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Does enterprise standard contain intellectual property that can be legally protected?

Enterprise standard are voluntary standard that food companies decide to apply to the production of their product. They shall comply with national food safety standard and can have stricter provisions/requirements than these.

Enterprise standard are filed by companies with province or city level bureaus of the National Health Commission, and after a 20-day public notice for comments, their filing is completed and they remain open for public consultation.

As the information contained in these standards becomes public knowledge, companies shall avoid including in these standards sensitive information that they wish to protect – or should at least they should secure that such information shall open to public disclosure.

Another aspect may be copyright protection.

Copyright protects works which also include written works, but which exclude “laws and regulations, resolutions, decisions and orders of State organs, other documents of a legislative, administrative or judicial nature and their official translations”. So, are standards included?

In 1999 the PRC Copyright Bureau issued a Reply To The Supreme People’s Court On Standard Copyright Disputes (权司 [1999] No.50), stating that:

  • mandatory standards are technical norms of a legal nature;
  • recommended standards on the contrary are not technical norms of a legal nature and shall therefore fall within the scope of copyright law protection.

Moreover, Administrative measures on standard publication (技监局政发[1997]No.118) request that any entity or individual that intends to reproduce any part of standard in any form for the purpose of business shall obtain the prior written consent of the entity who has the exclusive right of publication.

Even if these two regulations do not refer explicitly to enterprise standards, their rationale is clearly applicable also to enterprise standards: in practice, if they have some degree of originality, they are also covered by copyright.

Applicability of copyright to enterprise standards seem also confirmed by courts.

In a 2018 judgment issued by the court of High Court of Shandong Province, the court stated that while the structure of enterprise standard is strictly and has no originality, however other written content, as long as it can show some kind of creativeness, can be deemed as intellectual work of the author thus protectable by copyright law.

The case involved Company A – who had filed registration of its own enterprise standard in 2015 – and Company B – who had filed for registration of its own enterprise standard in 2016. Both standards referred to the same product – i.e. cast-in-place lightweight foamed concrete partition wall (construction standard industry; however the legal rationale applies to all enterprise standards in any industry, such as food industry).

Company A complained that Company B’s standard was too similar to Company A’s – in terms of content as well as lay out and graphic, and thus infringed Company A’s copyright, with specific reference to the right of authorship, of reproduction, of transmission on information network and on other media platform.

Company A thus filed a litigation with the People’s Court requesting that Company B (i) stop the infringement; (ii) compensate damages at 100,000 RMB.

The Court evaluated the two standards and highlighted general similarities (such as: consistency in frame and terminology, including name, preface, scope, normative reference document, terminology and definition, classification and marking, raw material requirements, technical requirements, test methods and basic inspection rules).

A few differences were also found such as (i) one different reference standard, (ii) one different diagram, (iii) unit measures inserted next by some identical figures in only one of the standards, (iv) in a technical there was one different item, (v) in two tables there were two different values (one in each, out of several).

However, in the end the court upheld Company A’s claim. Company B then changed the structure of its own standard, by modifying some reference documents, by inserting some formulas, by adding new tables and definitions.

In the end, as more and more companies localize production in China for local market, more and more enterprise standards will be filed. Copyright issue needs to be considered by drafters, along with the technicalities of the standards.

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Food waste in China is a big issue to tackle.

According to a report issued by authors Jun Zhang and Chuchu Zhang, it is estimated that major Chinese cities produced approximately the astonishing number of  88.65 million tons of food waste in 2016, and that first-tier municipalities like Beijing and Shanghai produce 1,000 to 2,000 tons of food waste per day.

This report highlights that “Food waste today mainly ends up in landfills or incinerators without undergoing proper treatment, or is illegally diverted into the informal system to feed livestock or produce cooking oil through practices that have resulted in serious food safety problems”.

In a famous case in 2015, it was discovered that some KFC stores in Songjiang arbitrarily handed over kitchen waste to a Company A, which then handed it over to an unqualified Company B, who then handed it over to a farm owner as feed for pigs. Company A, Company B and the farmer were fined and punished for this.

In brief, food waste is (i) waste of valuable resources, (ii) an environmental threat as well as (iii) a food safety threat.

China is trying to both reduce the amount of food waste and improve its disposal and recycling system.

What actions to reduce food waste?

 Several policies have been enacted in this sense in the last ten years aimed at promoting food-saving behaviors:

