In recent years, food safety has become a hot topic in China (PRC), and food labeling is becoming more and more heavily regulated as a result. Food manufacturers and distributors doing business in China should familiarize themselves with relevant labeling requirements and take action to ensure compliance.

PRC Regulatory Framework for Food Labeling
PRC regulation of food labeling is intended to safeguard Chinese consumers’ right to know about the foods they eat, guide consumers in their food purchases and safeguard against unfair competition by preventing counterfeit goods and fraudulent or misleading labeling. The extensive regulatory framework relating to food labeling also serves as the basis for supervision and administration by relevant PRC governmental authorities.

Food labeling in China is currently regulated by a multitude of laws, regulations and standards covering: 1) general product labeling requirements (e.g., net weight, quality certificates, barcodes, etc.); 2) general food labeling requirements (e.g., identification of ingredients, identification of food additives, etc.); and 3) the requirements for specific food labeling information (e.g., nutritional labels, QS marks, etc.), labels for specific types of food products (e.g., health foods, genetically modified foods, green foods, etc.) and labels for food products of different types under the same family (e.g., under the “candy” category, “hard candies,” “creamy candies,” “aerated candies,” etc.). Practically speaking, the inconsistencies among different regulations and standards applicable to food labeling in China often make it difficult to identify applicable labeling requirements for a particular product.

If food labels fail to comply with applicable requirements, the entity responsible for the noncompliant labels may be subject to one or more of the following administrative penalties: 1) an order to make rectifications within a specified period; 2) confiscation, recall or destruction of applicable products; 3) confiscation of illegal income; 4) imposition of a fine (which, depending on the type and severity of the violation, could range from either RMB 500 to RMB 50,000 or 30–500 percent of the value of applicable products); and 5) in severe cases, an order to suspend business or even the revocation of the noncompliant company’s applicable permit (e.g., a food manufacturing permit). In addition to the legal consequences of noncompliance with food labeling requirements, the reputational damage to a company found to be noncompliant can be severe.

Food Labeling: A Recent Focus of Enforcement Efforts
PRC authorities have become increasingly concerned about properly regulating food labeling in China, as evidenced by the promulgation and implementation of a number of food labeling-related regulations and standards in recent years, including: 1) the Provisions on the Administration of Food Labeling, effective as of October 22, 2009; 2) the Provisions on the Supervision and Administration of Inspection of Labels for Import and Export Prepackaged Food, effective as of June 1, 2012; 3) the National Standard: General Principles for the Labeling of Prepackaged Foods (GB 7718-2011), effective as of April 20, 2012 (GB7718); and 4) the National Standard: General Standard for the Labeling of Nutrition Information of Prepackaged Foods (GB 28050-2011), effective as of January 1, 2013 (GB28050). The currently pending draft of the amended PRC Food Safety Law, if adopted, would impose even more stringent food labeling requirements.

Enforcement of laws related to food labeling is also becoming stricter in China. Food labeling noncompliance is usually brought to light through inspections or investigations initiated by relevant governmental authorities, such as the China Entry-Exit Inspection and Quarantine Bureau (CIQ) or the Quality and Technical Supervision Bureau (QTSB). Food safety was previously subject to overlapping supervision by various PRC authorities, including, among others, CIQ, QTSB, the Administration for Industry and Commerce and the Food and Drug Administration (PRC-FDA). Currently, restructuring of the relevant regulatory framework is under way at the national and local levels in accordance with an institutional reform scheme issued by the State Council in March 2013. Upon the completion of such restructuring, PRC-FDA will serve as the main authority responsible for the supervision and administration of the manufacturing and distribution of food products, while CIQ will focus on the safety of imported and exported food products and QTSB will focus on the safety of products related to food processing. Labels of imported foods are frequently challenged by the relevant regional CIQ. According to information published by the General Administration of Quality Supervision, Inspection and Quarantine, from January 2014 to November 2014, 3,148 batches of imported food failed to pass inspection and quarantine procedures carried out by the local CIQ, and approximately 17.7 percent of such batches were found to have failed to comply with food labeling requirements. As an example of a severe recent crackdown, the records of the Guangzhou CIQ indicate that in 2013, 2,365 batches of imported food failed to pass Guangzhou CIQ inspection and quarantine procedures, and 1,551 of such batches failed to comply with food labeling requirements.

