On Feb. 28, 2009, following a wave of tainted food scandals that rocked public confidence, the Standing Committee of China's National People's Congress enacted a Food Safety Law (the “Food Law”). The Food Law creates nationwide standards for everything from nutritional specifications for baby food to pesticide usage. Effective June 1, the Food Law is a result of years of drafting and revision.
This advisory highlights key points of the Food Law and emphasizes new obligations for businesses. Hallmarks include a requirement for detailed record keeping in each step of the food production and distribution process as well as an expansive joint liability structure.
China's State Council is reportedly drafting implementation rules for the Food Law in order to set out further details. We expect that the implementing rules will be promulgated and go into effect when the Food Law becomes effective.
The Food Law, which requires safety supervision of food, food-related products and food additives, covers the following industries and processes:
- Food manufacturers and processors (collectively, “Food Manufacturers”), food distributors and caterers (collectively, “Food-Business Operators”)
- Manufacturing and processing of food additives
- Manufacturing and processing of (i) packaging materials, containers, detergent and disinfectant used with food; and (ii) tools and equipment used in production and processing of food (collectively, “Food-Related Products”)
- Food Manufacturers' and Food-Business Operators' usage of food additives and Food-Related Products
Establishment of a state-level food safety commission
Under the Food Law, China's State Council will establish a national food safety commission that will coordinate and oversee the new food supervision apparatus. This apparatus includes the following ministries and agencies:
The Ministry of Health (MOH). MOH is charged with implementing the Food Law. It will primarily administer food safety monitoring and investigation of violations. MOH will also be responsible for coordinating departmental efforts and promoting local health authority reform.
The Ministry of Industry and Information Technology (MIIT). MIIT is charged with creating a credit record system among Food Manufacturers and strengthening self-discipline in the food industry.
The Ministry of Agriculture (MOA). MOA is charged with taking measures to secure the quality and safety of farm products at the source and promoting standardized agricultural production.
The State Administration for Industry and Commerce (SAIC). SAIC is charged with inspecting retail and wholesale markets and establishing a long-term supervision system for food distribution.
The General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) and the State Food and Drug Administration (SFDA). GASQSIQ and SFDA are jointly charged with managing producer access to the market.
SFDA is further charged with conducting restaurant sanitation inspection.
The Food Law also calls for quality safety standards of edible primary agriculture products (“Edible Agriculture Products”) and the publication of relevant safety information for Edible Agriculture Products.
New food safety standard
The Food Law requires formulation of a national food standard (the “Standard”), which is to be made publicly available. The Standard is to include: (i) limitations on hazardous ingredients such as invasive organisms, pesticide residue, veterinary drug residue, heavy metals and pollutants; (ii) prescription for type and dosage of food additives; (iii) nutritional specifications for baby food and food for other special groups; (iv) labeling and instruction requirements in connection with food safety and nutrition; (v) hygiene requirements for food production and distribution; (vi) quality requirements relating to food safety; (vii) food inspection methods and procedure; and (viii) other necessary information.
The Standard will be formulated and published by MOH and should pass review and examination by an examination committee of the national food safety standard, which is to be composed of experts in medicine, agriculture, food and nutrition as well representatives from various departments of the State Council.
Under the Food Law, Food Manufacturers, Food-Business Operators and food importers face new obligations of quality inspection and record keeping as stipulated below. All records mentioned are to be maintained for at least two years.
Food Manufacturers must, when purchasing raw food materials, food additives, Food-Related Products and Edible Agricultural Products, inspect the seller's relevant permit and inspection certificate of product quality. They are to maintain records of purchase details and inspection results including product name, specification, quality, purchase date, and the seller's name and contact information. Food Manufacturers cannot purchase or use substandard raw ingredients, food additives, or Food-Related Products. They are required to effect and record final inspection when food products exit the factory. Such final inspection records are to include a food's: (i) name; (ii) specification; (iii) quality; (iv) production date; (v) production batch number; (vi) inspection certificate number of product quality; (vii) sale date; and (viii) buyer's name and contact information.
