PRODUCT SAFETY TRUMPS FUN AND GAMES AT HONG KONG

UNCLAS SECTION 01 OF 03 HONG KONG 000091

SIPDIS

STATE FOR EAP/CM, STATE PASS CPSC RICHARD O'BRIEN

E.O. 12958: N/A
TAGS: ECON EFIN EINV ETRD HK
SUBJECT: PRODUCT SAFETY TRUMPS FUN AND GAMES AT HONG KONG
TOY FAIR

REF: A. HONG KONG 2211

B. HONG KONG 1989


1. (SBU) Summary: Director of International Programs and
Intergovernmental Affairs at the U.S. Consumer Product Safety
Commission (CPSC) Richard O'Brien visited Hong Kong from
January 4-9. He educated local manufacturers and exporters
about the new U.S. Consumer Product Safety Improvement Act
(CPSIA),and received feedback regarding CPSC's efforts to
implement the revised regulatory framework mandated by the
law. In meetings with HKG officials, industry associations
and individual firms, O'Brien described the CPSIA's 2009
deadlines for reduced lead content in toys, the revised
accreditation process for third party laboratories testing
products shipped to the United States, and new restrictions
on the composition of plastic components in consumer
products. During O'Brien's visit, a senior PRC product
safety official publicly acknowledged several shortcomings of
mainland government bodies in ensuring the safety of consumer
products made in China. The largest product testing labs
told O'Brien that the CPSIA has not yet caused product
testing capacity constraints. He conducted a media
roundtable with local and international publications,
provided interviews to local and regional television
broadcasters, and provided interviews to Guangdong-based
trade publications. O'Brien and EconOff also visited 300
booths at the Hong Kong Toy Fair to provide information about
the CPSIA, and distributed cards with the CPSC website link
that contains detailed information about U.S. consumer
product safety requirements in both English and Chinese.
Hong Kong interlocutors expressed their desire for a
permanent CPSC presence here; O'Brien informed them that the
CPSC recently requested permission to establish an office in
Beijing. End summary.


2. (SBU) Comment: O'Brien's visit was eagerly anticipated by
HKG officials and Hong Kong's leading manufacturers and
exporters. Hong Kong-based toy manufacturers especially
appreciated the opportunity to pose detailed questions and
express their concerns in person about the CPSIA's rigorous
testing and product content rules. His visit reinforced our
view that the CPSIA inadvertently provides a competitive
advantage - at least in the near term - to larger and more
sophisticated manufacturers in mainland China. Compared with
their smaller rivals, the larger firms can better devote the
resources necessary to ensure full compliance with the law
(i.e. enhanced product testing, and adjustments to product
component compositions),with compliance-related costs spread
over a larger production base. Smaller Hong Kong-based firms
continued to express nervousness regarding their ability to
comply with new U.S. product safety regulations in a timely
and cost-efficient manner (refs A and B).

Strong Interest from Manufacturers and Exporters
-------------- ---


3. (U) At two major speaking engagements - an AmCham-arranged
gathering of 35 procurement professionals from U.S. and Hong
Kong-based firms, and a seminar at the Toy Fair attended by
600 individuals - O'Brien explained the CPSC's efforts to
revise its regulatory framework in support of the CPSIA. He
described the law's lowered limits on lead content, new rules
restricting phthalate content (phthalates are additives that
increase the flexibility of plastics),and tightened
regulation of children's products and toys.


4. (U) O'Brien also described CPSC's efforts with European
Union product safety officials to identify mutually
compatible regulatory requirements, especially with regard to
product testing and content limits on hazardous substances.
These discussions could potentially form the basis for more
harmonized product safety statutes in Europe and the United
States. Audience members expressed strong support for such
efforts. They commented that the paucity of internationally
accepted product safety standards requires duplicative and
"unnecessarily" costly product testing programs.


5. (SBU) AmCham event participants reiterated their December
2008 request to a visiting U.S. Congressional Staff
delegation that the CPSC permanently post in Hong Kong and/or
China an officer to field product safety inquiries and
conduct educational outreach programs. O'Brien responded
that the CPSC in October 2008 formally requested permission
from the PRC's Ministry of Foreign Affairs to establish a
two-person office (one American, one Chinese national) in
Beijing that would have regional responsibility for Asia.
The ministry has not yet responded to CPSC's request.


