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Cablegate: Hong Kong Agrees to Pursue Mou with U.S. Consumer

VZCZCXRO7844
RR RUEHCN RUEHGH
DE RUEHHK #0149/01 0260935
ZNR UUUUU ZZH
R 260935Z JAN 10
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 9482
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 HONG KONG 000149

SENSITIVE
SIPDIS

STATE FOR EAP/CM, PASS CPSC FOR RICHARD OBRIEN

E.O. 12958: N/A
TAGS: ECON EFIN EINV ETRD USTR HK CH
SUBJECT: HONG KONG AGREES TO PURSUE MOU WITH U.S. CONSUMER
PRODUCTS SAFETY COMMISSION

REF: 09 HONG KONG 1452

1. (SBU) SUMMARY: The Hong Kong Government's (HKG) Customs
and Excise Department (CED) told U.S. Consumer Products
Safety Commission (CPSC) Director of International Programs
and Intergovernmental Affairs Richard O'Brien on January 12
that CED would work in 2010 on a memorandum of understanding
(MOU) with the CPSC. The MOU will facilitate CPSC training
of CED officers and provide more rapid and comprehensive
exchanges of information about product safety investigations
and regulatory efforts. O'Brien addressed public concerns
about alleged cadmium-for-lead substitutions in children's
jewelry made in China. He also pledged further CPSC efforts
to work with international jurisdictions - especially the
European Union and China - to harmonize consumer product
safety standards and regulations. A senior PRC product
safety official requested changes in CPSC product recall
announcements related to goods made in China, arguing that
such recalls were often related to product design flaws
originating outside China; the CPSC's press releases failed
to mention this and were therefore "misleading." O'Brien
also explained why the CPSC might not accept China's regional
export certification laboratories (CIQs) in its third party
testing program for children's products. End summary.

2. (SBU) COMMENT: The Associated Press report about cadmium
in Chinese manufactured children's jewelry exported to the
United States broke just as O'Brien touched down on January
11 in Hong Kong. He addressed the issue at several speaking
engagements attended by over 800 global consumer product
safety experts from government and industry. His public
appearances and cadmium-related media interviews in Hong Kong
(including CNN) demonstrated Hong Kong's utility as a media
center for all of Asia and enabled CPSC to communicate around
the clock about its immediate efforts to address the problem.
The apparent widespread use of cadmium in
Chinese-manufactured children's jewelry was highlighted by
industry observers as an example of the developing, often ad
hoc nature of consumer product safety oversight in China.
While deep concerns remain about the safety of consumer
products manufactured in China, tangible progress has been
made. CPSC recalled far fewer Chinese-made goods in 2009,
compared with the prior year. To support this trend, the
CPSC strives to maintain its largely amicable and productive
working relationship with China's General Administration for
Quality Supervision, Inspection and Quarantine (AQSIQ). An
MOU with CED would enhance CPSC's communications and
relationship with the HKG, while enabling CPSC to gain
valuable insights into a key component of the Southeast China
supply chain that provides a large percentage of all consumer
products sold in the United States. End comment.

Background
----------

3. (U) CPSC Director of International Programs and
Intergovernmental Affairs Richard O'Brien met with consumer
product safety regulators and business leaders from around
the world on January 12-13 in Hong Kong. He addressed over
800 individuals at several toy safety-related events,
including an APEC Toy Safety Initiative conference. He met
with CED (the HKG's consumer product safety enforcement body)
to discuss a potential MOU, held trilateral discussions with
senior PRC and European Union product safety regulators, and
spoke with AQSIQ about areas of mutual concern and possible
cooperation.

CED Agrees to Explore MOU
-------------------------

4. (SBU) CED Head of Consumer Protection SM Wong told O'Brien
on January 13 that Hong Kong accepted CPSC Chairman Inez
Tenenbaum's August 2009 proposal to explore a Memorandum of
Understanding (MOU) between CED and CPSC (reftel). O'Brien
reiterated that the non-binding MOU should be a "broad,
cooperative platform" that enables the CPSC to: provide
training to CED officers; facilitate more rapid and
comprehensive sharing of intelligence about potentially
non-compliant consumer products leaving Hong Kong for the
United States; and share non-public information about product
investigations and regulatory rulings.

5. (SBU) O'Brien said CPSC would soon send CED a draft MOU
modeled after CPSC's April 2004 agreement with AQSIQ. CPSC
will tailor the draft MOU for Hong Kong to suit regulatory
and market differences between Hong Kong and the PRC. Wang
agreed with O'Brien's proposal to try and finalize the MOU

HONG KONG 00000149 002 OF 003


text by 2010 year-end, if possible.

