Exports in China
China’s increased wealth has led to an clear increase in consumption of imported food and agricultural products. Chinese imports of U.S. food and agricultural products increased from US$12.1 billion in 2008 to US$25.9 billion in 2012. EU Food and Drink Exports to China is rising as well. This makes China the largest export market for agricultural products.
Entering the Chinese market requires leaving the premise that the sale of foodstuffs is constantly protected by detailed safeguards regarding security, health and information on the food product. In light of this, the entrepreneur who sells food products to buyers abroad must pay strict attention to the conformity of the products, to current regulations and necessary importation procedures.
In the past, one of the most relevant problems had to do with issues inherent to the specific regulations applicable, in the destination country, to the products available for sale. The peculiarity of the subject has brought about anticipating a limit on the warranty obligations charged to the exporter, limiting the responsibility to the obligation to deliver a product that conforms to the current regulations of that country, expressly conferring to the buyer the responsibility to verify the compliance of the food products sold to the regulations of the destination country.
The buyer must provide information about: i) the possible adjustment of the products and their packaging for the purpose of resale in the destination country; ii) necessary importation procedures in that country.
Obstacles to exporting and the importance of labeling
The tremendous growth, in recent years, of the importation of agricultural products in China has brought about numerous obstacles that get between the foreign exporter and the Chines importer/reseller. The greatest obstacles have to do with the complexity of the administrative procedures and the certification system, a system of sketchy authorizations and health restrictions. The legislator has placed the attention on such aspects, providing by means of laws and regulations, quite a detailed set of guidelines
Every agricultural product packaged and imported in China must possess the original labeling in Chinese. The General Rules of Pre-packaged Food Labeling (General Rules of Pre-packaged Food Labeling, 2004), in the second chapter, indicate the mandatory elements the label must contain:
- The name of the product: every word, image, brand or description that identifies the product;
- The ingredients: every substance and additive used in the preparation;
- The date of manufacture: the date in which the food became a final product;
- The expiration date: the date by which the product will keep its quality and in which it will be fully marketable;
- Configuration: the relation between net weight and unit that compose the prepackaged food in the event it is formed by other prepackaged foods.
Besides those elements, the General Standard of Labeling for Pre-packaged Food of Special Dietary Use (2004), has inserted additional madatory elements the label must contain:
- The name of the manufacturer;
- The name and address of the distributing importer;
- Storage dates and instructions;
- The country of origin.
It is good to remember that since October 1 2012 all exporters of agricultural products and wine to China are required to register on the Admnistration of Quality Supervision, Inspection and Quarantine site (AQSIQ), that is also available in English. Registration requires the compilation, on the part of the export company, of an online formula with information about the business and its importers/authorized agents in China.
The necessary documents that the exporter must prepare in order to export their merchandise in China are:
- The bill of sale and order confirmation;
- The invoice;
- The packing list;
- The cargo manifest;
- The bill of lading;
- The shipping notice (from the sender to the importer);
- The certificate of origin;
- The health certificate for exportation;
- A label sample in compliance with Chinese regulations;
- A label sample translated into Chinese;
- The inspection certificate (also required for wood packaging).
The third chapter of the General Rules of Pre-packaged Food Labeling on the other hand indicates the basic requirements that the label must present in order to be considered legal. The label must: i) must be in compliance to food safety standards; ii) must be clear, obvious, indelible and easy to read for the consumer; iii) be supported by true and accurate scientific data; iv) must not be separated from the food product to which it refers; v) be written in Chinese characters (with the exception of the registered trademark) in a correct and legible manner; vi) may also be written using Chinese pinyin or the language of other ethnic minorities, but the size of the words must not exceed that of the corresponding Chinese characters.
The importance of the reputation of the Chinese importer
In order to assure the exportation goes well, it becomes necessary to trust in the reputation of the Chinese importer (or intermediary) since most large clients (hotel chains, large distributors, ex cetera) don’t usually import directly, the use of an importer is the only channel of possible access. The importer has the function to: i) support the prearranging of necessary documentation for export, including the labels; ii) directly provide, or by means of a related company, the license for importation; iii) handle the clearing of customs for the product and the payment of associated fees; iv) directly provide, or through a related company, for the distribution in the internal territory; v) to ensure, in the case that they handle the distribution, all promotional activities, marketing and sales of the product.
