On 14 May 2014, the Chinese State Council submitted the draft amendments to the Food Safety Law (the Amendments) to the National People’s Congress, the Chinese top legislature, for review and deliberation. This is a sign of the Chinese government’s determination and commitment to further strengthen the regulation of food safety in China, which has become a top concern for the Chinese people, ranking even higher than corruption.
The Amendments were first published for public comment in October 2013. If the Food Safety Law is amended as proposed, there will be an overhaul of the existing food safety regulatory regime in China, in particular in the following aspects:
- Currently food production, food circulation and catering services are subject to three different licenses. Under the Amendments, they will be combined into one food production and operation license, which will be administered by the China Food and Drug Administration or its provincial counterparts. For the first time, operation of food additives is also subject to government licenses.
- Food producers and operators will shoulder more responsibilities and liabilities under the Amendments. For example, they must establish a food safety self-examination system to examine the safety situation of their food product and a food traceability management system to ensure that food is traceable. They also must procure compulsory food safety liability insurance, which is yet to be established, in accordance with the rules. Online food traders not only need to obtain food production and operation licenses for themselves, but also must carry out due diligence on the food distributed on their platform. Otherwise, they will have to bear joint and several liabilities if consumers’ rights are prejudiced and advance compensation to the consumers.
- Regulation of infant formula food will be even more restrictive. For the production of infant formula food, food producers must report the raw materials, product formula and labels to food safety regulatory departments for record. In addition, infant formula foods will no longer be allowed to be produced by way of sub-contracting, OEM, or sub-packaging.
- The Amendments grant more authority to the regulators. For example, if food producers and operators are suspected to have violated the law and may cause significant harm or major social impacts, the regulators may carry out spot checks without prior notice. Whistle-blowers will be awarded if the reported violation is verified (amount of award will be determined following local rules).
- To curb the food safety incidents, the Amendments introduce harsher penalties for those who violate the Food Safety Law. For example, if illegal additives are used in food production and processing, the perpetrator will be subject to a fine of RMB50,000 – 150,000 if the total value of the commodity is less than RMB10,000 or a fine between 15 and 30 times (in contrast to five to ten times under current law) the total value of the commodity if the total value of the commodity exceeds RMB10,000. In addition, if any person who has been sentenced to a fixed-term imprisonment or more severe penalty due to food safety crimes, he/she will be barred from food production and operation work for life.
- The most striking aspect of the Amendments is probably the introduction of punitive damages. According to the Amendment, if any manufacturer produces any food not conforming to the food safety standards or sells any food knowing its nonconformity with the food safety standards, the customer can demand the manufacturer or the seller to pay a penalty ten times of the paid amount or three times of the loss, in addition to the compensation for the loss thereof. It is worth noting that this is more than the punitive damages set out in the Consumer Interest Protection Law, also recently amended, which only provide for punitive damages one to three times the value of the product/services.
- For imported food products, more complex procedures will be introduced. Importers shall establish an examination and verification system for overseas exporter and overseas food production businesses, to ensure that imported food complies with the law and the requirements of national food safety standards. Labels of prepackaged imported foods will have to bear more items than what is currently required, including name, specification, net content, production date, ingredients or composition sheet, shelf life, storage conditions, applicable standards, etc.
Due to the wide range of food safety issues and endless list of food safety scandals in China, Chinese consumers have a general preference to foreign branded and imported food products. However, multinational food manufacturers and operators are advised to be more prudent and careful in managing their businesses in China, which will for certain face a more challenging regulatory environment after the Amendments become law later this year.