Food-Business Operators must inspect a seller's permit and certification documents evidencing a food's compliance with safety standards. They are to maintain records of purchase details and inspection results including a product's: (i) name; (ii) specification; (iii) quality; (iv) production batch number; (v) shelf life; (vi) purchase date; and (vii) seller's name and contact information .
Finally, food importers need to maintain record of the import and sale of food, including the food's: (i) name; (ii) specification; (iii) quality; (iv) production date; (v) production or importation batch number; (vi) shelf life; (vii) delivery date; and (viii) exporter's and purchaser's name and contact information.
Previously, Food Manufacturers and Food-Business Operators needed only a food production permit issued by GAQSIQ and a food hygiene permit issued by MOH. The Food Law revamps China's food safety permitting system by requiring Food Manufacturers and Food-Business Operators to obtain, when necessary: (i) a food production permit; (ii) a food distribution permit; and (iii) a catering service permit, to be administered by GAQSIQ, SAIC and SFDA, respectively.
The Food Law codifies a food recall system, which was previously regulated under administrative rules. Food products proven to be substandard are subject to: (i) cessation of production; (ii) market recall; (iii) notification of Food-Business Operators and consumers; (iv) record keeping of the recall; and (v) report to the county-level (or above) quality supervision authority.
If a Food Manufacturer or Food-Business Operator fails to effect a recall accordingly, the county-level (or above) quality supervision authority, the Administration of Industry and Commerce (AIC), or SFDA can order a recall or suspend the violator's business. If the violator fails to recall the food or fails to suspend business after a government authority's official order, the substandard food products, the income earned therefrom, and any tools, equipment and raw materials used therein will be forfeited. If the value of the substandard food products is less than ¥10,000, the violator can be fined up to ¥50,000; if the product value is more than ¥10,000, the violator can be fined at five to 10 times the value. Relevant food permits can be revoked in serious cases.
Joint and several liability
Under the Food Law, an expansive liability structure will be implemented. Food-related businesses need to take measures to prevent food safety accidents. For instance, organizers of food markets, lessors of counter space and exhibition organizers should inspect Food-Business Operators' permits, clarify food supervision responsibilities of Food-Business Operators participating in the market, and periodically inspect the premises and conditions of Food-Business Operators.
In the case of a violation, they should report immediately to the county-level AIC or SFDA. Where a food market organizer, counter space lessor or exhibition organizer fails to perform any of the above obligations, they may be held jointly and severally liable for any food safety incident in their market. Further, any social group, organization or individual that promotes a food product in misleading advertising that causes harm to consumers may be held jointly and severally liable with the Food Manufacturer and Food-Business Operator. The Food Law's expansion of liability to include individuals is likely a result of the recent dairy product scandal in which famous Chinese actors and actresses were blamed for appearing in advertisements of products that were later found to be hazardous.
Punitive damages and priority of civil liability
The Food Law provides that if a Food Manufacturer produces, or a seller knowingly sells, substandard food, consumers can claim for punitive damages equaling 10 times the original product price, in addition to normal compensation (ordered by a court) for losses caused to the consumer. If the violator's property is insufficient to simultaneously cover civil liabilities and administrative or criminal fines, the civil liabilities will take priority.
The Food Law also abolishes any exemption for inspection. In the past, some food industry giants were able to obtain inspection exemptions. Unfortunately, some of the exempted companies have been involved in safety scandals.
Food products claimed to have specific health benefits are subject to stricter supervision. Such products may not cause chronic health hazards. Labels and instructions cannot claim a product's function to be prevention or treatment of disease. Further, labels and instructions must contain an ingredients listing and information prescribing who should and who should not consume a product. Also, misleading advertising of food products is banned, and advertisements cannot claim that a product may prevent or treat disease.
Only authorized products that have been proven safe and industrially necessary in food production are allowed to be listed as food additives. Unauthorized additives which may be hazardous are prohibited.
China's Food Safety Law appears to be as much a consequence of recent food safety scares as it is the result of protracted consideration and drafting. On top of the establishment of a national food safety commission and a forthcoming safety standard, manufacturers and distributors will be subject to increased penalties if they produce substandard food. Even celebrities who endorse a product may be held jointly liable. Businesses will be required to maintain detailed inspection and purchase records and to obtain particular permits.