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28-04-2019

Practical Guide to Exporting Food to China

1.    Introduction

In the discussion of the ongoing trade tensions between China and the US, it is time to realize that it is not raising tariffs that have the most impact on exporting food to China. The economic impact of logistical problems and/or products being non-compliant under China’s food laws and regulations is much higher. It can not only lead to delays in food products entering the Chinese market, but also result in strict regulatory scrutiny for food companies involved. Therefore, it is of essence for every company exporting food products to China, to have a good understanding of the latest logistic opportunities and regulatory requirements. This article serves as an introduction and practical guide to exporting food and food transportation to China. 

2.    Import procedure

According to China’s Food Safety Law 2015 (FSL), the import procedure is usually arranged in the following division of roles:
 
Overseas Manufacturer -> Overseas Exporter -> Chinese Importer -> Chinese Distributor

As  the  FSL prescribes,  the  overseas  manufacturer  and  overseas  exporter  are  responsible for  their  exported  food  products  and  their  compliance  with  Chinese  national food safety standards (mainly including product standard and general standard such as  food labelling requirements). How-ever, the importer is the one responsible for setting up its own audit system to keep information of the overseas food producer and exporter as well as import and sales records. In practice, the obligation of the importer is to ensure that the overseas companies and their imported food products comply with Chinese food safety regulations, that  documents  of  proof  are  sufficiently  provided  during  import,  that  import  records  are  kept  track of,  and  that  it  is  the  obligation  of  the  importer  to  inform  the  consumers  and  make  recalls  when  non-compliant  food  or  proof  for  unsafe  foods  is  found.  In  other  words,  the  domestic  importer  also takes  full  liability  for  the safety of the imported food products. 

For the Chinese distributor, there are no distinctions in its responsibilities regarding imported food and non-imported food. The distributor shall check the qualification proof documents during procurement and keep an inspection records system including information such as the description and date of manufacture. It also falls into distributor’s liabilities to properly store food and conduct regular inspection so as to ensure its safety.

All imported products are subject to inspection and quarantine by the General Administration of Cus-toms, P.R.China (GACC)). If a product falls into the List of Entry-Exit Commodities Subject to Inspec-tion and Quarantine promulgated by GACC, inspection and quarantine is required during its entry and/or exit of China and a Customs Clearance for the entry and/or exit of goods, issued by inspec-tion and quarantine institutions, shall be provided to customs accordingly. This is a very detailed list and most food items are covered. 

2.1.    Pre-import registrations

2.1.1.    Manufacturer

For high risk food, the overseas manufacturers (including production, processing and storage enter-prises) should register with the Certification and Accreditation Administration of the People’s Republic of China (CNCA) before exporting their food products to China. The categories of food subject to the aforesaid pre-registration system is listed in the Catalogue of Registration and Implementation of Im-ported Food Overseas Manufacturer which will be updated from time to time and currently includes  meat, aquatic products, dairy products and bird's nest products. GACC conducts supervisions and will administer the overseas manufacturers in the catalogue and, if necessary, organizes relevant ex-perts or designated institutions for review.

It is suggested to also check whether the exported food products fall into the special food category, which would generally require additional registrations and/or record-filing procedures with the State Administration for Market Regulation (SAMR). Especially when these special food products (under which are health food products such as vitamins and minerals, but also special food products like infant formula milk and other baby food products) are imported for the first time. 

2.1.2.    Exporter

For all food products, the exporter should file records at the online record filing system of GACC and meet strict documentation requirements.

Besides, exporters must register each shipment online with the GACC for tracking purposes.

2.1.3.    Importer

The importer (regardless of whether it is Chinese-owned or non-Chinese owned) must be established in China with a registered business scope that includes the business activities of importing and distributing food products. An importer must also be registered as a foreign trade operator with the Ministry of Commerce (MOFCOM). 

Additionally, the importers must register each shipment online with the GACC for tracking purposes. 

In order to be able to act as a qualified importer for food products, several licenses and registrations need to be obtained/filed by the importer, such as a business license, food operation license, food importer and exporter registration, etc. 