  • In 2010, the General Office of the State Council issued the “Notice on Further Strengthening the Work of Saving Food against Waste“, requiring provincial government and agencies to fully understand the importance of saving food, to strengthen publicity, leadership and supervision.
  • In 2014, the General Office of the Central Committee issued the “Opinions on Strictly Saving Food and Fighting Waste”. This document applies to party and government organs at all levels and state-owned enterprises and institutions, and advocates the implementation of scientific and civilized catering consumption patterns in society. It also clearly proposed to promote the utilization of food waste resources. For official government banquets, it is recommended to mainly provide home-cooked foods and foods that are common in different regions of China, and to arrange the number of meals in a rational way to prevent waste.
  • the “Proposal of 13th Five-Year Plan for Economic and Social Development”, proposed by the Central Committee of the Communist Party of China In 2015, put forward “Three “Anti-” Actions”: anti-over-packaging, anti-food waste, anti-over-consumption.
  • A 2010 “Opinions on Strengthening the Improvement of Waste Oil and the Management of Kitchen Wastes” provides detailed obligations for food service operators, including specific requirements for collection and transportation of food waste, establishment of a waste management register and sanctions. At the same time, it also promotes the utilization and harmless treatment of kitchen wastes, implement and strengthen supervision, inspection and publicity and education for correct disposal of food waste.
  • “Clean Your Plate” campaign. On January 16, 2013, a Weibo (a popular Chinese social network) user launched the “ Clean Your Plate ” campaign, aimed at reducing food waste at restaurants. The campaign soon went viral and it was supported by many celebrities and media. On January 22, 2013 CCTV News reported the activity, calling on everyone to “Save food, start from me”. This – amongst other – resulted in regulations being enacted such as “Opinions on Strictly Saving Food and Opposing Waste” on March 11, 2014 and “Notice on Promoting the Catering Industry to Save Food and Oppose Waste” on April 10, 2014, whereby catering enterprises are encouraged to take incentive to actively guide consumers to save food, post or display promotional posters or signs in prominent places, accurately mark the amount of food on the menu, and actively remind consumers to order food on demand, consume rationally, pack leftovers before ordering, and differentiate portions (such as “half meal” and “small meal”). Catering companies are also encouraged to marked the content of portions on the menu.
  • The so-called “Transparent Kitchen Program” is also inspired by these regulations and it urges catering service units to establish a management system for the disposal of kitchen waste and classify and place kitchen waste; to establish a table account for the disposal of kitchen waste to record in detail the types, quantities, destinations and uses of kitchen waste; to calculate the production of kitchen waste in catering service units.

In general, all departments and state-owned enterprises and institutions in all regions shall disclose the expenses for official dining. Each region shall establish a standard for the expenses of official dining in the region and adjust it regularly.

Canteens of organs and state-owned enterprises and institutions shall provide food “according to the principles of health and simplicity, match dishes rationally, and pay attention to dietary balance”.

Canteen shall also establish a registration system for diners, implement dynamic management, purchase and prepare meals according to the number of diners. Canteens shall also arrange a special person to be responsible for the inspection of the canteen, and give criticism and education to the wasteful behavior.

Most of these policies – yet – seem lacking the real “motivating agent”: sanctions, or rewards. Shanghai municipality is acting in this regard and it has enacted regulations whereby any kitchen waste producer shall pay a fee for the treatment of kitchen waste to the competent institution in accordance with the type and quantity of kitchen waste collected and transported. The base amount of unit domestic waste disposal shall be checked once a year. Food waste disposal fees vary between 60 and 120 RMB per barrel (240 liters).

Reducing plastic use

Something is being done in this regard, but not much indeed. In 2007, the “Notice on Restricting the Production and Sale of Plastic Shopping Bags”, prohibits the production, sale and use of ultra-thin plastic shopping bags, implements the paid use system of plastic shopping bags and improves the recycling level of waste plastics.

The “Measures for the Supervision and Administration of Food Safety of Internet Catering Services” enforced in 2018 encourage third-party platform providers of online catering services to provide degradable food containers, tableware and packaging materials.

In 2018, SAMR issued the “Food Safety Operational Regulations for Catering Services” to encourage catering service providers to reduce the use of disposable tableware. It is recommended that plastic materials shall not be used as containers for hot foods, and disposable containers should not be reused. The disposable containers and tableware should be made of materials that meet the food safety requirements, and degradable materials are preferred.

However, in practice, these recommendations are not duly matched by sanctions and/or rewards.

Kitchen waste disposal

 This is a key issue, due to its environmental and food-safety consequences.

The regulatory framework of food waste disposal includes several national and local regulations.

Food Safety Operational Regulations for Catering Service of 2018 provide detailed regulations on the management of food waste, including containers, facilities and signs for waste storage, classified disposal of waste, and waste management registers.

Before handing over the food waste, food service providers shall inspect the qualification certificate of any kitchen waste collector shall be obtained and retained, and a contract of shall be signed with them to clarify their respective food safety responsibilities and obligations.

A kitchen waste register shall be kept for the records, and a food waste disposal account shall be established to record in detail the disposal time, type, quantity, and transporter of the kitchen waste.

The “Opinions on Strengthening the Improvement of Waste Oil and the Management of Kitchen Wastes” also provides detailed regulations on the food waste management, including regulating the collection and transportation of waste, establishing a waste management account and punishing the illegal acts.

At the same time, it also proposes to promote the utilization and harmless treatment of kitchen wastes, clarify the responsibilities of various departments, implement and strengthen supervision, inspection and publicity and education for correct disposal of food waste. In particular:

  • Kitchen waste generating units shall establish a management system for the disposal of kitchen wastes, and classify the kitchen wastes.
  • It is strictly forbidden to dump kitchen wastes directly into public waters or into public toilets and domestic garbage collection facilities.
  • Kitchen waste shall not be handed over to the kitchen waste collection and transportation unit or individual that has not been approved or filed by the relevant department.
  • Livestock shall not be fed with kitchen waste that has not been harmlessly treated.
  • Kitchen waste shall be transported sealed in containers with kitchen waste logo, and leakage during transportation shall be avoided.
  • Any unit that produces, collects, and disposes kitchen waste shall establish an account, recording the type, quantity, destination, use, etc. of the kitchen waste, and report regularly to regulatory authorities.

