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Cablegate: China's National Recall System: An Unfunded Mandate

VZCZCXRO2227
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #6264/01 2672204
ZNR UUUUU ZZH
P 242204Z SEP 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 2150
INFO RUCPDOC/USDOC WASHDC
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHEHNSC/NSC WASHDC
RUEAEPA/HQ EPA WASHDC
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 03 BEIJING 006264

SIPDIS

SENSITIVE
SIPDIS

EAP/PD FOR NIDA EMMONS
HHS FOR OGHA/STEIGER AND PASS TO FDA/LUMPKIN
USDA FOR FSIS/RAYMOND
USDA FOR FAS OA/YOST, OCRA/ALEXANDER, OSTA/BRANT AND SHNITZLER
COMMERCE FOR ITA/HIJIKATA AND CINO
STATE PASS TRANSPORTATION FOR NHTSA ABRAHAM/KRATZKE
STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION RICH O'BRIEN/INTL
PROGRAMS
STATE PASS USTR CHINA OFFICE/TIM WINELAND
STATE PASS OMB/INT'L AFFAIRS
STATE PASS HOMELAND SECURITY COUNCIL
STATE PASS IMPORT SAFETY WORKING GROUP

E.O. 12958: n/a
TAGS: TBIO EAGR ECON HHS ETRD BEXP CH
SUBJECT: CHINA'S NATIONAL RECALL SYSTEM: AN UNFUNDED MANDATE

Ref: A. Beijing 5797
B. Beijing 5899
C. Beijing 6018

BEIJING 00006264 001.2 OF 003


SUMMARY
-------

1. (SBU) China unveiled its new national recall system for toys and
processed food on August 31, a program spearheaded by the General
Administration for Quality Supervision, Administration, and
Quarantine (AQSIQ), the regulatory agency in charge of inspection
for some aspects of domestic production and consumption of food as
well as all aspects of export product certification and safety. An
AQSIQ contact subsequently told Econoffs that the new toy recall
system is not significantly different from the previous one, but the
food recall system has been strengthened. The new rules now codify
the definition of unsafe foods and defective toys and also establish
requirements for manufacturers and the rest of the supply chain in
the recall process. Local and provincial governments shoulder
responsibility for regular-sized and voluntary recalls, and AQSIQ at
the national level takes control of larger and compulsory recalls.
Our contact said that no new funds would be allocated to support the
rollout of the national system, but the agency will request
additional funds if needed. The recall system is expected to
utilize existing staffing. The new rules do not address the recall
of food and toys intended for export. END SUMMARY

A NEW AND UNFUNDED RECALL SYSTEM
--------------------------------

2. (SBU) China announced its new national recall system for food and
consumer products on August 31, a program spearheaded by the General
Administration for Quality Supervision, Administration, and
Quarantine (AQSIQ), the regulatory agency in charge of testing any
product certified for export and some production sectors related to
domestic consumption. (The recall regulations were promulgated on
August 27.) AQSIQ Department Policy and Legislation Director
General Liu Zhaobin told Econoffs September 10 that the new food and
toy recall systems were not different from the ones that existed
before -- China has conducted food product recalls for years, and an
automotive recall system was implemented in 2005 -- but the new
rules now codify the definition of unsafe foods and defective toys
and also establish requirements for manufacturers and the rest of
the supply chain in the recall process. The new rules do not
address the recall of food and toys intended for export, areas for
which Liu said AQSIQ would later issue detailed guidance.

3. (SBU) The food recall system establishes voluntary recalls in
Categories I, II, and III for decreasing severity of harm to human
health, and the affected products must be banned for sale within
one, two, and three days, respectively. Compliance is monitored at
the provincial level. When producers fail to respect the terms of
voluntary recall or fail to remedy violations, AQSIQ can mandate a
compulsory recall and take charge of monitoring the recall from the
national level. For toys, manufacturers are required to take
voluntary, prompt action when they discover defects. No specific
deadline is imposed for implementing a ban on their sale, and AQSIQ
can escalate the voluntary recall to a compulsory recall. The new
rules establish fixed criminal penalties of 10-30,000 RMB (USD 1,300
- 4,000) for failure to stop the sale of hazardous food or toys,
comply with recall procedures, or rectify violations. Corruption by
officials is subject to both criminal and administrative penalties
in cases of hazardous food and administrative punishment in cases of
defective toys.

