China has issued detailed rules concerning online food safety. The rules, which implement China's recently-revised Food Safety Law, impose new obligations on both third-party online platform providers (“Online Platforms”) and food traders. While the increase in food safety standards will be welcomed, some operators will need to upgrade significantly to stay in business.

The new rules are set out in the Measures for the Investigation and Punishment of Illegal Acts concerning Online Food Safety (“Measures”), which will take effect on 1 October 2016. It remains to be seen how the Measures will be implemented by the China Food and Drug Administration (“CFDA”).

Background

Food safety has been an ongoing concern in China for many years. Progress was made with the 2009 Food Safety Law, but problems remained. In 2015, China revamped its Food Safety Law to strengthen its regulatory efforts. Among other changes, article 62 of the Food Safety Law obligated Online Platforms that trade food to (i) register the real contact information of its food traders, (ii) check the food operation licences of its food traders, and (iii) report illegal activities.

Draft regulations concerning online food sales were circulated for public comment in August 2015. The Measures represent the final form of the 2015 draft regulations. Compared with the 2015 draft regulations, the Measures focus more on the investigation and punishment of illegal online food trading activities.

Highlights:

New obligations of Online Platforms

The Measures introduce new obligations for Online Platforms that trade food:

  • Filing. Online Platforms and food manufacturers with their own online food-sale systems must file with the CFDA within 30 business days after obtaining approval to establish an online sales system.
  • Adequate technology. Online Platforms must maintain adequate technology, including data backup and restoration technology, to ensure the security of trading data.
  • Management systems. Online Platforms must establish various systems, including for (i) the registration of food traders, (ii) the self-inspection of food traders’ operations and information disclosure, (iii) the prevention and reporting of illegal activities, (iv) the termination of services for food traders who commit serious violations, and (v) customer food-safety complaints.
  • Licence inspections. Online Platforms must examine and register the relevant food operation licences of its registered food traders.
  • Archives. Online Platforms must establish archives for registered food traders to record their basic information and management team information.
  • Trading records. Online Platforms and food manufacturers with their own online sales system must retain trading records for at least 6 months after the warranty period for any product, or for at least two years if no warranty period is specified.

Online Platforms may face penalties for failure to comply. If failure to comply results in death or grievous bodily harm, or causes food safety accidents, the CFDA may order the Online Platforms to cease business and impose fines ranging from RMB5,000 to RMB30,000.

Obligations of food traders

The Measures clarify certain obligations of food traders under the Food Safety Law, and also set out some new obligations:

  • Licences. Online food traders must obtain food operation licences. However, licensed food manufacturers do not need an additional food operation licence to sell online. Licensed catering service providers do not need an additional food manufacturing licence to sell online foods processed by them.
  • Public disclosure. Online food traders must display on their webpages their business licence, and food manufacture or operation licence. Online catering service providers must also display their ratings under the “Quantitative Classification Management of Food Safety Supervision” system. Food traders who sell health foods, foods for special medical purposes, or infant milk powder, must also display their product-registration certificates. Food traders that hold an advertisement approval code must display the code with a link to the website of the CFDA.
  • Prohibitions. Food for special medicinal purposes, which includes certain full-nutritional formulas, may not be traded online.
  • Storage and logistics. Online food traders must provide proper storage and transportation in order to ensure food safety.

Prohibited acts

Prohibited activities of food traders include:

  • food information displayed online (such as ingredients, production location and warranty period) differs from that on the food label;
  • impliedly or expressly indicating health functions for non-health foods;
  • certificate information displayed online is different from that registered with the CFDA;
  • impliedly or expressly indicating that infant formula milk powder improves intelligence or immunity; and
  • failure to point out any special requirements for storage, transportation and consumption.

Investigatory powers and procedures

The CFDA may inspect online food sales, including by using inspectors to pose as customers to buy products from randomly selected online stores.

The Measures detail the sampling process. For each order for inspection, the CFDA must fill out sampling forms, record names, type, quantity, purchaser, payment information, user account, shipping address, contact information of its orders, and keep relevant tickets. The process of opening any parcel must be photographed or videotaped.

The CFDA must inform food traders and Online Platforms about the inspection results if the results fail food safety standards. The Online Platforms must stop the sale of unqualified foods if notified.

The CFDA may also employ other inspection methods, including onsite inspections, interviews, examination of trade records, and review of technical data.

Our Observations

This is the first time that China has directly regulated food trading via Online Platforms. The level of regulatory supervision imposed means that the compliance cost and regulatory risk of Online Platforms will increase. In particular, many Online Platforms will need to set up new computer systems, revise working procedures, and recruit additional inspectors, to meet the regulatory requirements. The alternative will be to face regulatory sanctions for noncompliance.

The new obligations for food traders mainly focus on procedural aspects and information disclosure. Some business models, however, may need to change significantly or close. For instance, online catering services that involve home-cooked food will no longer be able to operate as most home kitchens will not hold a food operation licence or be under the “Quantitative Classification Management of Food Safety Supervision” system.

Importers of foreign foods who sell the foods via Online Platforms will need to ensure that the foreign food products are complaint with the Measures. For instance, they may not sell food for special medical purposes, and they may need to provide additional information for public disclosure.