On March 16, 2010, the PRC Ministry of Health (“MOH”) issued two orders establishing standards and licensing requirements for food service businesses. Order number 70 Food Service License Management Guidelines (“Licensing Order”) and order number 71 Food Service Safety Supervision Guidelines (“Safety Order”) become effective on the first of May. The Licensing and Safety Orders are to serve as implementing regulations for The Administrative Licensing Law of the People’s Republic of China (“Administrative Licensing Law”) and The Food Safety Law of the People’s Republic of China (“Food Safety Law”), respectively.
The Licensing Order (No. 70)
The Licensing Order outlines the relevant departments, procedures, inspection processes, supervision, and penalties for failure to adhere to licensing requirements. The Licensing Order applies to entities engaged in catering services, including production, processing, and end-consumer sales of food products.
Businesses seeking a license to engage in the catering industry must apply to the food and drug supervision department of the MOH. The application is to provide details of the business plan— including (among others) food storage, processing, contamination prevention procedures, and staff food safety training. Upon submission, the MOH is to conduct an onsite verification and is to render a licensing decision within 20 days of the initial submission. Under certain undefined circumstances, the process can be extended for an additional 10 days. Licenses are nontransferable and are valid for three years from the date of issuance. Renewal, replacement, or modification of a catering service provider license will require submission of the original license, as well as documents explaining any changes to service.
Failure to disclose relevant information or providing false materials to the MOF will result in non-issuance of a license and a one-year ban on reapplication. Further, instances of fraud, bribery, and other improper practices may result in termination of a license, a one-year suspension, and potential criminal prosecution. In a case where these rules are violated, both the applicant business and the person primarily responsible for the business will receive one-year bans on operation.
The Safety Order (No. 71)
The Safety Order seeks to improve food safety by increasing “consumer self-protection” capabilities, strengthen self-discipline, disseminating food safety knowledge, and establish standards for the operation of food-related businesses. Generally, the Safety Order provides basic guidelines to ensure that businesses comply with the Food Safety Law.
While many of the guidelines appear routine, there are several areas of interest under the Safety Order. Food service providers are instructed to maintain a detailed record-keeping system for supplier purchases, storage, and distribution. The Safety Order also requires reporting for “food safety incidents” and provides guidance on the management of such events. Inspection is to include examination of relevant licensing documents, staff food safety knowledge and training, the cleanliness of facilities, water sanitation, product labeling implementation of procedures and business records. Post inspection, a food service provider is entitled to receive test results within 10 days. If a business fails an inspection, reexamination may be requested and is to be considered by a separate reviewing body within the local MOF inspection department. Licensing orders, inspection results, and other information is to be published by the MOF on a regular basis.
The Safety Order also outlines potential liabilities for failure to follow relevant Food Safety Law provisions. For instance, adulteration of food products, failure to maintain clean work environments, using food outside of its expiration date, utilizing animal or fish products where the animal or fish died of unknown causes, the use of uninspected meat and exceeding safe heavy-metal or other pollutant limits will require remediation and may carry substantial penalties. Businesses may face substantial fines, suspension of business licenses, and/or criminal liability in the most egregious cases. Actions taken to mitigate harm may be taken into consideration when punishment determinations are made. Finally, the Safety Order provides for an internal MOH appeals process for businesses subject to negative findings.
Following several high-profile food safety scandals, there has been substantial pressure on the government to respond. The Licensing and Safety Orders constitute one of many steps taken by the PRC government to improve consumer protection. For businesses operating in the Chinese food and beverage market, it is important to review existing operating procedures in the coming months to ensure compliance with these orders. As is often the case in China, initially the application of these orders may be slow and inconsistent; however, foreign-invested businesses are likely to be early targets in enforcement so early compliance is essential in managing potential licensing and liability issues.