. Whilst every effort has been made to ensure accuracy, this client alert is not an exhaustive treatment of the area of law discussed and no responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this presentation is accepted by Baker & McKenzie FenXun (FTZ) Joint Operation Office.