china's growing (health) food industry: how can you enter ... · washington, d.c. brussels san...

www.khlaw.com

Washington, D.C. ● Brussels ● San Francisco ● Shanghai

Yin DAIAssociate

Keller and Heckman LLP, Shanghai

222 Yan'an Dong Rd., Suite 3604

Shanghai, China 200002

[email protected]

China's Growing (Health) Food Industry:

How can you enter the market and stay in it?

April 27, 2017

mailto:[email protected]

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Five Offices Worldwide

Washington DC office founded in 1962

Brussels office opened in 1992

San Francisco office opened in 2001

Shanghai office opened in 2004

Paris office opened in 2015

Serve clients in 26 countries

A Global Law Firm with Scientific Advantage

Indianapolis

Washington DC

ShanghaiSan Francisco

Brussels

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Virtually all of our practice in China (and Asia generally) is regulatory in nature

• Product status check under all of the Asian regulatory

schemes;

• Food additive petitions, food-contact notifications,

technical dossiers, and other regulatory clearance

(novel foods and substances used in packaging materials

and processing equipment);

• Genetically Modified Organisms (GMOs) and their

derived products (experimental release, marketing, and

labeling of );

• Food labeling and advertising

• Compliance issues (GMP requirements, product recalls,

and record keeping and traceability requirements);

• Monitoring legislation and policies and providing

strategic analysis

K&H Shanghai Office


Agenda

Part I- Doing Food Business

in China

Part II- Cross-Border E-

Commerce Trade Policies in

China

Part III- Chinese New

Management System for

Health Food

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Washington, DC ● Brussels ● San Francisco ● Shanghai ● Paris

Part I

Doing Food Business in China:

What does the business and regulatory landscape look like?


What are they in line for?


Cheese Topped Tea!


Frank’s Food Empire in Shanghai


Spotlight on Food Safety


Hierarchy of Laws and Regulations

Laws- Food Safety Law (FSL)- Quality and Safety Law of Agricultural Products- Advertising Law…

Administrative Notices

- Announcements of AQSIQ, CFDA, etc.

- Directions, response letters from NHFPC…

Regulations and Rules

- Implementing Regulation of FSL

- Management Measures

Standards

- National food safety standards

- Regional standards

- Industrial standards


Major Food Safety Government Organizations

State Council

NHFPC CFDA AQSIQ

• NHFPC: National Health and Family Planning Commission

• CFDA: China Food and Drug Administration

• AQSIQ: Administration of Quality Supervision, Inspection and

Quarantine


Amended Food Safety Law

On October 1, 2015, the revised Food Safety

Law (FSL) of China took effective Based on 2009 Food Safety Law

2nd Draft Implementing Regulation: October 19,

2016

The most stringent Food Safety Law ever

passed in China

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Part II

Cross-Border E-Commerce Trade

Policies

How is the government promoting e-commerce while protecting food

safety?


An Era of E-commerce


Different CBEC Models

Bonded Warehouse Model: products are shipped in

bulk from the foreign country to bonded warehouses or Free

Trade Zone (FTZ) in China from where the products will

subsequently be sent to an individual consumer in China.


Current CBEC Pilot Cities in China

New pilot cities

include

Chengdu,

Dalian, Qingdao,

Suzhou and

Hefei , making

15 pilot cities in

total.

*Image from HKTDC Research


Different CBEC Models

Direct Shipping Model: products are shipped upon

orders on the CBEC platform from the foreign country

directly to an individual consumer in China.

• Regulated as personal mailing items


Three Phases of CBEC Management

Risk-based management

Negative List+Positive List

New Supervision

Model?

Phase I Phase II Phase III


Phase I: Risk-based Management

On May 14, 2015, AQSIQ published an announcement

indicating that a risk-based quality control system would

be used for consumer goods purchased on cross-border E-

commerce platforms

• Low risk products Format review of required documents

• High risk products Verification test by an accredited third-party lab

“Notification” required for both CBEC operators (e.g., online

platforms, logistic and storage companies, etc.) and products

“Risk surveillance” and “quality traceability”


Implications in Practice

For a temporary period of time, many foreign

products can be sold to China via CBEC without

complying with all regulatory requirements and

procedures that are mandatory for products

imported via traditional trade channels (e.g.,

standard compliance, Chinese labeling, etc.)


