SHANGHAI'S CIQ LEADERSHIP CALLS FOR MORE COOPERATION

UNCLAS SECTION 01 OF 03 SHANGHAI 000285 SENSITIVE SIPDIS STATE FOR EAP/CM AND EB STATE PASS USTR FOR STRATFORD/WINTER/ALTBACH/KATZ DOC FOR ITA - DAS KASOFF, CMCQUEEN, ESZYMANSKI DHS/ICE FOR IPR CENTER-DFAULCONER DHS/CBP FOR IPR RIGHTS BRANCH-PPIZZECK TREASURY FOR OASIA - DOHNER/HAARSAGER/CUSHMAN NSC FOR KURT TONG, JONATHAN SHRIER TREASURY FOR OASIA - CUSHMAN, WINSHIP E.O. 12958: N/A TAGS: ETRD TBIO PGOV ECON BEXP EAGR CH SUBJECT: SHANGHAI'S CIQ LEADERSHIP CALLS FOR MORE COOPERATION SHANGHAI 00000285 001.2 OF 003 (U) This cable is sensitive but unclassified and for official use only. Not for distribution outside of USG channels. ¶1. (SBU) Summary: The Consul General (CG) met July 17 with China Inspection and Quarantine (CIQ) Shanghai Director General Xu Jinji to discuss ways the two sides can work closer together on information sharing. CG noted that the U.S. Food and Drug Administration would soon open an office in Shanghai and welcomed CIQ's close cooperation with FDA staff. Xu welcomed more information and training opportunities. He also emphasized Shanghai CIQ's willingness to resolve import and export issues with the Consulate. In an earlier meeting at Shanghai's Waigaoqiao Port, Xu outlined CIQ's efforts to improve food and product safety and Shanghai CIQ's general operations. He believes the primary reason unqualified products enter the States are divergent requirements and regulations between the two sides. End Summary. ¶2. (SBU) Xu was joined by Shanghai CIQ Vice Director Xu Chaozhe, Division Director for Supervision on Health He Yuping, Division Director for Supervision on Animal and Plant Zhou Guo Liang, and Deputy Director for Foreign Affairs Li Riming. Other Consulate officials included Agriculture Trade Office (ATO) Chief Wayne Batwin, ATO Officer and Econoff. Context: Holdups with CIQ Inspection Improving -------------- -- ¶3. (SBU) In 2007, the Consulate encountered a spate of issues with U.S. agricultural imports at Shanghai ports. Many of these cases involved goods that had been previously imported but suddenly faced restrictions or enforcement of previously un-enforced regulations. The situation seems to be improving, although issues still arise over U.S. agriculture imports. CIQ has generally been very cooperative in resolving problems. It has also been cooperative on other fronts, including meeting with the Health and Human Services Secretary in May and Food and Drug Administration officials in July. In addition, the Consulate has also had successful training events with CIQ over the past year. For example, ATO and CIQ Shanghai co-hosted a Food Safety Seminar in October 2007. CIQ officials also recently attended an industry training program arranged by ATO. Other planned training programs have been postponed until 2008 due to budget consideration on the Chinese side. Predictability and Transparency -------------- ¶4. (SBU) At the July 17 meeting, the CG said U.S. exporters to China would welcome additional guidance as China's regulations governing food and product safety evolve. Xu also urged the U.S. side to cooperate closer on providing guidance on U.S. regulatory changes that affect exporters from China. Training and clarification of standards would help the respective countries' exporters meet standards and ultimately improve food and product safety in both countries. In this regard, Xu welcomed the establishment of an FDA office in Shanghai and promised to work closely with the FDA staff. ¶5. (SBU) Xu noted that all new regulations and policies can be viewed on CIQ's website, which provides information in English as well as Chinese, though many foreigners are unaware of the website. In addition, CIQ plans to establish a new hotline to field inquiries regarding rules and procedures for CIQ clearance. Xu added that this will be a channel for foreigners to inquire directly for clarification on issues. Currently, most foreigners inquire through their embassies or consulates. CIQ also occasionally provides training seminars for foreign traders and asks for feedback on CIQ's work. Deputy Director Xu Chaozhe added that CIQ not only welcomes information and feedback on U.S. imports to Shanghai, but also wants to hear about quality issues on Shanghai area exports to the U.S. U.S. Pork Exports Still an Issue -------------- ¶6. (SBU) ATO Chief inquired whether there was any change in SHANGHAI 00000285 002.2 OF 003 Shanghai's policy regarding inspection for ractopamine residue in U.S. pork. (Note: U.S. pork producers have legally produced imported meat with traces of ractopamine for years, although Chinese regulations prohibit the importation of such products. In early 2007, authorities began rejecting container loads of U.S. pork products at the port of Shanghai because they contained traces of ractopamine. However, in the fall of 2007, Chinese officials temporarily suspended the enforcement of the regulation. Recently, enforcement of the regulation appears to have resumed. End note.) Director General Xu replied that there was no change in China's policy on ractopamine. Traces of ractopamine had been detected in U.S. pork and therefore U.S. pork was subject to closer scrutiny. Since the E.U. prohibits the use of ractopamine and no traces have been found in their pork exports, CIQ does not inspect them as