Sanctions for failure to dispose food waste in compliance with the regulations go up to 50,000 yuan; if the circumstances are serious, the license will be revoked.

Strict enforcement will be key to reduce the problem of “unofficial” disposal channel.

ANY NEW SOLUTIONS?

 First tier cities are trying to find new approach to the food waste issue. Landfills shall cease to be used in Shanghai by 2020, while alternatives to incinerating plants will also be searched.

As highlighted by the report, possible options for the future recycle of food waste may be earthworm composting (worms and their casting are soil conditioners and compost) – i.e. food waste becomes feed for worms, which are then used as soil conditioners or organic compost in agricultural activities. See some interesting stories about insect farming here

Another use may be for microorganism composting, i.e. decomposition through microorganism and conversion into microbial fertilizers.

However, while new technologies are being developed, a regulatory framework for the byproducts from these processes shall be created in order to allow legitimate their trade as fertilizers.

Meanwhile, enforcement of current regulations shall be improved.

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Shanghai city is doing efforts to improve its population’ dietary habits.

In recent years, the threat of chronic diseases related to dietary nutrition to residents’ health has become increasingly prominent.

Shanghai Municipal Center for Disease Control and Prevention launched the “Monitoring of Diet and Health Status of Shanghai Residents” in 2012-2017. The result is a Monitoring Report of Diet and Health Status of Shanghai Residents (2012-2017)”  which show that the dietary structure of Shanghai residents is not reasonable, mainly due to excessive intake of livestock and poultry meat, oil and salt, and insufficient intake of cereals, fruits, vegetables, milk and soybean. This lead to both nutrient deficiency and nutrient excess issues. Overweight and obesity problems are becoming prominent, also amongst children and teenagers.

The Monitoring Report also shows that – compared with the recommended intake by Chinese Dietary Guidelines (2016) – Shanghai population has an excessive intake of livestock and poultry meat, cooking oil and salt. In general, from 1982 to 2012, the intake of livestock and poultry meat, fruits, milk and soybeans, cooking oil had risen, while intake of other foods had declined.

In this scenario, Shanghai Health Promotion Committee (a department of Shanghai Municipal Health Commission) published a Dietary Knowledge Reader aimed at guiding the public to to improve the nutritional status of Shanghai residents and reduce or prevent the occurrence of chronic diseases through a better diet.

The Reader is divided into seven chapters.

Chapters 1 to 5 respectively focus on five types of food: cereals and tubers, vegetables and fruits, fish, poultry, meat, eggs and other animal foods, milk, soybeans and nuts, cooking oil and salt.

Each chapter explains the suggested average daily intake of food for Shanghai residents, the nutritional elements of each type of food, and some suggestions for healthy cooking and eating those foods.

Cereal and tubers

The Monitoring Report shows that the average daily intake of cereals and tubers per adult in Shanghai are 189.6g and 14.5g, which are 30.5% and 71.0% lower than the recommended intake.

From 1982 to 2012, their intake decreased significantly. Cereals and tubers are the main sources of carbohydrates and various nutrients. The Dietary Guidelines for Chinese Residents (2016) recommended that adults should consume an average of 250-400g of cereals and tubers per day. Refined rice and noodles lose about 70% of the vitamins, minerals and most dietary fiber in rice and wheat, so the Guidelines promote eating wholegrains, mixed beans and tubers.

Dairy products

The Monitoring Report shows that the average daily intake of milk per adult in Shanghai is 97.2g, which is 67.9% lower than the recommended intake.

From 1982 to 2012, the intake of milk in Shanghai residents has risen. Milk (as well as other dairy products: yoghurt, cheese, milk powder, etc..) is a good source of protein and calcium. Adults should take in milk and dairy products equivalent to 300g of fresh milk every day. People who are lactose intolerant can drink milk in separate sessions (no more than 250ml at a time), or switch to yogurt, but shall not drink milk on an empty stomach. When choosing yoghurt, consumers should pay more attention to the content of protein and carbohydrates, and thickeners added within the national standard will not affect human health.

Others

Chapter 6 is about sports and drinking water. This chapter points out that the adult population and overall overweight obesity rate in Shanghai is 44.1%, and that of children and adolescents is over 25%. In order to promote energy balance and maintain good health, the chapter recommends that we should develop the habit of daily exercise, drink 7 to 8 cups of water a day, and drink less sugary drinks.

Chapter 7 is about how to balance the nutrition, taste and safety in daily diet. This chapter suggests, amongst others, minimize the consumption of foods that contain food additives. It also encourages consumers to cook food at their home as much as possible.

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Sale of home-made food is becoming increasingly common in China – at least in first tier cities.

More and more we see we-chat accounts, websites or even just…telephone numbers that can be contacted to purchase the widest variety of home-made products. This is being done not only by Chinese persons, but also by a lot of foreigners living in China and with passion for food: home-made cheese, yoghurt, sauces, grounds, drinks, etc..

Usually the pattern is as follows: it all start as a personal hobby of someone rather gifted in cooking, its friends start to appreciate and the cook starts to share with them and acquaintances its home-made delicacies.

A chat is created on we-chat and pictures are posted regularly on the new-cooked products.

Other times we have a chat whereby people can purchase imported products (cheese, meat, other delicacies), selected and scouted from the chat’s administrator.

