Food exporters, under the Draft Regulation to Implement China’s New Food Safety Law, will face an increasing number of technical barriers to trade. Below, we explore how these somewhat restrictive reforms will specifically affect Australian dairy producers looking to export to the lucrative Chinese market.

Biological Interference

Amongst the new measures being introduced will be the requirement that foreign food producers will have an onus to prevent intentional damage of food by means of chemical, biological or physical interference throughout the production and transportation process. Moreover, samples of food goods deemed to be high risk will be analysed and retained for entry inspection. Products with an ordinary risk will also be tested, and those which carry a low-risk rating will only be subject to onsite inspections.

Dairy products could well fall into this high-risk category and will be subject to this higher level of scrutiny. As such, to prevent having stock rejected from a failed inspection in China, dairy exporters will need to be vigilant in ensuring that their products have gone through stringent testing before shipping.

Special Purpose Foods

Manufacturers of foods classified as “special purpose “, namely infant formula products and health food, will also need to apply for registration with the Chinese government. These new requirements are especially relevant to Australian dairy producers, who are a key supplier of infant milk formula to the country.

More specifically, every registered product formula manufactured by the same company should have substantial differences that can be ascertained by scientific assessment. At most, a company would be permitted to have three series of products and nine product formula.

Labelling

Several changes to Chinese labelling requirements have also been brought into effect. They include the prohibition of words on the label that indicate banned substances were not added under Chinese national food safety standards. This is also applicable for claimed GMO-free products that have not received Chinese government approval. Lastly, Chinese labelling must be printed before importation. However, in general, defective labelling no longer gives rise to a right to compensation.

Dairy exporters should factor this into their risk assessment, given the more costly and non-refundable consequences that can ensue from non-compliance.

Sanctions and Penalties

Dairy exporters should also be aware of the array of sanctions that could apply to them. Failing to register correctly infant formula can incur fines of up to 20 times the product value just as consumers can also seek recourse up to 10 times the value of the defective products against suppliers. Furthermore, these breaches will likely endanger producers prospects of re-exporting and so should be front of mind in managing risk.

Practical Considerations

One possible measure that dairy companies may want to implement is establishing robust internal systems. This would primarily involve developing a protocol and establishing a company committee to monitor compliance. Compliance committees should comprise of team members from across departments to ensure the input from all business areas on the interactions that may affect the quality and labelling of products. Moreover, giving this committee a recordkeeping function also facilitates accessibility to the findings of any investigations conducted into products.

Key Takeaways

It remains to be seen as to whether China will adopt a more flexible approach to import regulations that will significantly reduce the costs of compliance for Australian exporters. However, by all indications, the free trade agreement should serve to bolster the standards of Australia’s food integrity systems, affording them greater recognition by trading partners. Moreover, increased demand for Australian dairy produce and an expressed preference by the Chinese government to streamline regulatory burden should see incremental reforms to this end being phased in throughout the course of 2016.

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Anthony Lieu

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