The year of 2015 witnessed sweeping and far-reaching changes in China's food law regulatory framework. The new Food Safety Law (FSL) entered into force on October 1, and the Chinese government is now drafting its implementing regulation (Draft Regulation). Public comment solicitation for the Draft Regulation has ended; past experience suggests that it should be finalized and published soon. Both FSL and the Draft Regulation underscore more comprehensive prevention and control of food safety risks as well as greater government and corporate accountability to the public.

To implement the changes in these new laws, dozens of new food regulations and national food safety standards, and amendments to food regulations and national food safety standards, either have been adopted or will become official shortly. In the meantime, we continue to see the promulgation of new local food regulations and standards that play a prominent role in local food law enforcement. Given the extensive changes in 2015 in China's food laws, this will be the first of a two-part series of Keller and Heckman Shanghai's China Regulatory Matters e-news alert. Part I will cover the following topics: 1) Regulatory Mechanisms, 2) Production and Operation, 3) Labeling, and 4) Recall. Part II will be published next week and cover the following additional topics: 1) Import, 2) Specially Controlled Foods, 3) Food Additives, and 4) Other Developments.

I. Food Safety Regulatory Mechanisms

One prominent feature of the new legal framework established by FSL is the introduction of some innovative food safety regulatory mechanisms, such as accountability meetings with producers/operators arranged by FDAs,¹ the creation of full-time food safety inspector teams at FDAs,² and unannounced inspections to be conducted by higher level FDAs.³  In addition, the following three mechanisms are of particular importance.

1. Enhancing Criminal Accountability

To impose harsher penalties for food safety violations, FSL mandates the establishment and improvement of mechanisms linking administrative law enforcement to the judicial system with priority given to criminal accountability.⁴ The Draft Regulation further proposes the establishment of a food safety forensic science identification system.⁵ In addition, relevant measures were jointly issued in December 2015, by China Food and Drug Administration (CFDA), the Ministry of Public Security, the Supreme People's Court, the Supreme People's Procuratorate, and the Office of State Council's Food Safety Commission, with detailed provisions on such matters as the transfer of cases and inter-department cooperation and coordination.⁶ By way of example, the Supreme People's Procuratorate decided to put food safety crimes under special case supervision from March 2015 until December 2016.⁷ One prominent case under its special supervision in 2015 resulted in the prosecution of several people on charges of selling substandard foods from Japan in China.⁸ These measures to enhance criminal accountability, in addition to administrative law enforcement, indicate that food law violations in China will be much more costly than ever, which warrants close attention from industry.

2. Encouraging Complaints/Reports

FSL allows any individual to report food safety violations, directs the handling of complaints/reports, and specifically prohibits food producers/operators from retaliating against internal whistle-blowers.⁹ The detailed management rules for food and drug complaints and reports were issued on January 14, 2016, and will become effective on March 1. They address such relevant matters as procedure and time limits.¹⁰

3. Promoting Credibility Rating

The Chinese government is also placing greater emphasis on food safety-related corporate credibility ratings, a matter the industry cannot afford to take lightly. FSL directs FDAs to maintain and publicize credibility records of food producers/operators and to enhance supervision and inspection of food producers/operators with poor credibility records.¹¹ It also specifically requires inspection and quarantine authorities to keep records of food importers and increase inspection and quarantine measures of those with poor credibility records.¹² The Draft Regulation further mandates the establishment of a credibility checking system against food producers/operators and calls for the linking of food safety credibility ratings to credibility systems in other areas such as industry access, financing and securities offerings.³ In addition, in November 2015, CFDA issued a guiding opinion promoting the establishment of a nation-wide food safety credibility database by 2020 and a rating system of corporate credibility.¹⁴

II. Food Production and Operation

Both the new FSL and the Draft Regulation impose stringent requirements for local food production and operation. For example, the Draft Regulation obligates food producers/operators to establish a food safety information publicity system for disclosure of such matters as identification of risk levels, food recall, and disposal of substandard products.¹⁵ Notably, restaurant service providers are required to publicize the name, scope and level of food additives used in self-made foods.¹⁶

With respect to licensing, new management rules for both food production licensing and food operation licensing became effective on October 1, 2015.¹⁷ According to CFDA, food producers licensed under the new rules must label the new food production licensing number rather than the "QS" mark; the old package and label with the "QS" mark may be used until October 1, 2018.¹⁸ On the other hand, separate licensing in the past for food operation and restaurant services is now integrated into food operation licensing. The provisional rules for food operation licensing review also entered into force on September 30, 2015.¹⁹ Although public comments have not been solicited on the regulation on food production licensing review, we expect they will be in the near future.

A licensed food producer/operator is further subject to routine supervision and inspections. In this regard, the Management Rules for the Supervision and Inspections of Food Production and Operation is being drafted, which establishes detailed inspection requirements for food producers/operators,as well as relevant procedure.²⁰

The new FSL extends food safety regulation to food storage and transportation and subjects these operations to general safety and hygiene requirements.²¹Articles 49-52 of the Draft Regulation further elaborate on this issue by addressing such matters as commissioned storage and transportation, notification of non-food producers/operators dedicated to food storage and transportation, and cold chain transportation.