However, from the moment when it evolves into a (even simply structured) business and the cook actually charges a price for this and arranges deliveries, it all becomes – legally – much more complicated…

Home-restaurants, home-cooks, home-food suppliers are still an unregulated industry, therefore they need to comply with general requirements for food industry of the corresponding category.

First of all, we have the rather complex e-commerce compliance: under the new 2018 E-Commerce Law, the administrator of the chat can be qualified as “e-commerce operator” (电子商务经营者) and – as such – it should comply with the registration obligations provided by the law (article 10) – only exception is for those who sell self-produced agricultural products, un-processed or with very basic processing (washing, slicing).

E-commerce law also requires from the e-commerce operator tax compliance as well as license compliance (i.e. the operator shall have all the licenses required to perform that activity).

This brings us to the second and even more sensitive issue: selling food and cooking to customers requires duly-issued food licenses, and no exceptions apply for informal/simply structured sales through we-chat groups of friends/acquaintances. We have been enquired several times from home-based cooks on how their business can become legitimate. Very simple: the correct food license shall be obtained. This requires a company, and this requires also the careful choice of license.

Example: online sales of steaks personally cut/sliced by the seller (usually the chat administrator) should and could be done under Food sales operator license/retailer (exclusively online)/bulk products (including bovine, swine, ovine); a person selling home-made-sauces should apply – for example – for a catering license/restaurant (exclusively online)/cooked food or catering license/onsite made-and-sold (including  online)/hot food.

For other products with more sensitive making process (such as fermented foods, etc..) authorities sometimes require that a production license shall be used, as this would guarantee a better equipped facility to prevent any possible safety hazard.

Of course this creates a cost issue, as getting any kind of food license involves securing a food processing location duly equipped and compliant with the specific provisions applicable to that kind of license.

It is not rare that – in order to reduce this issue – home-based cooks choose to cooperate with duly licensed companies by cooking in their facilities and thus enjoying coverage by their food license. The licensed company usually happens to be an online seller of fresh food (we see more and more of those in the market, and coopeating with home-based cooks can help them to differentiate from competitors), restaurants,  in some case (rarer) factories.

This may cause of course other issues: know-how sharing (both technical, as the food processing method and know-how will also be disclosed to the food licensed company, and commercial, as the cook will not be able to sell directly to its customers, and all sales will be done by the licensed company, which means that all its client database will be basically disclosed to the food-license company) as well as commitment on minimum volumes are the most typical ones.

Time would seem mature in cities like Shanghai for having platforms duly licensed and equipped to provide legal coverage/incubation to those “freelance” food business…. Certainly, if the volume of this business keeps growing, it will be soon time for the law-maker to provide regulation.

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China is in the process of updating two crucial standards – the cornerstone of its food labeling regulation. Two non-final drafts were disclosed at the end of December 2018, and they seem to introduce several important modifications concerning:

  • QUID for ingredients;
  • Positive and negative claims;
  • Allergenic ingredients labeling;
  • Additive declaration
  • mandatory content of nutritional label;
  • exemptions to nutritional labeling;
  • error ranges in nutritional declaration;
  • Recommended serving;
  • allowed nutritional claims (content, comparative, function);

We will talk about it in this webminar on February 15, in cooperation with Foodlawlatest !

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On November 2018 the new draft GB 7718 was released for public comments.

This is a key regulation for food industry, as it is the cornerstone of the food labeling regulation in China.

Although the draft may be different from the final version – which may undergo last modifications subject to the public comments that will be submitted, likely in very high number – this draft needs to be already well studied by food companies and food operators.

This new draft basically:

  • Consolidates some provisions previously scattered in other pieces of regulation;
  • Introduces some new key provisions;
  • Adjusts some of the previous provisions.

Some of the changes were largely announced, others come more unexpected. Impact on food companies’ labeling behaviors may be rather strong.

This post wants to offer a “tasting” of the most important features of this new draft.

For all those “hungry” to know what the changes will be, let’s see what the new draft brings on the table and enjoy our meal!

ENTREE

We start with some technicalities.

Minimum fonts size for mandatory labeling has increased from 1.8mm to 2mm for foods with larges surface not smaller than 40cm2 (previously 35 cm2). This may have some important impact at production level and also in the design of labels (especially for those already very dense).

In case of co-packing production, labeling of both principal and co-packer is now mandatory (the option of labeling exclusively the principal still remains, however only in case co-packer belongs to the same group). We had however seen this already in the Shanghai Food Safety Regulations in 2017, so we knew it was coming.

Mandatory information is expanded to include also statement of ingredient containing allergenic substances (wait for main course n. 3 to arrive, if you want to taste more) as well as (for imported products) corresponding Chinese translation of information in the original label related to edible amount for the group of people for whom the food is suitable (however let’s pay attention here as this information is sometimes covered by mandatory Chinese regulation, such as for example in some novel foods), edible method and other items (which otherwise would be only recommended).

Does it mean that – besides basic “instruction on how to use” also suggested recipes are now to be mandatorily translated? Maybe not, but this remains somewhat vague…

Declaration of additives has also some technical changes – not always totally clear though.

MAIN COURSE

Now the big dishes arrive!

1 – QUID

It seems that the new draft aims at promoting use of positive claims, while basically forbidding any kind of negative claim.

