ARMS WIDE OPEN, BEIJING WELCOMES U.S. CONSUMER PRODUCT

UNCLAS SECTION 01 OF 04 BEIJING 007485

SIPDIS

SENSITIVE
SIPDIS

STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION RICH O'BRIEN/INTL
PROGRAMS
EAP/PD FOR NIDA EMMONS
HHS FOR OGHA/STEIGER AND PASS TO FDA/LUMPKIN
USDA FOR FSIS/RAYMOND
USDA FOR FAS OA/YOST, OCRA/ALEXANDER, OSTA/BRANT AND SHNITZLER
COMMERCE FOR ITA/HIJIKATA AND CINO
STATE PASS TRANSPORTATION FOR NHTSA ABRAHAM/KRATZKE
STATE PASS USTR CHINA OFFICE/TIM WINELAND
STATE PASS OMB/INT'L AFFAIRS
STATE PASS HOMELAND SECURITY COUNCIL
STATE PASS IMPORT SAFETY WORKING GROUP

E.O. 12958: n/a
TAGS: TBIO EAGR ECON HHS ETRD BEXP CH
SUBJECT: ARMS WIDE OPEN, BEIJING WELCOMES U.S. CONSUMER PRODUCT
SAFETY COMMISSION

Ref: A. Guangzhou 1249

B. Bejing 6264


1. (SBU) Summary: Even after a week of United States toy recalls
totaling almost 5 million units, U.S. Consumer Product Safety
Commission's Rich O'Brien received a cordial welcome from Beijing
authorities, private industry, and the China Toy Association during
a four day November visit. Meetings revealed that there is
potential for cooperation with AQSIQ on new standards for toxic
substances and with China Toy Association on outreach to toy
manufacturers. Industry association channels are critical to
disseminating information on U.S. standards, and O'Brien encouraged
Chinese companies to take a more active role in seeking standards
requirements from foreign buyers. In official meetings, the U.S.
November 7 recall of the Aqua Dots craft toy and a surprise meeting
with AQSIQ Minister Li monopolized the agenda, revealing the extent
to which AQSIQ appreciated early notification from CPSC and the U.S.
Embassy about the severity of the recall, enabling them to take
prompt action on locating and closing down the manufacturer in
Guangdong (Ref. A).


2. (SBU) U.S. Consumer Product Safety Commission (CPSC) Director of
International Programs Rich O'Brien visited Beijing November 10-14
as part a three-stop visit to China. O'Brien held official
discussions with the General Administration of Quality Supervision,
Inspection, and Quarantine (AQSIQ) and the Beijing CIQ, as well as
private discussions with the China Toy Association, SGS testing
company, and standards officials from the European Union. O'Brien
also conducted a factory visit to Tong Niu apparel in northern
Beijing.

Aqua Dots
--------------


3. (SBU) AQSIQ Industrial Products Division Director General Wang
Xin thanked CPSC for its swift communication about the severity of
the Aqua Dots craft toy problem to his office after the recall was
announced, enabling AQSIQ to pursue a trail that would lead to the
manufacturer and the eventual closure of the Aqua Dots plant, which
O'Brien later visited (septel). Wang sought further clarity about
whether the CPSC viewed the product viewed as having a design flaw
or a manufacturing problem. To a child, the pellets resemble edible
chocolate which could indicate a design flaw, but the toxic
chemicals on the surface points to a manufacturing problem. Wang
asked to receive the medical records of affected U.S. children as
well as pertinent U.S. regulations on the chemical so that China
could ascertain the nature of the substance and its dangers. Wang
claimed the Aqua Dots manufacturer had sent product samples to
testing firm Intertek in Hong Kong, which found the toy to be safe.
With U.S. compliance experts still analyzing the case, including the
substance's classification as chemical or narcotic, O'Brien said he
would share the outcome of the investigation with the Chinese side
as it becomes available. Providing medical records to Chinese
officials would be difficult because of privacy concerns, he said.



4. (SBU) During a break conversation, AQSIQ officials pointed to
cultural differences between the U.S. and China to explain why Aqua
Dots would be less of a concern in China than they were in the
United States. The intensive vigilance of Chinese parents over their
children would prevent them from swallowing such toys in the first
place, and officials noted that perhaps U.S. parents were not as
careful. (Comment: Econoff raised the point that there was no data
in China on the number of Chinese children who may have been
poisoned by such toys. The AQSIQ officials, all of whom have
children, conceded that it would be impossible to know. Still, their
comments illustrate that Chinese parents have a higher threshold

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than typical U.S. parents for what constitutes a dangerous
product.)


5. (SBU) AQSIQ Minister Li in an unscheduled meeting went on at
length about Chinese efforts to ensure product safety. He also said
that the U.S. and China should consider undertaking joint research
into common standards for toxic substances, in addition to
strengthening cooperation in special cases like Aqua Dots. CPSC
should also be more objective, he said, when identifying the reasons
for a recall in its public communications. O'Brien noted that the
reasons for recalls are available to the public, but they are
available long after the recalls are announced, and therefore do not
receive much press attention.