CPSC Addresses Cadmium Concerns
-------------------------------

6. (U) In a video recorded message to the APEC Toy Safety
Dialogue by CPSC Chairman Inez Tenenbaum, in O'Brien's media
interviews (including CNN), and at various toy safety events
attended by over 800 government and industry representatives,
CPSC effectively addressed an Associated Press news report
that Chinese manufacturers used large amounts of cadmium in
children's jewelry sold in the United States. Cadmium is a
known carcinogen deemed especially dangerous to children.
O'Brien said the CPSC immediately launched an investigation
into the cadmium report and would work quickly to address the
issue.

7. (U) O'Brien explained that children's jewelry is not
categorized as a toy within U.S. product safety laws and
regulations, and therefore did not fall under the USG's tight
regulatory restrictions on hazardous substances such as lead
and certain phthalates in toys. However, O'Brien said the
CPSC has broad powers under the Federal Hazardous Substances
Act (FHSA) to investigate and prevent the retail sale of any
children's products containing harmful substances such as
cadmium or other heavy metals. (Note: Industry observers
suspect that Chinese manufacturers began to substitute
cadmium for lead after very tight lead limits came into
effect under the U.S. Consumer Product Safety Improvement Act
(CPSIA) of 2008. Cadmium melts at a much lower temperature
than zinc (a much safer lead substitute), consumes less
energy than zinc during the manufacturing process, and is
much cheaper than zinc. End note.)

Harmonization of Global Toy Safety Standards
--------------------------------------------

8. (U) Participants at each of O'Brien's public meetings
described difficulties faced by each part of the toy supply
chain (i.e., manufacturers, importers and retailers) in
complying with disparate toy safety regulations from the
United States, the European Union, other international
jurisdictions, and even from various U.S. states.
Acknowledging the benefits of international synchronization
of toy safety regulations, O'Brien said the CPSC would
continue discussions with its counterparts in Europe and
China toward that goal. He noted that global regulators made
progress in 2009 toward a future common approach on product
tracking labels. He urged toy industry leaders to suggest
priority areas for harmonization, including submission of
specific ideas that could be accepted by regulators in
disparate jurisdictions.

AQSIQ Requests Changes in CPSC Recall Announcements...
--------------------------------------------- ---------

9. (SBU) AQSIQ Director General Wang Xin told O'Brien on
January 12 that his agency was concerned that CPSC product
recall announcements for goods manufactured in China were
misleading. He said most recently recalled products
manufactured in China resulted from product design flaws
originating outside China. By only including China as the
country of manufacture in its recall announcements, Wang said
CPSC unfairly placed all the blame for design-related recalls
on Chinese manufacturers. O'Brien acknowledged that flawed
product designs were often the primary cause of recalls, and
said he would discuss AQSIQ's concerns with his CPSC
colleagues. O'Brien pointed out to Wang that even when
designs didn't originate with Chinese producers, they should
adopt the best practice of examining the design for possible
problems. He also noted the overall progress made by Chinese
toy manufacturers in improving the safety of toys exported to
the United States. The CPSC recalled only 41 toys in 2009,
down significantly from 162 in 2008.

...And Wants CPSC Certification of AQSIQ Labs
---------------------------------------------

10. (SBU) The CPSC does not recognize product test results
from AQSIQ-owned or controlled testing laboratories (CIQ
laboratories), but accepts product safety test results from
66 private sector and other government testing laboratories
in China (including Hong Kong). The competence and
independence of CPSC-certified "third-party" labs play a
crucial role in ensuring the safety of sensitive imports such
as toys and other children's products. AQSIQ's Wang
reiterated his agency's previous requests to the CPSC to

HONG KONG 00000149 003 OF 003


certify and accept product test results from AQSIQ labs in
China. O'Brien said U.S. law prohibits CPSC certification of
any testing labs that enjoy foreign government preferences
withheld from competing private sector labs. In addition to
being PRC-owned, O'Brien said AQSIQ labs enjoy at least one
key government preference currently denied to competing labs
- i.e., the ability to issue consumer product export
certificates in China. Absent structural changes that sever
the PRC's influence over AQSIQ labs, the CPSC would remain
unable to accept the labs' test results, O'Brien concluded.

11. (U) This cable has been cleared by CPSC's O'Brien.
MARUT

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