closely. Xu emphasized there were only two ways for the ractopamine issue to be resolved; either both countries agree to acceptable levels of ractopamine, or the U.S. bans the use of the substance in pork. CIQ's Olympic Work -------------- ¶7. (SBU) In response to CG's inquiry on the effect of the Olympics on CIQ's activities, Xu said there was little influence. However, CIQ has beefed up its inspection efforts on steroids and other additives in food that might be consumed by athletes. Shanghai CIQ: Big Workload with Few Resources -------------- ¶8. (SBU) During an earlier meeting with Consulate officials at Shanghai's Waigaoqiao Port, Xu emphasized that food safety is a concern for both countries and that Shanghai CIQ is doing its part to ensure the safety of food being sent to the United States from Shanghai ports. Deputy Director Xu gave an overview of the Shanghai operations, noting that with only 1,600 employees, Shanghai CIQ must oversee quality inspection and quarantine operations at China's busiest port. On a yearly basis, Shanghai CIQ must inspect approximately 250,000 batches of export goods and 330,000 batches of import goods, many of which include plant and animal derived products. To conduct these inspections, Shanghai CIQ maintains 13 branches in Shanghai port facilities, cargo distribution centers, and other locations, as well as 4 technical centers, one of which is devoted to the inspection of imported and exported food. ¶9. (SBU) Xu pointed out that Shanghai is currently the world's busiest port in tonnage terms, handling over 600 million tons of cargo throughput in 2007, of which 250 million tons was foreign traded goods. The value of the 2007 trade volume through Shanghai's port totaled over USD 520 billion, a 21.5 percent increase over the previous year. Container throughput is now 26 million TEU in 2007, a 20.4 percent increase over 2006. Shanghai is now second only to Singapore in container throughput. In 2007, Shanghai's port handled 256,226 batches of food throughput, valued at USD 2.8 billion. Shanghai CIQ Tough on Import and Export Quality -------------- -- ¶10. (SBU) Of the imported batches of food, most came from the United States, Canada, E.U., Australia, S.E. Asia and Japan, and 375 batches, or 7.89 percent of total imported batches were found to be unqualified. The major reasons for import disqualification include microorganisms, drug residue, deterioration and exhausted expiration dates. According to Xu, Chinese exports were disqualified mostly for drug residue and pesticides reasons, although the qualification rate was 99.6 percent. He acknowledged that Shanghai does not have a developed food production industry and the export value of food exported through Shanghai is very small. In 2007, only 12,493 batches of food were exported with a value of USD 417.6 million. Most of the food exports were destined for the U.S., Japan, E.U., Australia, New Zealand, Hong Kong, and South East Asia. SHANGHAI 00000285 003.2 OF 003 ¶11. (SBU) According to Xu, CIQ relies on importers to provide extensive data in advance of the arrival of the shipment. When the shipment arrives in Shanghai, CIQ carries out an on-site inspection, ensuring the documents match the actual goods. If required, they will take a sample for inspection and testing. Xu emphasized that lab tests and standards are based on international standards. In particular, CIQ tests for microorganisms, pesticides, heavy metals, trace elements, chemical residues, parasites, pathogens and weeds. Goods that qualify are released. Those that do not meet standards are returned to their point of origin or sent for destruction. ¶12. (SBU) Likewise, CIQ ensures the quality of food exports. All exported food and raw material derived from animal and plant sources must come from farms and production plants that are inspected and approved by CIQ. Xu said that CIQ relies on three methods of ensuring quality from approved producers: self inspection and control, regular sanitary inspections by CIQ authorities and random sampling. He added that as of last year, all goods that have been approved by CIQ must have a CIQ mark on its outer packaging. In addition, all food export enterprises must indicate their name on every product's outer packaging. This allows for traceability. Divergent Requirements Allows Loopholes -------------- ¶13. (SBU) Xu said that because U.S. authorities do not require the same information and certificates that the Chinese side requires, there are some unqualified Chinese goods that enter the United States. He also noted that all exported goods are managed locally by the CIQ in the relevant jurisdiction. For example, food produced in Jiangsu is subject to the oversight by the Jiangsu CIQ authorities. However, if the food is exported through Shanghai, Shanghai CIQ also carries out inspection on a certain percentage. Shanghai CIQ checks to see if the goods comply with the documents and they bear the CIQ mark. Only after this inspection are clearance documents given so that Customs will release the goods. Xu noted that CIQ officers judge the level of risk of each type of food according to their previous experience to target certain types of food for more careful scrutiny. Pharmaceuticals and medical devices do not fall under the purview of CIQ, only a small number of traditional Chinese herbs. JARRETT