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This exact package of cereal was sold this week on the shelf of an import-food supermarket in Shanghai: patched everywhere with white stickers, to cover claims and advertisements, which are not compliant with PRC law.
In this case we have an imported product from the US. The packaging used is the same for the US domestic market, and therefore it bears claims in English that we assume compliant with US regulation. However, some of those are not – or may not be – compliant with PRC law.
- Claim “WITH WHOLEGRAIN FIRST INGREDIENT”. Under PRC GB 7718-2011, if a label stresses the main presence of one ingredient, it must specify its percentage (not the case here);
- Claim “CAN HELP LOWER CHOLESTEROL”. This functional claim is allowed under GB 16740-97 only for health food, which however shall undergo specific approval and certification from CFDA (not the case here);
- Nutrition label compliant with US standards. Those are very different – as for lay-out and content – from those required under PRC GB 28050-2011.
Administration for Industry and Commerce is responsible to inspect food products labeling, and even if they normally focus on Chinese labels, they may also question labels which are written in a foreign language if they deem that these can be understood by Chinese customers.
Whenever AIC deems a food product non-compliant with PRC regulation, it can apply sanctions, normally relying on PRC Advertising Law: in this case the sanction is up to 5 times the cost of the packaging of the non-compliant food product, per every non-compliant product found in that same retail store. The good thing is that such sanction cannot be repeated in other stores. The bad thing is that AIC also order rectification of the non- compliant product, which means that either each product should be recalled, or non- compliant claims shall be erased (normally with a marker).
In the – less frequent – cases in which a non-compliant labeling is deemed breaching Anti Unfair Competition Law, the sanction is up to 200,000 RMB. This is one payment and not calculated per package, however can be repeated in every store in every city in China. The consequences from this can be devastating…
Not to mention that under Food Safety Law, consumers can receive punitive damages up to 10 times the price they spent for non-compliant food products. More and more, so-called professional consumers target mislabeled food products, and buy those in massive quantities to claim for very high punitive damages. Supreme Court recently issued an interpretation supporting the consumer’s claim even if they willingly buy mislabeled product (bad-faith purchase).
Coming back to our case above, we believe that here the importer or the retailer voluntarily covered those claims to avoid incurring any sanctions. However, the way they implemented this (gluing white stickers to hide the claim) may not be 100% safe: what if a so-called professional consumer peels the sticker off, and reports the mislabeling?
Not to mention the loss of appeal: a patched product is most certainly less “sexy” for a consumer. If this was a parallel-imported product (we do not know in this case), based on (few) precedents there might be grounds for requesting a court to stop the parallel-importer, as the non-compliance with PRC standards of this specific product may damage the brand’s reputation.
In any case, food companies who are targeting a big market share in China should start thinking about having their packaging tailor made for China.