Complaints and criticisms made by consumers, relevant semigovernmental or nongovernmental organizations (e.g., consumers’ associations) and the mass media relating to labeling are also becoming more widespread. For instance, in August 2012, a consumer raised claims against Hsu Fu Chi (HFC), a famous confectionary company in China, alleging that HFC was directly adding tertiary butylhydroquinone (TBHQ) and butylated hydroxytoluene (BHT) into certain candy and pastry products in violation of applicable laws, because the ingredients list on the applicable product labels implied such direct addition. HFC claimed the TBHQ and BHT were carried into the final product via edible oil, instead of being added directly, and that it had simply made a labeling error. The initial court judgment ruled against HFC, although HFC has appealed the ruling.

Regardless of the ultimate disposition of the HFC case, it highlights the need for companies dealing with foods to pay close attention to labeling. In light of the potential damage of noncompliance from a financial, operational and reputational perspective, it is critical for food manufacturers and distributors to ensure that their products are in compliance with applicable labeling requirements.

Frequently Asked Questions Related to Food Labeling
Q: What are the fundamental principles of food labeling?

A: Food labeling should: 1) be easily noticeable, durable and legible; 2) be true and accurate, with no false, deceptive, exaggerated or misleading information; and 3) contain no express or implied statement regarding functions of prevention or treatment of diseases.

Q: Which food labeling requirements apply to my business?

A: Different categories of food are subject to different labeling requirements. For example, labeling requirements applicable to prepackaged food and bulk food are significantly different from each other, with prepackaged food subject to more stringent labeling requirements. To take another example, a food product, if imported into and repacked in China, would be subject to labeling requirements applicable to domestically manufactured products rather than imported food products. Therefore, to identify applicable labeling requirements, it is critical to first determine the category that relevant food products would fall into (e.g., prepackaged food or bulk food, imported food or domestically manufactured food).

Q: How can I differentiate between “bulk food” and “prepackaged food?”

A: “Prepackaged food” refers to food products that 1) are prepackaged in a predetermined quantity or fit into packaging materials or containers; and 2) are packed with a consistent quantity or volume indicated for each package. “Bulk food” refers to food, food raw materials and semifinished food products that are not prepackaged, but excludes fresh fruits and vegetables and food products that require cleaning and processing before consumption (e.g., grains, poultry products and aquatic products). However, due to the lack of clear-cut criteria for determining whether a food product is prepackaged, in some cases, it may be practicably difficult to differentiate bulk food from prepackaged food.

Q: How can I differentiate between “imported and repacked food” and “imported food?”

A: Under PRC law, food repacking is deemed to be a form of food manufacturing. Food products that are imported into China and then repacked (“??” in Chinese) are deemed to be domestically manufactured. However, “food repacking” is not specifically defined under applicable PRC regulations. The closest definitional statement may be from the Reply of the Ministry of Health on Several Issues Regarding Food Repacking and Supervision and Administration of Repacked Food, which provides that “food repacking” refers to repacking of food products that were originally packed in bulk packages. Nonetheless, in practice, there appear to be two prevailing yet different interpretations of what constitutes “food repacking.” One view is that if a food product were originally packed, but becomes unsealed and thus directly exposed to air in the repacking process, such product would be deemed to be “repacked.” The other view is that if a food product were originally packed, but is at any time repacked in another package, such a product would be deemed to be “repacked” regardless of whether the product was directly exposed to air during the repacking process.

Q: Can foreign languages be used on food labels?