The new draft finally provides better explanation for when QUID, i.e. quantitative labeling of ingredients, is necessary.

Basically, special emphasis does not occur (and therefore QUID is not required) if an ingredient:

  • is mentioned in allergenic substances declaration or other warnings;
  • is presented only in usage or food suggestions (e.g. recipe, pairings, etc..);
  • is presented only to describe the sensory properties, such as shape, flavor, taste and mouthfeel of the product (e.g. strawberry yoghurt).

If an ingredient is included in the name of the food product, QUID is necessary unless:

  • the name of the food is provided as such (i.e. inclusive of the ingredient name) by regulations or standard;
  • the quantity of the ingredient in the final product or in the manufacturing process is regulated by a standard;
  • the ingredient is presented only to describe sensory features properties, such as flavor and taste.

2- NEGATIVE CLAIMS

This is likely to be the most “hard to digest” part of the meal, directly served by article 4.4.2.1: negative claims are expressly forbidden for (i) food additives, (ii) contaminants and (iii) substances not allowed to be added or existing in food.

This should mean the end of any kind of “colorant-free”, “preservative-free”, “additive-free” and maybe even “Pesticide free” claims.

If this was not enough, we have another provision forbidding tout-court any negative claim whatsoever – however, isn’t this just conflicting with the provision of article 4.4.2, which acknowledges that a food label may stress the low presence or absence of a certain ingredient?

We hope that some clarification may be given in this regard. Is a “palm-oil free” (or a “sugar-free”) claim to be considered illegal under the new draft?

3 – SPECIAL GROUPS OF PEOPLE  

It is forbidden any reference to special group of people except for:

  1. Foods subject to special approval;
  2. Foods for which specific group of people are declared in relevant standard;
  3. Foods which can meet the special nutritional needs of special group of people, as supported by scientific data.

This will likely limit claims such as “good for children”, “ideal for athletes” etc…

SIDE DISH – INGREDIENTS

Pictures of raw materials are not allowed when the food contains only their fragrance. Let’s see how many jams, yoghurt etc. will need change of artwork.

The new GB simplifies the labeling of some ingredients such as microbes used during production for fermentation purpose (“fermenting microbe” or “microbial starter”) and juices not exceeding 2% by weight and not singly present in the food (“fruit juice”, “vegetable juice”, “fruit juice concentrate”, etc..).

  VS 

 

Imported prepackaged foods may optionally declare – beside country of origin of the product – also the country or region of origin of their raw materials/ingredients – which is rather easy for single-ingredients product such as olive oil, but more tricky for others such as bakery products or even sauces, as the draft standard does not mention any reference to the characterizing ingredients or so.

DESSERT – ALLERGENS

This will be easier to swallow – if you are not allergic of course!

Everybody was expecting it and almost everybody had already complied with this since long time. Now however it is becoming official: mandatory labeling information is expanded to include also labeling of ingredients containing allergenic substances (the big-8 which were formerly recommended).

Labeling remains voluntary for other allergenic substances than the big-8, or for possible cross-contamination occurring in shared production plants, or in case non-protein components of the big-8 are used as ingredients.

FINAL CONCLUSIONS WITH A GOOD COFFEE

The meal seems big, tasty, but some dishes are indeed hard to digest.

Let’s see however how this goes, i.e. how the final text will look like.

We expect a lot of comments will be submitted to reduce the scope of those provisions forbidding negative claims, and possibly those forbidding use of pictures for ingredients of which only flavorings/essences are used.

It is not unusual to have major changes after the public comments phases – for example, let’s remember that in 2015 a draft of Implementing Regulation of Food Safety Law had been released for public comments, and it included a provision which sent the whole import-food industry into panic (basically forbidding sticker labels, thus implying that any imported food product will need to be directly printed in Chinese in the country of origin), only for such provision being deleted in the next draft circulated after.

So, our guess is that food companies shall start to re-think their labeling as if the current draft was to enter into force; however, of course, as for any implementation they should wait for the final release of the standard.

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Recently we had a lot of debate was sparked by the news that on PINGDUODUO platform it was possible to purchase Beingmate milk powder products (whose original price would be 888 RMB) for only … 7.5 RMB.

The first obvious concern by customers was whether those products were original or fake, or (maybe even worst) whether they had some kind of defect justifying such dramatic slash in the price.

PINGDUODUO then issued a statement to confirm that these products were original and had no quality problems, and that the reason why they were sold at such cheap price was that they were near the end of their best-before date.

It is obvious that expired products are not allowed to be sold; however, what about nearly-expired food?

Well, this kind of products – which allows consumers to purchase real products at low price – certainly do have a market rather considerable in size, both online and offline.

Many food products near the end of their shelf life are sourced

by online merchants from offline physical stores, where statistically most consumers are rather reluctant to purchase prepackaged with shelf life shorter than 6 months.

This helps brick-and-mortar retailers to clear inventory and reduce their loss, while online dealers offer them at an enticing price to the broader audience of online shoppers.

How is sale of “nearly expired food” (in Chinese: 临近保质期食品) regulated?

As we have seen in a previous post, the shelf life date is defined under GB 7718 as “the date which signifies the end of the period under any stated storage conditions on the label of the prepackaged food during which the quality of the product will be maintained and the product will remain fully marketable and retain any specific qualities for which tacit or express claims have been made”.