Progress on Lead Paint Plan
and Support for Traceability
--------------


6. (SBU) Wang described AQSIQ's efforts in its lead paint action
plan, including a new requirement for third-party testing, closer
inspections of violating factories that export to the United States,
and increases in training and dissemination of standards information
to manufacturers. O'Brien noted that these were all important steps
to take, but emphasized the need to sustain such measures. Wang
replied that these efforts were sustainable, as long as the United
States did not ask China to test every single toy, since China
exports 22 billion toys every year. Although some businesses do not
want a system that imposed traceability, Wang said AQSIQ supported
the concept.

Tong Niu Apparel: A Model
of Standards Awareness
--------------


7. (SBU) On an AQSIQ-sponsored trip to Tong Niu apparel in northern
Beijing, company executives described their aggressive safety
standards in manufacturing clothes for Columbia sportswear and H&M.
Before acquiring H&M as a customer in 2000, the company had little
awareness of high safety standards of premiere foreign labels. H&M
then supplied Tong Niu with volumes of detailed standards
information and undertook a thorough testing regime with the
company. Tong Niu also hired a full time standards officer to track
compliance with and changes in buyer country standards. The firm has
since become a contributor to the China National Garment
Association's efforts to educate other textile firms about
standards. Tong Niu's higher wages and a regular 8-hour work day,
which distinguish the company from its southern competitors, may be
two factors that contribute to high production quality.


8. (SBU) Tong Niu's early days in the 1950s shed light on the
origins of quality control in state-owned industries in China. In a
system where all material and labor inputs were controlled by one
single entity (the state),and all profit incentives were
suppressed, tight quality control was seen as the only way to ensure
a good product. (The firm even received praise from Chairman Mao for
its quality.) The modern Tong Niu appears to have inherited its
progenitor's business culture and emphasis on quality output despite
its numerous acquisitions and expansions.

Testing Firms Face
Tighter Industrial Control
--------------


9. (SBU) Executives from joint venture testing firm SGS said that
the third party testing business in China was becoming more
unpredictable because of new qualification certificate and
examination requirements. Qualification certificates were required

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starting in 2001 upon China's WTO accession, while the competency
rules mandate that two-thirds of employees pass an annual technical
examination. Market access is also a concern. Local CIQ offices
must endorse the establishment of private testing company branches,
resulting in a lengthy registration process that can take up to six
months. Testing firms are still restricted from offering China
Compulsory Certification (CCC) services, while AQSIQ subsidiary
companies, which may have access to CIQ facilities and staff, are
granted exclusive product certification rights in specific market
areas. These restrictions and privileges are the result of AQSIQ's
dual goal to impose industrial control while preserving market share
for itself. Still, despite competitive pressures, private firms can
benefit from government relationships. Some local governments have
recommended manufacturers to seek out SGS testing services.

China Toy Association Seeks
Further Engagement with CPSC
--------------


10. (SBU) Despite concern over critical media reports about China's
toy industry, China Toy Association (CTA) President Ms. May Liang
said her group was pushing ahead to encourage toy manufacturers to
achieve a 100 percent safety target for toy exports. CTA studies
show that awareness of importer safety standards must be raised, she
said. Initiatives such as CTA conferences and expanded web-based
resources are intended to accomplish that goal. Liang said CTA is
working through AQSIQ's system to force small companies to develop
product safety standard awareness. CTA is also encouraging companies
to move away from a passive approach to standards toward an active
approach to learning about them. Chinese companies lose financially
when recalls happen, regardless of the reason for the recall; a more
active approach to standards can actually prevent financial losses.
CTA supports mandatory third party testing, but Liang expressed
concern about increasing costs. She acknowledged that the definition
of "independent third party" in any new U.S. legislation and whether
state-owned or state-affiliated testing companies would be
considered as such will be of great interest to the Chinese toy
industry. She said there is potential for redundant, costly testing
if these state-owned/affiliated firms are not considered as
independent.

Comment
--------------


11. (SBU) Foreign governments are already contributing to improved
standards dissemination in China to assist regulatory authorities
and industry. USTDA through its U.S.-China Standards and Conformity
Assessment Cooperation Program has funded standards workshops with
the American National Standards Institute and other organizations
engaged in China. Through its Quality and Standards Project, the
European Commission conducts training and safety compliance work for
toys exported to the European Union. Still, ensuring consistent
application of standards in China will require a sustained effort by
all parties involved to implant a culture of product safety inside
every industry and to provide industries with the tools to self
regulate. Promoting and supporting industry self-regulation, as
opposed to greater market surveillance, is a better way for China to
guarantee safer exports, particularly since the size of the AQSIQ
workforce remains static in the face of growing exports (Ref. B).


12. (SBU) CPSC's cooperative approach to engaging with Chinese
regulators and industry will benefit its future activities in China.
China Toy Association invited CPSC to visit toy factories and
contribute content to its trade publication. Similar interactions
could be sought with trade groups across product categories and
would likely reveal varied levels of awareness about consumer
product safety rules, as well as gaps where technical assistance and

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government-to-government cooperation could make a difference.


13. (SBU) This cable was cleared by CPSC Rich O'Brien.


RANDT





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