HONG KONG 00000091 002 OF 003


Beijing Acknowledges Product Safety Deficits
--------------


6. (U) A senior PRC quality assurance official provided
public statements at the Toy Fair that on surface supported
stricter consumer product safety standards. Liu Xiang, Vice
Director at the Administration of Quality Supervision,
Inspection and Quarantine (AQSIQ),told reporters that
Beijing is developing incentives for toy producers to meet
safety standards, in an effort to avoid further international
product recalls and related damage to the reputation of PRC
manufacturers. Strengthening safety standards would
inevitably increase costs, but would also ensure only safe
products were sold, according to Liu. The PRC government
would be tightening the regulatory regime on toy safety and
quality, implemented in August 2007, to boost consumer
confidence and meet international practices, and is
developing safety regulations for mainland-made electronics
and home appliances, Liu said. Since the summer of 2007,
said Liu, approximately 20,000 mainland-made toys had been
recalled over safety hazards, with many found to contain
toxic materials such as lead paint. Liu admitted that China
"lags behind Europe and the U.S." on its product safety
monitoring and enforcement capabilities. He said, "We need
to step up our work on consumer product defect
investigations, information collection, inspections,
documentation of complaints, and our ability to serve
consumers."

Hong Kong Customs Values Cooperation with CPSC
-------------- -


7. (SBU) During O'Brien's January 5 meeting with Hong Kong
Customs Head of Trade Inspection and Verification S.M. Wong
and Head of Trade Controls S.Y. Cheung, the officials
explained that the HKG does not regulate the safety of
consumer products exported from Hong Kong or transshipped
through its ports. Cheung contrasted this approach with the
PRC's AQSIQ that regulates and tests the safety of mainland
China's consumer product exports. He said AQSIQ's
laboratories currently conduct most of the testing on
consumer products produced in mainland China, and he
questioned the reasonableness of CPSIA provisions that
prevent U.S. importers from accepting those test results.
O'Brien explained that unlike privately held labs, PRC
government labs issue export licenses in addition to their
provision of product testing services. The CPSIA prevents
U.S. accreditation of government-owned labs that offer
special government services or privileges.


8. (SBU) Wong and Cheung requested creation of a CPSC
training program for Hong Kong Customs officials. The
program would provide detailed information about CPSIA
requirements, the CPSC's regulatory framework and activities
in support of the new law, and USG enforcement efforts to
ensure product safety compliance. O'Brien informed the HKG
officials about the CPSIA's new provisions that authorize the
CPSC to conduct training of foreign officials. He requested
Wong and Cheung to request such training in writing, but he
stated that CPSIA implementation has priority and it would
likely be some months before any training could be scheduled.
O'Brien said the CPSC would like to work in a "closer, more
formal manner" with Hong Kong Customs.

Lab Operating Capacity Not Stretched
--------------


9. (SBU) At the annual Toys and Games Fair in Hong Kong,
representatives of five leading consumer product testing
companies told O'Brien that while enactment of the CPSIA had
boosted their firms' respective revenues, their operations
had not yet been stretched to capacity. Turnaround times for
product testing remained five to ten days - unchanged from
the period prior to enactment of the CPSIA in August 2008.
In addition, sufficient numbers of technical and professional
staff remain available for employment. The CPSC will
continue to monitor turnaround times at product testing labs,
in order to ensure that the CPSC's product content deadlines
and testing requirements do not outstrip product testing
capacity.

O'Brien's Additional Outreach Efforts in HK
--------------


10. (U) O'Brien received extensive media interest and
coverage during his visit. He conducted a media roundtable
discussion with local and international publications, as well
as interviews with RTHK (local English language radio),NOW

HONG KONG 00000091 003 OF 003


TV (local),and Phoenix TV (Hong Kong-based broadcaster
reaching 150 million PRC viewers). O'Brien and EconOff also
visited approximately 300 booths at the Toy Fair, in order to
remind exporters and manufacturers about the CPSIA, and to
distribute business cards with the CPSC website link
containing information in both English and Chinese about U.S.
consumer product safety compliance requirements.


11. (SBU) The HKG's Director General of the Trade and
Industry Department, Joseph Lai, hosted a meeting for O'Brien
and leaders of six major Hong Kong-owned toy and apparel
manufacturers. Lai praised O'Brien's visit to Hong Kong as a
"highly productive effort to reach out to local companies who
might be struggling to comply" with the CPSIA. He said the
HKG shares the USG's goals of improving the safety of toys
and other consumer products. Lai was pleased to learn the
CPSC has requested PRC permission to establish an office in
Beijing, stating that the office would "facilitate
communication about product safety among the HKG, PRC, USG
and industry."


12. (U) This cable has been cleared by CPSC's Richard O'Brien.
DONOVAN