“Nearly expired products” are therefore legally to be considered as “non-expired products”, meaning that they remain fully marketable.

At national level, we do not have a clear definition or standard for “nearly expired” food.

However, this changes when we check local regulations. Some local governments such as Beijing, Shanghai and Guangzhou have introduced some legal provisions concerning “nearly expired products”.

Food Safety Regulations of Shanghai Municipality of 2017 require that food producers and traders shall establish a management system for food and food additives near the end of self-life and mark in a very visible way concentrated storage, display and selling of food and food additives near the end of shelf life.

The main aim of the provision appears in our opinion to prevent that food products – once expired –  shall be recycled for human use, rather than to inform customers that the product they are about to purchase is about to expire.

This is however covered by another AIC regulation in Shanghai (a 2012 “Proposal to seriously implement the requirements of AIC, take the initiative to accept supervision, and effectively strengthen the management of food nearly expired”), which requires that supermarkets shall prepare an area where the “nearly expired food” shall be displayed, with clear notice in this regard. Specific warning should also be provided when nearly-expired food is sold jointly/tied to “normal” food. Very important, this Proposal also specifies the thresholds for a product to be considered as “nearly expired”: 45 days prior to expiry date (if shelf life is longer than 1 year); 20 days prior to expiry date (if shelf life is between 6 months and one year); 15 days prior to expiry date (if shelf life is between 90 days and 6 months); 10 days prior to expiry date (if shelf life is between 30 and 90 days), etc.

Another 2017 AIC regulation in Shanghai specifies thresholds and obligations for management of nearly expired food by food producers and traders.

In Beijing, as well as other cities (Kunming, Guangzhou) or provinces (Zhejiang) we have other similar regulations, which however all differ between each other in terms of thresholds – meaning that food companies having operations in different cities or provinces may have to adopt all such different standards (for example, in Beijing any food with expiry date less than 15 days is considered nearly expired starting from 4 days before expiry date; however in Guangzhou products with shelf life between 2-15 days are considered nearly expired one day before the expiry date; in Zhejiang products with shelf life between 10-30 days are nearly expired 2 days before the expiry date, while those with shelf life less than 10 days are nearly expired the day before the expiry date).

As for online sale, it seems that we do not have clear provisions about noticing consumers about products “near shelf life”. However, providing correct information in this regard will help online operators to avoid legal disputes with consumers – who may possibly complain if the product is actually delivered after on upon expiry of shelf life, thus invoking breach of mandatory provisions of consumer protection law, or quality law.

Cases such as the above-described PINGDUODUO one are not rare, and they are usually resolved through negotiations (and by granting some kind of compensation/refund to the consumer).

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I was recently invited to attend a Global Dairy Forum organized in Shanghai during FHC exhibition on November 13.

In particular, I was requested by organizers to deliver a speech outlining the market performance of Italian cheese industry in China. Despite this topic being out of my area of practice, thank to the help of Italian Dairy Industry Association as well as clients working in this industry I was able to collect some interesting data and – for once – it was big fun adventuring into this area – market data.

So, for once, this post will not be about regulatory/legal topics. However some of this blog’s readers showed me their interest for this content and encouraged me to publish it, so… here it is. Let’s call it a little special post due to special events…

It is well known that cheese is amongst the most difficult food products to seel on the Chinese market. The main reason is that Chinese are not used to this food and therefore – as of now – a very narrow slice of Chinese consumers is fond of cheese.

Yet numbers show significant growth.

According to data shared by several speakers at the recent Global Dairy Forum held at Shanghai during FHC on November 13, 2018, Chinese cheese market is currently dominated by New Zealand (52%), Australia (18%) and USA (10%).

Then come EU countries.

According to Eurostat (COMEXT) data, in 2017 the first European Country exporting cheese to China is Denmark.

Italy comes second – although I learn that data from other sources put France ahead (there is indeed an eternal competition – also in cheese – between those two countries!) With more than 3,000 tons out of 18,000, Italy is the second European supplier in China, accounting for 18,72%.

Italy export in China is even better in 2018 (first 6 months), whit 2,264 tons out of 11,474 tons in China (19.73%).

Clearly, from EU cheese industry perspective, China is not yet a top destination market.

In 2017 the main destination of EU cheese were still USA (more than 140,000 tons), Japan, South Korea and Switzerland, China being on 11th position (with around 18,000 tons) right after Lebanon, Chile and U.A. Emirates. The same seems to be the trend in 2018, with China still on 12th position for the first 6 months of this year and 11,000 tons of cheese from Europe.

Even less so from Italian Italian industry perspective.

In terms of value, in 2017 France is the country that spends more to buy Italian cheese (517million euro) covering 20% of the export value, then Germany (424 million euro/16%), USA and UK (287 million euro/11% and 240 million euro/9%). In the top 10 we also see Spain, Switzerland, Belgium, Netherlands, Austria and Japan (from 5% to 2% of export value), while China ranks 21st with 16 million euro (1% of export value).

In terms of volume, the ranking is the same, with France as main destination country (21% of total Italian export volume) and China down to 28th place (1% of export volume).

However, if we look at the growth, China market numbers seem more ….cheesy.

In China imported in 2009 10,700 T of cheese, while in 2017 it imports 109,000 T of cheese.

Italian cheese export to Cina grew +40% in 2017 compared with 2016. Impressive number if compared with same period worldwide growth of EU (+3%) and Italian cheese export (+6%).

