China’s State Administration for Market Regulation (“SAMR”) recently issued proposed Measures on Supervision and Administration of Entrusted Manufacturing for Food (the “Proposed Measures”). The Proposed Measures expand the rights and obligations of companies that entrust food manufacturing to a licensed food producer in China. Consistent with other recent rules, such as the Administrative Measures for the Inspection and Supervision of Food Manufacturing and Distribution, the Proposed Measures build out the body of implementing rules under the Food Safety Law governing the food manufacturing process.
Of note, the Proposed Measures make it clear that any ex-China company must establish a Chinese entity to contract with a licensed food manufacturer in China to produce food for sale in China, and the ex-China company’s Chinese entity must obtain a food distribution license, other distribution credentials, or a food manufacturing license before that entity can contract with a licensed food manufacturer for these purposes. This requirement does not apply when a manufacturer is being entrusted by the ex-China company to manufacture food for export only. In that case, the ex-China company can contract directly with the entrusted local entity.
The Proposed Measures contain additional limitations on the permitted scope of contract manufacturing. Under the Proposed Measures, only an entity that holds a health food registration and a health food manufacturing or distribution license can entrust another party to manufacture the health food. Furthermore, the contract manufacturer must cover all stages of the health food production; in other words, the Proposed Measures prohibit a health food registrant from separating different stages of production and contracting with different parties for different stages of the production of the health food. The Proposed Measures also prohibit contract manufacturing of “food formulated for special medical purposes” and powdered infant formula produced within China.
The Proposed Measures provide for the obligations of the entrusting party and the entrusted party, including the obligation of the entrusting party to oversee production. The Proposed Measures require that these parties enter into a contract to govern the relationship and set forth specific items that the contract must contain. Further, this arrangement needs to be reported to the county-level food safety supervision and administration department. The Proposed Measures also make the inspection of contract manufacturers an inspection priority for local food safety supervision and administration departments. Specifically, under the Proposed Measures, the licenses of both the entrusting party and the entrusted party, the record of the entrusting party’s oversight of the production, and the food labeling, among others, are to be inspected.
The comment period on the Proposed Measures is currently closed. However, food companies should closely follow any further development of the Proposed Measures.
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Contributors for the China & APAC Food, Drug, Device, and Cosmetics blog:
John Balzano, Julia Post, Muyun Hu, Kaixin Fan, and Kexin Yang.