Implications in Practice

Safety and hygienic requirements

in pertinent Chinese National

Standards would be relied upon

for monitoring purpose

Disjoined enforcement rules and

policies at the local level and

changes must be closely

monitored


Phase II- Negative List + Positive List

Positive List published in 2 batches,

including tariff codes and product

names of permitted CBEC products

encompassing almost 1,300

commodity categories.

Check and balance added in the 2016 reform


Phase II- Negative List + Positive List

A• Use Negative List to screen products that cannot

be traded via CBEC

B• Establish a Positive Listing System to clarify

products eligible for CBEC

C

• Customs Clearance Certificate (CCC) is a prerequisite to the clearance of CBEC goods traded in the “bonded warehouse model”


Phase II- Negative List+ Positive List

A grace period to has been granted to

products on the Positive List to mandate CCC

until December 31, 2017• CCC is NOT a prerequisite to the distribution of CBEC products in

“direct shipping model” during the grace period in 10 pilot cities.

No import permits, registration or notification is required for baby formula or special

food products (including health food and food for special medical purposes) imported

for the first-time until 12/31/2017.


Phase III- New CBEC Supervision Model

The Chinese Ministry of Commerce confirmed

on March 17th 2017 that a new CBEC

supervision model would be implemented

since January 1st, 2018, applying to 15 pilot

cities.

Recognition of the personal item nature of

CBEC products

! NOT recognized in any legislative or administrative

document

! NO further details have been disclosed

Implementation rules of the new model are

expected to become available later this year.

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Part III

Chinese New Management

System of Health Food

What are the opportunities and challenges to the health food industry?


How China defines “health food”?

“Health food” are foods which are claimed to have

certain specific health functions or can supplement

certain vitamins and/or minerals. In other words, the

foods are suitable for certain people to help them

improve body functions without the purpose of

therapy, and will bring no acute, sub-acute or

chronic harm to human body.


Food Safety Law & Health Food

Catalog Management

• Raw Materials (active ingredients

and auxiliary materials)

• Function Claims

* Independent procedures to

expand the above catalogs

Notification and Registration

• Domestic Health Food

• Imported Health Food

Labeling and Advertising


Health Food

Regulatory classification is completely claim oriented:

- If a “health claim” as defined is made, there is no alternative other than getting an administrative approval

- Currently, 27 claims are permitted, probably will be consolidated.

What if a claim does not appear on the label but appears online or in advertising, will it still be treated as a “health food?”


Notification vs. Registration

Others

Using unlisted ingredient

Using listed nutritional

substances (e.g., vitamins& minerals)

Using listed ingredient(s)

Domestic

Health

Food

Health

Food

Imported

1st Time

No

tificatio

n

Reg

istra

tion

Lo

ca

l FD

AC

FD

A

• Imported health food must be already sold in the exporting country

• Application for notification/registration must be filed by a local agent

CF

DA


Nutrient Supplements

The Catalogue of Health Food Ingredients (1st Batch)

lists vitamins and minerals that are allowed for use in

nutrient supplements.

Catalogue of Health Food Ingredients

Ingredient Name

Ingredient specifications

Dosage Forms with Use Levels

Standardized Language of Function Claims


Health Food Other Than Nutrient Supplements

Approvals are granted on a product by

product basis

For each health function claim, the petitioned product must be tested in accordance with precise protocols

for both safety and effectiveness

If a new health food ingredient is used, safety data on the ingredient

must be submitted

www.khlaw.com

Washington, D.C. ● Brussels ● San Francisco ● Shanghai

Yin DaiKeller and Heckman LLP

222 Yan’an Dong Rd.

Shanghai, China 200002

+86 (21) 6335-1000

[email protected]

Thank you!

mailto:[email protected]

china's growing (health) food industry: how can you enter ... · washington, d.c. brussels san...

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