What are the most exported Italian cheeses to China?

Mainly fresh cheese like mozzarella (frozen), mascarpone. After those we have ricotta, Parmigiano Reggiano and Grana Padano, Provolone, grated cheese, Fiore Sardo and Pecorino. Import of Gorgonzola – as any other blue cheese – is slowly recovering after it dropped, due to the ban on importation of cheese with penycillum roquefortii between June-October 2017.

This is rather different from the top export from other countries: mozzarella (blocks and/or shredded) for New Zealand, Australia, France; Cream cheese for USA.

At the end, Italian and European cheese in general is constantly growing in Cina having a great success in China, but still there are some issues.

Growth is mainly driven by HORECA channel – luxury hotels, restaurants, restaurant chain stores (pizza chains, fast food, etc…). On the other hand, retail sales are still very low – on average it is estimated that every Chinese eats 100g cheese per year …. (basically, the same quantity I daily grate on our pasta). This explains why mascarpone (widely used as ingredient for tiramisu and other dessert) ranks so high in Italian exports.

The key to improve retail sales is of course educating Chinese consumers to cheese – it will happen for sure, but of course it is a time consuming process.

Other challenges include tough competition from Australia and New Zealand, by far market leaders (70%), which enjoy free trade agreement and are already very well positioned in the market.

Very interstingly, at the Global Dairy Forum some Chiense consumers – while acknowledging the high reputation enjoyed by EU cheese industry – at the sane time pointed out that EU cheese industry seems having a rather conservative approach to their product, while a market like China may grant recognition to product innovation (such as high-protein cheese sticks for children, as a Chinese cheese-loving mum said).

Finally, this market is very fragmented, and it is crucial for cheese companies to identify a clear strategy and find the right partners to increase the export of Italian cheese in China.

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Today we focus on gluten and “gluten –free” food.

Although not yet as popular as in Europe or US, gluten free food starts to appear in China as well. We mainly see import products using claims such as “gluten-free” (无麸质) and similar, and they try to set the trend – i.e. to lead gluten-free awareness for Chinese consumers.

We researched the legal status of this kind of claims.

Gluten is a protein, so basically gluten-free is a claim related to a nutrient, not to an ingredient.

As such it should be on principle be not subject to GB 7718 but rather to GB 28050  which – however – does not include any mention to gluten in its positive list of allowed claims.

If this would be it, we should consider that this kind of claim is – in theory – not allowed in China.

However gluten is somehow mentioned in food regulations.

A first reference appears in GB/T23779 issued in 2009 by AQSIQ (“Allergens in prepackaged foods”), which includes – amongst the substances that may induce allergic reactions – gluten-containing grains and related products.

This reference is then taken into GB 7718 “General Rules for the Labelling of Prepackaged Foods” which recommends (!) the labeling of foods containing sensitizing substances such as gluten.

A real regulation of “gluten-free” claim however appears much later. A 2015 standard specifically applicable for inspection of gluten allergen ingredients in prepackaged food for export (however, not for import or for domestic trade) makes clear reference to STAN 118-1979 in order to verify compliance of gluten-free claims. This regulation sets a maximum limit for gluten-free claim of 20 mg/kg.

It appears – although in a not very explicit way – that STAN 118-1979 has become applicable piece of regulation also in China.

Beside the abovementioned referral, we also notice that a Chinese version of this regulation is published on the official SAMR/CFDA website. China is member of CODEX ALIMETARIUS COMMISSION which approved such regulation.

This gluten-free claim – rather new in China – has however encountered some…misunderstanding from some courts though.

We had a case where a Court considered mislabeled a product claiming “without gluten” as the ingredient list did not contain any referral to gluten.

The Court in fact qualified “gluten” as “other nutrient content” according to Article 4.2 of GB 28050-2011, and accordingly required that its content should be labeled on the list.

Basically, this court required that a “without gluten” needs to include “gluten” as nutrient in the nutrition label, failing which the specification in nutrition list would mislead consumers (since “麸质” is very important to a particular group of people who are allergic to gluten).

As a result, the court supported the consumer’s proposition.

This seems frankly speaking questionable to us as (i) GB 28050 has a very exhaustive list of nutrients that can be labeled, (ii) this list is clearly blocked and cannot be modified, (iii) gluten is not on such list, (iv) there is therefore no guideline on how gluten should be labeled (which measure unit? Which rounding? How to calculate its NRV? Etc..).

Moreover, if we consider that China has in some way defined the threshold for Gluten Free, we can also consider that there is no risk of misleading customers.

This in our understanding confirms that – more and more – a clear standard for gluten free products is needed in China.

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On August 6, 2018, CAPPMA (China Aquatic Products Processing and Marketing Alliance) issued a rather controversial draft standard about “Salmon for raw consumption”. The draft is aimed at regulating “definition, requirements, inspection methods, inspection principles, label, indications, packaging, transportation and storage for raw salmon”. CAPPMA is a non-profit industry association gathering Chinese aquaculture industries. This standard shall be applicable to raw salmon products that are processed directly from fresh and frozen salmon.

The controversial part of this standard is its article 3.1, whereby it defines “三文鱼 – salmon” as “a general denomination for the varieties of salmonidae, which includes Atlantic Salmon (Salmo Salar)、rainbow trout, silver salmon, chinhook salmon、sockeye salmon, chum salmon, humpback salmon etc.”.