A: As a general rule, standardized Chinese must be used on all food labels, and when a foreign language is used, the corresponding Chinese characters must follow such text. Under the Provisions on the Administration of Food Labeling, the exceptions to the requirement that Chinese characters be used are specifically limited to registered trademarks only. However, there is some contradiction in applicable standards regarding the exceptions. GB7718 provides that standardized Chinese must be used on the labels of prepackaged food products, and where a foreign language is used, the corresponding Chinese characters must follow except for trademarks, websites and, for imported prepackaged food, the name and address of the overseas manufacturer or distributor. Furthermore, the Responses of the Ministry of Health to Questions Regarding GB7718-2011 (Response to GB7718) provide that when a foreign language is used for mandatory food labeling information, the corresponding Chinese characters must follow, which implies that if a foreign language is used for nonmandatory food labeling information, the corresponding Chinese characters would not be required. Generally speaking, food manufacturers and distributors may reasonably take the position that they should be able to rely on the interpretation of the Response to GB7718. Nevertheless, in light of the conflicting requirements under the Provisions on the Administration of Food Labeling and GB7718, there is still a chance that not including Chinese characters for even nonmandatory labeling information could be challenged.

Q: What are the requirements for ingredients lists?

A: For prepackaged foods, an ingredients list must be included on each food label. As a general rule, all ingredients and food additives must be listed in descending order by weight at the time the food was manufactured. However, ingredients that individually constitute no more than 2 percent of the food need not be listed in any specific order. There are complex rules concerning the identification of compound ingredients and food additives in an ingredients list. Food manufacturers and distributors should be very careful when compiling ingredients lists and may want to consult with experts.

Q: Is a nutritional label required for all food products?

A: As of January 1, 2013, except in certain limited circumstances, a nutritional label consisting of a nutrition table and applicable nutrient information is required for all prepackaged foods. Furthermore, even for certain prepackaged foods that are generally exempt from nutritional labeling requirements, nutritional labels would still be required in certain scenarios (e.g., where a nutritional claim or a nutrient function claim is made on the food label). Food manufacturers and distributors should be mindful of such exceptions and ensure that the nutritional labels are in full compliance with GB28050.

Practical Tips for Ensuring Compliance with Food Labeling Requirements
In light of the complexity of PRC food labeling requirements and the importance of compliance, it is advisable for food manufacturers and distributors in China to:

•    Be familiar with the laws, regulations and standards applicable to food labels

•    Be aware of relevant local requirements and practices governing food labeling

•    Engage professionals (e.g., legal professionals and consultants) with relevant experience and expertise to review food labels before applicable products are introduced into China

•    Establish an internal controls system for labeling compliance (e.g., set up a series of corporate procedures for the drafting, review and approval of food labels)

•    Maintain regular communications with relevant government authorities (e.g., PRC-FDA, QTSB and CIQ) and industry associations

•    Stay updated on the latest legal and practical developments at the national and relevant local levels, including the promulgation and implementation of new and amended national and local standards.

Yingxi Fu-Tomlinson is the office managing partner of Kaye Scholer’s Shanghai office and a member of the Corporate Department. She was born and raised in Shanghai and is among the first small group of attorneys to have received formal legal education in both China and the United States. She has advised multinational corporations, private equity funds and Chinese companies on a wide range of strategic and financial inbound and outbound investment, acquisition, restructuring and joint venture projects in various industries. Yingxi can be reached at +86 21 2208 3610 or yingxi.fu@kayescholer.com.

Vicky Wang is a China associate in Kaye Scholer’s Shanghai office, which she joined in 2006. Her practice focuses on mergers and acquisitions, foreign direct investment, corporate restructurings and hotel management. She also frequently advises clients on general corporate matters, including but not limited to corporate governance, foreign exchange control and product regulatory compliance. Vicky can be reached at +86 21 2208 3609 or vicky.wang@kayescholer.com.