On November 6, 2013, the Ministry of Food and Drug Safety (“MFDS”) issued a public notice of proposed amendments to the Enforcement Decree and Enforcement Rule under the Health Functional Foods Act (“HFFA”). The MFDS is open to receive public comments until December 16, 2013.

The proposed amendments include (i) phased implementation of mandatory tracking system for health functional food products; (ii) heightened regulation on false, exaggerated or slanderous advertising; and (iii) enhanced administrative measures.

Phased Implementation of Mandatory Tracking System for Health Functional Food Products1

The HFFA, as amended on August 13, 2013, will take effect on February 14, 2014. The amended HFFA provides that if a person who sells or manufactures health functional food products may register with the MFDS to trace the records of such products when the person meets certain requirements for the registration, and that a seller or a manufacturer of health functional food products who meets a certain level of sales or store size is obligated to register with the MFDS (Article 22-2 of the HFFA).

Under the proposed amendments, the MFDS would delegate the authority regarding the registration or management of tracking for health functional food products to MFDS local offices in order to contribute to the convenience of the public and increase efficiency (Article 20 of the Proposed Enforcement Decree of the HFFA). The amendments would also propose phased implementation of mandatory tracking system for health functional foods based on per-item annual sales revenue from manufacture or import of health functional food products in the previous year (Article 29-2 of the Proposed Enforcement Rule of the HFFA). More specifically, if the annual sales revenues are KRW 5 billion (approximately U$4.7 million) or more, the mandatory tracking system would kick in on December 2014; if KRW 1 billion (approximately U$940,000) or more, on December 2015; if KRW 100 million (approximately U$94,000) or more, on December 2016; and if less than KRW 100 million (approximately U$94,000), on December 2017. Under the mandatory tracking system for health functional food products, a prompt sales ban and recall is expected upon the occurrence of harmful effects.

Heightened Regulation on False, Exaggerated or Slanderous Advertising

Article 18 of the HFFA prohibits false, exaggerated or slanderous labeling or advertising regarding the name, raw materials etc. of a health functional food product. However, in some cases, such prohibited advertising has not ceased even after administrative measures were taken for the violation of the provision, spreading consumer damages. The proposed amendments specify the obligation to cease advertising when it was subject to administrative measures for its false, exaggerated or slanderous nature (Proposed Enforcement Rule Appendix 4). A violation of the obligation would be punished by a KRW 300,000 (approximately U$280) administrative fine (Articles 10(1)(v) and 47(1)(iv) of the HFFA; Article 21 and Appendix 2 of the Enforcement Decree of the HFFA; Article 36 and Appendix 12 of the Enforcement Rule of the HFFA).

Enhanced Administrative Measures

The proposed amendments to the Enforcement Rule of the HFFA would increase the effectiveness and fairness of the enforcement of the HFFA by segmenting administrative measures available for violations of the HFFA (Proposed Enforcement Rule Appendix 9). The proposed amendments will also enhance the level of administrative measures available for a violation of the HFFA, for example: (i) for labeling or advertising which implies therapeutic effects or prevention of diseases or which may lead to confusion with medicines, administrative measures available will be increased from a two-month ban on per item manufacturing to a one-month business suspension; (ii) for the use of materials, such as sildenafil citrate, which are allowed only for medicines, administrative measures available will be enhanced from a one-month ban on per item manufacturing and destruction of the products to a one-month business suspension and destruction of the products.

By enhancing the level of administrative measures available for a willful violation of the HFFA, the proposed amendments seek to heighten the safety control on health functional food products and increase consumer trust. For that purpose, the authority of the MFDS will be further strengthened under the proposed amendments, and health functional food companies will have to be prepared for the heightened regulations.