Find the intruder. Got it, the rainbow trout! How can the rainbow trout be labeled and sold as salmon? This has indeed astonished readers worldwide, following a very well-read article by the Guardian as well as several other websites and newspapers.

It all happened just few weeks after media reported the interesting news whereby most of Norwegian Salmon sold in China is actually domestically-produced rainbow-trout.

In this scenario, on social media and food-experts websites, the main comment was: is China actually legalizing some kind of food-fraud?

We analyzed the standard (still at draft level, so not effective yet) as well the official statement published by the CAPPMA on its website (please find herein our  unofficial translation).

CAPPMA briefly explains that the Chinese term 三文鱼 (pronounciation: “Sanwenyu”) “is not a scientific name … but rather a commercial common name for some kinds of fish …. . In origin, it comes from a translation of the English term “salmon” in HK and Macao. In origin, “sanwenyu” was used only for farmed Atlantic salmon [Salmo Salar]…. Later on, the domestic trout farming began to develop. Some restaurants in the vicinity of the trout farms sold the trout under the name of the sanwenyu since several decades. Because sanwenyu is a common name and has no scientific definition, it has been used until now. The reason why people are controversial about the term “sanwenyu” is that some people still believe that “sanwenyu” is only Atlantic salmon (Salmo Salar). Others believe that “sanwenyu” is a common name for several salmons and trouts, and debate arise…”

Briefly, if we read carefully CAPPMA statement, we understand that CAPPMA aims at regulating what it deems a language issue, which has created vagueness amongst consumers.

In the amazing richness of Chinese language, we in fact can see that:

  • “Salmon” is officially/scientifically translated as 鲑(pron: Gui);
  • “trout” is officially/scientifically translated as 鳟 (pron: Zun);
  • “Salmonidae” (the family to which both salmon and trout belong to) is officially/scientifically translated as 鲑科 (pron: Gui ke);
  • “Salmoninae” (the subfamily to which both salmon and trout belong to) is officially/scientifically translated as 鲑亚科 (pron: Gui ya ke)

From this perspective, it shall be agreed that the term “sanwenyu” although widely used is in fact not a scientific term. In practice, however, in real daily life, “sanwenyu” is the most used term by Chiense consumers to refer to salmon, and as a Mandarin-speaking foreigner in China since more than a decade I have to admit that I only knew “sanwenyu” as translation for “salmon”.

Yet, some linguistic researches eventually made me realize that “sanwenyu” is indeed also used in practice to refer also to trouts (if you want to test your Chinese capabilities, please refer to this link, amongst others).  On some – even major – Chinese dictionary, the term “sanwenyu” does not feature.

WHAT NEXT?

First of all, it remains to be seen whether the current draft standard will enter into effect or whether modifications will be input.

Secondly, we shall notice that the current standard requires quite clear (article 7.1) labeling requirements, whereby beside the generic product name as “sanwenyu”, it shall be specified the actual fish species (whether rainbow trout, or Salmo Salar, etc…).

If we assume that “sanwenyu” is actually in practice a vague term, at least this draft standard is aiming at regulating its use – even by acknowledging/including the existing vagueness.

SOME CONCLUSIONS

CAPPMA is intervening on a non-regulated term – yet widely used amongst consumers: “sanwenyu”. Briefly, it is acknowledging the vagueness of the term and – in a way – is making this vagueness becoming official – redefining in an extensive ways its meaning.

Most negative comments coming from non-Chinese sources stressed the fact that CAPPMA standard had been adopted on the main reasons that CAPPMA considers trout very similar to salmon from biological/taxonomy perspective. The message was: “China allows trouts to be called salmon because trouts are comsidered similar to salmon”.

Technically, by analyzing the draft standard and the suporting explanation by CAPPMA, this does not seem to be the main point, in our opinion. What is true is that China is now (if the draft standard will enter into force as such) allowing trouts to be called “sanwenyu”, which is a term usually referring to salmon, but not only (at least according to some/several persons in China).

If we carefully read CAPPMA explanation, the species similarity from taxonomic perspective is only a part of their grounds, while the fundamental part remains the claim – by CAPPMA – that “sanwenyu” is not the scientific translation of salmon and actually has become a vaguely-comprehensive term. So CAPPMA seems mainly to address a linguistic issue – which has of course business implications.

Of course, the use of english term “salmon” within the text of the draft standard as suggested translation of “sanwenyu” is incorrect and contributes to the chaos and disputes…

Questionable as it is – and I do believe that many Chinese consumer consider that the term “sanwenyu” is not vague and clearly defines only “salmon”) – in any way it seems that what is being done by CAPPMA is definitely not legalization of some food fraud – at least as long as the labeling requirement under article 7.1 will be strictly implemented and enforced.

The name of food on the label shall (according to article 4.1.2.1. of GB 7718) “shall clearly indicate the true nature of the food”.

For now, we can ask ourselves whether this was just an attempt to give legality to existing practices in the industry and to protect Chinese local aquaculture industry? Will the labeling requirements set by article 7.1 of the draft standard be enough not to mislead Chinese consumers? What will their reaction be – from both market behavior and claims against food operators? Will trout sales (and prices) soar?

Let’s sit by the river and wait for fish to come….

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