4. (SBU) Liu said that no new funds would be allocated to support a
nationwide rollout of the recall systems. At the provincial level,
the rollout will utilize existing staffing. However, AQSIQ is
expanding its headquarters office in Beijing to manage the recall

BEIJING 00006264 002.2 OF 003


system from the center and has said it will request additional funds
from the Ministry of Finance if needed. Recalls for products not
under AQSIQ's purview, such as fresh fruits and vegetables, are
handled separately by the Ministry of Agriculture or other
responsible agencies. This division of labor is necessary, Liu
commented, because one single agency would be unable to manage every
recall. The State Council Leading Group on Food Safety and Product
Quality is studying interagency coordination. (Note: The Leading
Group, Liu said, was meeting across the hall at the same time as our
own meeting. This is the first unpublicized meeting of the Leading
Group.) The Leading Group meets every ten calendar days to resolve
"friction" between agencies and improve coordination on food and
product safety matters, Liu said, adding that he usually
participates in the Leading Group meetings.

AUTO RECALLS AS A MODEL
-----------------------

5. (SBU) AQSIQ introduced China's first official recall system, for
automobiles, in 2005, resulting in the recall of 125,000 vehicles
from 40 manufacturers since that time, and then used it as a model
for the food and toy recall systems now in place. The major
difference between the food/toy recalls and auto recalls is the
introduction of the new concept of compulsory and voluntary recalls,
the former managed by AQSIQ national headquarters and the latter
managed by local Technical Supervision Bureaus (TSBs). (Note: TSBs
are the 31 mainland province legacy inspection agencies that were
folded into AQSIQ at the agency's creation in May 2001 and now
co-exist with and complement AQSIQ's provincial CIQ offices. End
Note)

NEW REGULATIONS AND LEGISLATION
-------------------------------

6. (SBU) Regulators are now discussing the establishment of a
general method for recalls in any product area, under the direction
of the State Council Legislative Affairs Office. Food, toys,
medicines, and agricultural products will continue to have their own
recall systems, but a general system will cover everything else.
Officials are also planning strengthened recall systems for
medicines and building materials. China is still interested in
learning from U.S. experience, Liu said, as it expands and improves
its own recall systems.

7. (SBU) China is amending the Law on Standardization and the Law on
Metrology, and will also contribute to a new Law on Food Safety.
Follow-up conversations with AQSIQ revealed that this new Law on
Food Safety would supplement the existing 1995 Law on Food Hygiene,
which deals with the implementation of a food sanitation license
system. AQSIQ will submit initial proposals/amendments on all three
laws to the State Council. Liu did not indicate when the Food Safety
Law draft would be completed.

FOUR-MONTH CAMPAIGN MAKES PROGRESS
----------------------------------

8. (SBU) Liu said that the State Council-initiated four-month
special campaign from August through the end of the year targets
"important" products, regions, industries, and large-scale safety
problems. Across AQSIQ's 30,000 employees, Liu said that 150,000
inspection work shifts had checked the certifications of 1,830,000
companies. (Note: A follow-up call to AQSIQ to confirm the types
of companies inspected and the time period over which such an
incredible number of inspections were conducted revealed no new
information. According to the State Council White Paper "The
Quality and Safety of Food in China," China has 448,000 food
production and processing enterprises, so the 1,830,000 figure for
inspected companies likely includes a wide range of consumer and
perhaps even industrial product manufacturers. End Note.) When

BEIJING 00006264 003.2 OF 003


asked by Econoff how progress in the campaign would be measured, Liu
said that auditors would be dispatched to local CIQ offices to
measure local CIQ and manufacturer compliance with the range of new
rules that cover everything from registration of firms to management
of inspection records.

COMMENT
-------

9. (SBU) While this regulation provides for clarifications to
AQSIQ's role in the existing comprehensive food recall system, it
does not provide details about the competent authorities for each
action. This is an important omission because AQSIQ is responsible
for only one portion of China's domestic regulation and enforcement
of food safety. By not including the duties and responsibilities of
the other ministries, the impact of this new regulation must be
questioned. By inference, this change in regulation only applies to
the recall of food that is regulated by AQSIQ. If this is the case,
a significant part of China's food will not be covered by the
regulation.

10. (SBU) The rollout of strengthened recall systems for food and
toys amounts to an unfunded mandate for AQSIQ. The ability of the
central government to punish violators will depend on the
professionalism of local CIQ officials and perhaps a heavy hand from
the national AQSIQ office, rather than an infusion of new inspectors
to canvass each province. Regulators are relying on that same sense
of professionalism -- and new penalties on corrupt practices -- to
crack down on violators in the four-month special campaign.

11. (SBU) Meanwhile, it appears that a broad awareness of food and
product safety is trickling down from the center to provincial
authorities. AQSIQ Minister Li Changjiang, Party Secretary Li
Chuanqing, and a third official (Ref. A) are visiting local offices
around the country for the next several months. AQSIQ auditors are
expected to visit local CIQ offices in December. Officials at the
WTO Center in Shanghai and academics at the Chongqing Academy of
Social Sciences indicated to a Beijing Econoff in early September
that China is taking food and product safety very seriously.

RANDT

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