China moves on food safety

01-08-2009
In the wake of the melamine scandal in the dairy industry and numerous other food-safety issues, China has implemented a Food Safety Law which was to go into effect on June 1.

The new law includes penalties for tainted products, cancellation of licences and the creation of a National Food Safety Commission to co-ordinate the work of five ministries that will retain day-to-day supervision over different phases of the food-production process. Difficulties in implementing the new law mean the old regulations are still applicable for the time being.

Reports about bad products from China have made headlines in the west but the issue is far more serious for people living in China, where a highly fragmented supply chain comprising hundreds of millions of farmers and 500,000 food-processing companies has operated with little oversight. Many of these processors struggle to make a profit, so economic survival takes precedence over food safety.

While the vast majority of food-safety issues are related to domestic producers, concern remains about whether food imports from other countries will be unfairly targeted as a form of protectionism. For countries like New Zealand, this is important. Food-related products contribute around 44% of total exports to China; in 2008 milk powder imports alone were around 46,000 tonnes.

Like many laws in China it sounds good on paper but there is considerable confusion about how it will be implemented. Steven Dickinson, a partner with Harris Moure law firm, who has been based in China since the 1980s, says: "As is typical in China, on first reading the law itself sounds quite modern. However, upon careful inspection you see that the law is very vague, lacking detail on both implementation and funding. It is more a wish list than a full-bodied law. They have taken a standards-based approach when the real issue is (lack of) enforcement of existing laws."

While the actual timing and implementation of the new law are still not clear, many food importers are optimistic it is a step in the right direction.

"There is a lot of uncertainty about how the new laws will be implemented and administered," says Craig Aldous, general manager of Elders Fine Foods in Shanghai.

"Established food importers should have the necessary relationships to cope with the new regulations but it would be tougher for a new importer to get up to speed with all the changes."

Philip Turner, general manager, Fonterra, China, believes it is a positive development for importers as well as the local food industry.

"Overall, it has generated more interest in and demand for high-quality ingredients and food products. This is positive for importers, like Fonterra, as well as local industries that are driving higher standards.

"We are also starting to see it play an important role in re-establishing consumer confidence in the dairy industry, which, in the long-run, will support greater consumption of dairy products in China."

Higher compliance costs may be one effect of the new regulations.

Duccio Alabiso, senior manager at Sinodis, an importer of food products from many countries including New Zealand, says: "The new food-safety law will probably slow down our operations and we will incur higher costs (which may result in higher retail prices for the end-consumer), but the direction is definitely the right one.

"Compliance will likely result in more checks and slower processing times at Chinese customs leading to higher handling costs, for example."

On the positive side he hopes it will weed out some operators who can't provide guarantees of traceability and good handling procedures as well as those ignoring fair-trade practices.

The Chinese news media has had a relatively free hand to report on issues such as food safety in recent years which has made people far more aware of the problems.

The new law may help to improve standards although real change is likely to come only with reform of the agricultural sector that gives farmers the chance to make a decent profit, and consolidation of the food-processing industry into larger players better able to provide quality products. Until then food-safety issues are likely to remain an ongoing problem.