Specifically regarding the labeling, the importer can help the exporter in the prearranging/application of labels by means of two different procedures:
a) The exporter provides basic information to the importer that will allow them to create a sample label that conforms to Chinese regulations, obtaining also an informal pre-approval from local authorities. Such a procedure has the advantage that once the merchandise arrives in China it doesn’t need to be handled and allows the labels to be applied to the original packaging with evident results for the imagery.
b) The importer arranges to apply the labels on the arrival of the merchandise in China inside a warehouse. In that case, the exporter sends the merchandise to China and provides the mandatory information for the labels in compliance with Chinese regulations to the importer, who will provide for the printing and application of the labels there in China. This option allows greater flexibility in the event of an error in the prearrangement of the labels, however, it does call for an increase in costs associated with the handling of the product, the use of the warehouse and the hiring of additional services on the part of the importer. This option is recommended for initial shipments or supplies with limited quantities.
Timing and results of customs inspections
At one time in China, arriving at customs, the local authorities would carry out the inspection of the labels at the same time as the other expected verifications of the inspection and quarantine procedure. According to the new regulation they are subject to inspection at the same time as the labels, products, and accompanying documents of the merchandise. In particular the CIQ (China Inspection and Quarantine Service) will check the compliance of the labels to the established requirements and applicable laws and rules of Chinese standards, and will inspect the authenticity and quality of the product.
There are two possible outcomes of the inspection:
a) Positive result: Should the label be found to be in accordance with the rules and standards of Chinese regulations and the product passes the quality inspection, the CIQ will issue an inspection certificate attesting that the product is in compliance with Chinese standards and contains the writing “Label approved”;
b) Negative result: Should the label not be found compliant to the Chinese regulations and whereas laws and administrative regulations do not provide differently, the CIQ could order the destruction of the imported merchandise; otherwise the exporter may submit a return notice to Customs in written form so that they may handle the formalities for returning the merchandise that didn’t pass customs inspections, thereby avoiding their destruction.
The customs and inspection procedure has a length of anywhere between one and three weeks depending on the type of product and the complexities of quality control.
AQSIQ carries out the supervision of food products, drinks and waste material in China, directly or indirectly overseeing thousands of products, such as: chemical products, cosmetics, any element that requires the CCC mark , elements that require mandatory inspection and specialized machinery.
The AQSIQ has 19 internal departments and 15 separate affiliates and participates in the planning and control of the opening of national ports to the outside world; formulates the basic list of products coming in and going out that are subject to inspection and quarantine; administrates the control and liquidation of merchandise coming in and out as regards the environment, health, animal and plant health, and human security; carries out the inspection and supervision of the importation and exportation of raw materials and their packaging; conducts legal inspections and carries out sample tests on unlisted raw materials.
The AQSIQ is responsible for the control and oversight of the importation and exportation of any product specifically indicated as under its authority and any test samples of unlisted materials.
The packing list
This is one of the most useful documents for shipping merchandise since it reports the list of packages containing the merchandise that was shipped, identifying the content of each one and attesting to it’s gross weight, tare weight and net weight. It serves the function of describing the type, nature (cases, cartons, crates, boxes, pallets, bags) and number of packages containing the shipped merchandise, as well as the content of each.
This is a document of utmost usefulness for all aspects of shipping merchandise and in particular for warehouse staff and the shipping agent for the preparation of the exportation statement and transport documents.
The inspection certificate
The merchandise inspection certificate is a typical document of international commerce that attests to the qualitative and quantitative standards of the goods for sale. Its function is to assure the buyer/importer that the goods bought really exist and conform to the quantity, weight, quality, and characteristics agreed upon, as indicated in the contract, purchase order, invoice or any other contractual document.
The certificate is issued by a company or other agency that specializes in inspections, audits and the handling of goods and certifications. Such guarantee of conformity will be much greater and thorough than the controls requested by the inspection firm, in relation to the type of goods themselves.