It is important to note that, in practice many overseas companies use a Chinese partner or agent for the customs clearance and quarantine inspections. Before engaging with a Chinese partner or an agent, it is of essence that an overseas manufacturer or exporter conducts due diligence on the legal existence, registration documents and track-record of such potential Chinese partner/agent. The  dis-tributor  is  subject  to  domestic  requirements  and  inspections  under  supervision  of  the SAMR.

2.1.4.    Distributor

The  distributor  is  subject  to  domestic  requirements  and  inspections  under  supervision  of  the SAMR.

2.2.    Licensing and document requirements

Except for poultry or dairy products, and food items that are generally subject to import tariff quotas (such as wheat, corn, rice etc.), food products entering China generally do not require pre-import li-censing. It is, however, worth mentioning that China has notified the World Trade Organization of its draft Measures for the Administration of Certificates Attached to Foods Exported to China (Measures), which aim to implement a certification requirement for all types of food products. China’s deadline to enforce these certificates is currently set at 30 September 2019, but the EU raised the concern that this new requirements would create a huge administrative burden, which would be disproportionate to the risks involved. The EU stresses that official certifications should be required only to manage real risks, and therefore, should be limited to high-risk products. China, however, holds the view that cooperation among countries is of significance to ensure the safety of global food supply chain, thus allowing a quick clearance, facilitating trade and enhancing consumer confidence. If there is doubt regarding whether certificates should be issued to low-risk foods, then relevant legal basis should be provided to define low-risk foods, according to China. 

Whether or not the Chinese certification and licensing requirements are going to be extended in the future, overseas manufacturers and exporters should be aware of the fact that China maintains strict document requirements for all food imports. 

Before sending products to China, the following documents must generally be submitted (however the documentation requirements may vary by product and by region):

  • Commercial invoice
  • Packaging list
  • Bill of lading
  • Export-certificate from country of origin
  • Hygiene/Health certificate
  • Certificate of free sale
  • Sample of original label
  • Sample of Chinese label
  • Inspection certificate

It is of essence that documentation is complete, because the documents will be reviewed only after arrival of the products in China. Incompleteness of documents will usually result in delays and addi-tional storage costs. 

If food products are being exported to China for the first time, a more extensive import review will be conducted by GACC, which requires a more complicated procedure. However, after the first (succes-sive) import, the process usually becomes more relaxed and straightforward.

2.3.    Labeling 

All food products entering the Chinese market must be labelled in simplified Chinese characters and contain specific information as required by the food labeling standards. A label verification application must be submitted and the label(s) should, ultimately, be approved by the GACC. 

On 26 November 2018, new draft regulations were published regarding the labeling of prepackaged food (currently regulated by the General Standard for the Labelling of Pre-packaged Food, GB7718-2011) and these are expected to come into force soon.  The draft regulations contain even more de-tailed regulations on food labeling with respect to the use of bilingual labels, the ways of showing ingredients, the use of food claims, and the indication of allergenic ingredients. For more information, please click here.

Be aware that the labeling requirements are different for specific food categories. For example, when importing organic food products, a so-called China Organic Product Certification Mark should be obtained before declaration for inbound inspection and quarantine. This mark can be printed on the label after the certification procedure has been completed. 

Manufacturers and exporters are advised to confirm requirements for the labelling of specific goods prior to the dispatch of goods for export to China. 

2.4.    Completion of import procedure 

The import procedure will be completed, i.e. the imported goods will be released, after the issuance of a Sanitary Certificate. A Sanitary Certificate must be issued for every shipment of products. 

3.    Contracting a Chinese buyer

Whether the Chinese buyer of the food products is a wholesaler, hypermarket or distributor, it is al-ways advised to have a detailed sales contract in place. Some important factors that should be taken into consideration when contracting a Chinese buyer:

Due diligence should be conducted when entering into a business relationship with a new Chinese business partner.

Intellectual property rights should be registered with the China Patent & Trademark Office be-fore starting any business in China. When contracting a Chinese partner, possible intellectual property license rights should be clearly defined.

