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Cablegate: China's New Product Safety Regulations Delay Exports Of

VZCZCXRO5744
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0993/01 2430841
ZNR UUUUU ZZH
R 310841Z AUG 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6424
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000993

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON PGOV CH
SUBJECT: CHINA'S NEW PRODUCT SAFETY REGULATIONS DELAY EXPORTS OF
U.S. MANUFACTURER

REF: BEIJING 5271

(U) This document is sensitive but unclassified. Please protect
accordingly. Not for release outside U.S. government channels. Not
for internet publication.

1. (SBU) Summary: A U.S. manufacturer in Guangzhou contacted ConGen
Guangzhou after exports to the United States were delayed at the
port due to new inspection requirements. After an initially
haphazard approach, the Chinese inspectors focused on ensuring the
quality and safety of the raw materials used by the manufacturer.
The shipments were released after one week, but the firm was
informed of new ongoing documentation and inspection requirements.
The owner of the firm expects additional new requirements will
follow. End summary.

2. (SBU) On August 20, 2007, Charles Hubbs, the U.S. owner of
Guangzhou Fortunique Limited, contacted post after the firm's
exports were delayed by Chinese inspectors implementing new product
safety regulations. Fortunique is an OEM manufacturer of medical
devices, such as surgical gowns and drapes. It exports US$10-12
million to the United States every year, shipping approximately 30
to 40 containers per month. The firm's major U.S. customers include
Cardinal Health, Medline Industries and DeRoyal. Fortunique employs
more than 600 workers at its factory in Panyu District, Guangzhou.

New Inspection Requirements
---------------------------

3. (SBU) Referred by the American Chamber of Commerce in South
China, Hubbs contacted ConGen Guangzhou because a container of
medical devices made by Fortunique for export to the United States
had been delayed at the port by Chinese inspection officials. In a
meeting with congenoffs on August 21, Hubbs explained that officials
from the Panyu Entry-Exit Inspection Quarantine Bureau (PEIQB), a
subordinate unit of the General Administration for Quality
Supervision, Inspection and Quarantine (AQSIQ), notified Fortunique
that it would be subjected to new inspections under product safety
regulations issued on July 26, 2007 (reftel). Hubbs said his firm
had not been informed of any new inspection requirements until the
container was stopped.

4. (SBU) In addition to inspecting the export products, the PEIQB
officials also planned to review the firm's procedures for safety
and quality assurance. They requested voluminous documentation from
Fortunique that included all of its U.S. Food and Drug
Administration (USFDA) registration documentation, client
specifications, and safety-related documentation provided by
Fortunique's suppliers of raw materials. Hubbs told us his staff
was up most of the night preparing the documentation.

Lack of Standards or Expertise
------------------------------

5. (SBU) PEIQB's apparent lack of any standards for assessing the
safety of the medical products was particularly troubling to Hubbs.
He explained that the officials at first wanted Fortunique to help
them develop standards. One official told Hubbs that he should be
manufacturing some products in a cleanroom environment. Hubbs
argued that this was completely unnecessary to meet USFDA standards.
He described the inspectors' initial approach as haphazard, noting
that they focused on any product labeled "surgical" regardless of
how it was used.

Focus on Raw Materials
----------------------

6. (SBU) Hubbs told us that after the local inspectors conferred
with officials from Beijing, their review focused on the safety of
raw materials. He said they asked Fortunique to provide additional
documentation from all of its suppliers on the quality of raw
materials. Hubbs speculated that such requirements would force
firms like his to buy more raw materials from large firms, which
might be better able to provide thorough documentation.

A Week Lost and More Requirements
---------------------------------

7. (SBU) After Fortunique staff prepared the documentation and held
a series of meetings with inspection officials, the firm's export
shipments were released for shipment on August 24 after more than a
week's delay. According to Hubbs, Fortunique was able to meet the
inspectors' requirements to resume exports but must prepare more
data on the raw materials it uses. In addition, inspection
officials will begin a new program of regular inspections of his
factory's facilities.


GUANGZHOU 00000993 002 OF 002


No History of Problems
----------------------

8. (SBU) Fortunique would welcome consistent standards established
by Chinese food and drug authorities in coordination with USFDA.
Hubbs said such standards would have a much stronger impact on his
competitors in China. He expressed confidence that Fortunique's
record on quality and safety would withstand scrutiny under
international industry standards. According to Hubbs, Fortunique is
registered with USFDA to produce class 1 and 2 medical devices and
its customers are some of the biggest medical device suppliers in
the United States. He declared that Fortunique is ready to provide
Chinese agencies with assurances from clients that its products meet
their specifications and comply with USFDA regulations.

More to Come?
-------------

9. (SBU) Hubbs believes that this was only the first hurdle for
firms like his. Once Chinese officials have further addressed the
safety of raw materials, he expects them to focus on other issues
related to product design and specifications. He said his
experience had been a "good wake-up call," and other U.S. firms
should prepare for similar experiences. The inspection officials
told him that the Chinese government's primary focus in product
safety efforts was Guangdong for now. Hubbs speculated that
inspection agencies would experiment with new procedures here and
then apply them to other parts of China. As he put it, they will
"throw a lot of mud" at firms here, then take "whatever sticks" and
apply it nationally.

JACOBSEN

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