FSL mandates the establishment, on the national level, of a food safety "through traceability" system, under which food producers/operators are required to set up food safety traceability schemes.²² The traceability requirements extend to food storage and transportation under the Draft Regulation,²³ which also allows a provincial-level government to introduce electronic traceability schemes for "foods with high risk levels" and "sizable food producers/operators."²⁴ Notably, in late 2015 CFDA issued two regulations on the establishment of food safety traceability systems targeting producers of formula milk powder for infants and young children and edible vegetable oil producers, respectively, signifying the importance that the government attaches to the regulation of these types of foods.²⁵

Under the general framework for food production hygiene norms set by GB 14881-2013 which became effective in 2014, a set of National Food Safety Standards for hygiene norms in the production of individual foods is being drafted. The standards will apply to items such as chocolate, beverages, beer, canned foods, and edible vegetable oil. Furthermore, the National Food Safety Standard for food operation hygiene norms (GB 31621-2014) also entered into force in 2015.

III. Food Labeling

Both the new FSL and the Draft Regulation address food labeling issues in various chapters and make some major changes. For example, FSL requires prominent labeling of GMO foods²⁶ and the Draft Regulation prohibits "non-GMO" labeling for GMO foods and ingredients not yet approved.²⁷ Notably, the Draft Regulation provides that use of stickers is no longer allowed on imported prepackaged foods.²⁸ Representatives of the industry have voiced opposition to this provision because it deviates from established trade practice; the finalized version may make some adjustments to the outright ban on stickers. The Draft Regulation also, for the first time, clearly defines "defects with food labels,"²⁹which is a very helpful since "defects with food labels" are exempted under FSL from the penalty of fines up to ten times the commodity value of foods with no or substandard labels.³⁰ In China, there are a large number of professional consumers who earn their living by seeking punitive damages from reporting alleged food law violations, especially alleged food labeling violations. Although the clarification regarding defects with food labels may bring some relief to the industry, the presence of professional consumers in China still calls for prudence by the industry with respect to food labeling issues.

IV. Food Recall

Following the requirements for food recall laid down in the new FSL, which subjects not only food producers but also food operators (including food importers) to food recall,³¹ new food recall management rules entered into force on September 1, 2015,³² and CFDA subsequently issued relevant implementing opinions.³³ The new management rules identify foods banned from production and operation, provide for classifications and time limits on initiating and completing food recalls, and identify defective labels that are not subject to mandatory recall. The new rules also mandate the establishment of food recall expert groups with FDAs.

According to both FSL and the management rules, food items are subject to recall if there is evidence that the food is substandard or may be harmful to human health. The new FSL also clearly requires food operators to recall food items if they render the foods unsafe. In addition, the management rules further require that if the producer of an unsafe food cannot be identified or the producer has become insolvent, then the food operator must issue the recall.

_{¹Article 114 of FSL (http://www.gov.cn/zhengce/2015-04/25/content_2853643.htm)}

_{²Article 132 of the Draft Regulation (http://www.sda.gov.cn/WS01/CL0782/137340.html)}

_{³Article 147 of the Draft Regulation}

_{⁴Article 121 of FSL}

_{⁵Article 159 of the Draft Regulation}

_{⁶See http://www.sda.gov.cn/WS01/CL0053/139961.html}

_{⁷See http://www.scio.gov.cn/xwfbh/qyxwfbh/Document/1443868/1443868.htm}

_{⁸See http://www.chinacourt.org/article/detail/2015/11/id/1756005.shtml}

_{⁹Articles 12 and 115 of FSL}

_{¹⁰See http://www.sda.gov.cn/WS01/CL0053/141900.html}

_{¹¹Article 113 of FSL}

_{¹²Article 100 of FSL}

_{¹³Article 142 of the Draft Regulation}

_{¹⁴See http://www.sda.gov.cn/WS01/CL0852/138006.html}

_{¹⁵Article 44 of the Draft Regulation}

_{¹⁶Article 53 of the Draft Regulation}

_{¹⁷See http://www.sda.gov.cn/WS01/CL0053/128320.html for food production licensing, and http://www.sda.gov.cn/WS01/CL0053/128340.html for food operation licensing}

_{¹⁸See http://www.sda.gov.cn/WS01/CL1633/130941.html}

_{¹⁹See http://www.sda.gov.cn/WS01/CL1349/130944.html}

_{²⁰See http://www.chinalaw.gov.cn/article/cazjgg/201508/20150800478817.shtml}

_{²¹Articles 2 and 33 of FSL}

_{²²Article 42 of FSL}

_{²³Article 52 of the Draft Regulation}

_{²⁴Article 63 of the Draft Regulation}

_{²⁵See http://www.sda.gov.cn/WS01/CL0053/141140.html for infant and young children formula milk powder producers, and http://www.sda.gov.cn/WS01/CL1605/141160.html for edible vegetable oil producers}

_{²⁶Article 69 of FSL}

_{²⁷Article 78 of the Draft Regulation}

_{²⁸Article 114 of the Draft Regulation}

_{²⁹Article 195 of the Draft Regulation}

_{³⁰Article 125 of FSL}

_{³¹Articles 63 and 94 of FSL}

_{³²See http://www.sda.gov.cn/WS01/CL0053/115580.html}

_{³³See http://www.sda.gov.cn/WS01/CL0851/131170.html}