It should be carefully identified which body of law and which court system will govern the contract’s provisions. Certain issues can only be governed by Chinese law, including aspects of intellectual property ownership and insolvency. 

  • International Commerce Terms of Sale (Incoterms) should apply to the delivery of goods. The use of Incoterms reduces or eliminates uncertainties from differing interpretations in contracts. 
  • Chinese courts cannot accept monolingual foreign language contracts such as those written exclusively in English. It is of essence to specify which language is the controlling language in a bilingual contract.
  • Payment conditions should be included. The usual payment conditions include Letter of Credit (L/C), Telegraphic Transfer (T/T), Demand Draft (D/D), Documents against Payment (D/P), and payment on delivery. 

It is strongly advised to engage legal specialist to assist in drafting a contract incorporating both mandatory Chinese law as well as tailor made solutions.  

4.    Food logistics 

4.1.    Latest developments

On 20 July 2018, the GACC issued the quality and safety report of imported food of 2017. The top 10 import ports in imported food trade values were Guangdong, Shanghai, Tianjin, Shandong, Jiangsu, Liaoning, Zhejiang, Fujian, Beijing and Guangxi, with a total value of 55.55 billion dollars, which ac-counted for 95.3% of the total imported food trade value.

In the coming years, modernization of supply chains remains a key enabler of increasing productivity in the food sector in China. Third-party carriers such as SF Express, YTO and EMS are rapidly becoming regional leaders supported by growth in China. Meanwhile, massive investments are made in cold storage and cold carriage to reduce waste and provide higher-quality food products to China’s middle class.

This paragraph will discuss some key elements regarding food logistics in China. 

4.2.    Setting up a business in China’s Free Trade Zones

Many foreign companies establish their businesses in one of China’s Free Trade Zones (FTZs). These are special economic zones, where customs approval processes are streamlined, which halves the time required, as well as reduces the costs involved, to bring goods into China Each FTZ also intro-duces specific tax benefits, which may lower a company’s tax burden in China. Moreover, companies in the FTZs are usually the first to benefit from industry specific reforms and liberalizations.  

FTZs are organized in areas with geographical advantages (major seaports and international airports). The first one opened in Shanghai in 2013, with several other FTZs following suit, including Tianjin, Guangdong and Fujian. Although Customs regulations are national, the way the regulations are ap-plied differ depending on which Customs gateway is used. Besides, it is important to note that each FTZ focuses on areas and industries of importance to its geographic location and economy. For ex-ample, the Shanghai FTZ focuses on trade liberalization, the financial market, investment and liberali-zation of foreign exchange controls and cross-border investment, whereas the Tianjin FTZ aims to facilitate industries regarding shipping, logistics, aviation and manufacturing.

 
4.3.    Selecting a logistics and transportation partner

It is of key importance to carefully select logistics and transportation partners, when exporting food products to China. Overseas companies are generally advised to select a freight forwarder and im-porter with a global network of company-owned offices, standard procedures, and IT systems that comply with the complicated Chinese export and import regulations. Global logistics providers that have established offices across China are, among others, CEVA Logistics, DB Schenker and Kuehne & Nagel International AG. Next to these global companies, there are freight forwarders and importers specialized in specific routes, such as KLG.

Within China, small parcels are most commonly carried by CTO, YTO, ZTO, EMS (China Post) and SF Express. The two largest ecommerce marketplaces, Alibaba and Jindong, even have their own last-mile delivery infrastructure in place in major cities. For large deliveries within China, common carriers are, among others, Deppon, ZTKY, SF express, ShengFeng, and CNEX.

5.    E-commerce: Selling food products online

On 1 January 2019, China implemented its first ever comprehensive E-Commerce Law (ECL). It is crucial for all companies selling their food products online in China to be compliant to this law. The ECL also applies to cross-border e-commerce and handles, among others, taxation, inspection and quarantine, customs clearance and payment methods. For more information, please click here.

6.    Conclusion

China’s regulatory system on food import can be complex taken into account different regulations across types of food and across regions, ports, local bureaus and even individual officers. Companies are advised to invest time and money in setting up their food logistics and work together with reliable partners in China. 

 

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