CHINA'S NEW PRODUCT SAFETY REGULATIONS DELAY EXPORTS OF

UNCLAS SECTION 01 OF 02 GUANGZHOU 000993 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ETRD ECON PGOV CH SUBJECT: CHINA'S NEW PRODUCT SAFETY REGULATIONS DELAY EXPORTS OF U.S. MANUFACTURER REF: BEIJING 5271 (U) This document is sensitive but unclassified. Please protect accordingly. Not for release outside U.S. government channels. Not for internet publication. ¶1. (SBU) Summary: A U.S. manufacturer in Guangzhou contacted ConGen Guangzhou after exports to the United States were delayed at the port due to new inspection requirements. After an initially haphazard approach, the Chinese inspectors focused on ensuring the quality and safety of the raw materials used by the manufacturer. The shipments were released after one week, but the firm was informed of new ongoing documentation and inspection requirements. The owner of the firm expects additional new requirements will follow. End summary. ¶2. (SBU) On August 20, 2007, Charles Hubbs, the U.S. owner of Guangzhou Fortunique Limited, contacted post after the firm's exports were delayed by Chinese inspectors implementing new product safety regulations. Fortunique is an OEM manufacturer of medical devices, such as surgical gowns and drapes. It exports US$10-12 million to the United States every year, shipping approximately 30 to 40 containers per month. The firm's major U.S. customers include Cardinal Health, Medline Industries and DeRoyal. Fortunique employs more than 600 workers at its factory in Panyu District, Guangzhou. New Inspection Requirements -------------- ¶3. (SBU) Referred by the American Chamber of Commerce in South China, Hubbs contacted ConGen Guangzhou because a container of medical devices made by Fortunique for export to the United States had been delayed at the port by Chinese inspection officials. In a meeting with congenoffs on August 21, Hubbs explained that officials from the Panyu Entry-Exit Inspection Quarantine Bureau (PEIQB),a subordinate unit of the General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ),notified Fortunique that it would be subjected to new inspections under product safety regulations issued on July 26, 2007 (reftel). Hubbs said his firm had not been informed of any new inspection requirements until the container was stopped. ¶4. (SBU) In addition to inspecting the export products, the PEIQB officials also planned to review the firm's procedures for safety and quality assurance. They requested voluminous documentation from Fortunique that included all of its U.S. Food and Drug Administration (USFDA) registration documentation, client specifications, and safety-related documentation provided by Fortunique's suppliers of raw materials. Hubbs told us his staff was up most of the night preparing the documentation. Lack of Standards or Expertise -------------- ¶5. (SBU) PEIQB's apparent lack of any standards for assessing the safety of the medical products was particularly troubling to Hubbs. He explained that the officials at first wanted Fortunique to help them develop standards. One official told Hubbs that he should be manufacturing some products in a cleanroom environment. Hubbs argued that this was completely unnecessary to meet USFDA standards. He described the inspectors' initial approach as haphazard, noting that they focused on any product labeled "surgical" regardless of how it was used. Focus on Raw Materials -------------- ¶6. (SBU) Hubbs told us that after the local inspectors conferred with officials from Beijing, their review focused on the safety of raw materials. He said they asked Fortunique to provide additional documentation from all of its suppliers on the quality of raw materials. Hubbs speculated that such requirements would force firms like his to buy more raw materials from large firms, which might be better able to provide thorough documentation. A Week Lost and More Requirements -------------- ¶7. (SBU) After Fortunique staff prepared the documentation and held a series of meetings with inspection officials, the firm's export shipments were released for shipment on August 24 after more than a week's delay. According to Hubbs, Fortunique was able to meet the inspectors' requirements to resume exports but must prepare more data on the raw materials it uses. In addition, inspection officials will begin a new program of regular inspections of his factory's facilities. GUANGZHOU 00000993 002 OF 002 No History of Problems -------------- ¶8. (SBU) Fortunique would welcome consistent standards established by Chinese food and drug authorities in coordination with USFDA. Hubbs said such standards would have a much stronger impact on his competitors in China. He expressed confidence that Fortunique's record on quality and safety would withstand scrutiny under international industry standards. According to Hubbs, Fortunique is registered with USFDA to produce class 1 and 2 medical devices and its customers are some of the biggest medical device suppliers in the United States. He declared that Fortunique is ready to provide Chinese agencies with assurances from clients that its products meet their specifications and comply with USFDA regulations. More to Come? -------------- ¶9. (SBU) Hubbs believes that this was only the first hurdle for firms like his. Once Chinese officials have further addressed the safety of raw materials, he expects them to focus on other issues related to product design and specifications. He said his experience had been a "good wake-up call," and other U.S. firms should prepare for similar experiences. The inspection officials told him that the Chinese government's primary focus in product safety efforts was Guangdong for now. Hubbs speculated that inspection agencies would experiment with new procedures here and then apply them to other parts of China. As he put it, they will "throw a lot of mud" at firms here, then take "whatever sticks" and apply it nationally. JACOBSEN