The China Food and Drug Administration (CFDA) has announced that in 5 sampling programmes carried out nationwide on domestic infant formula from January 2014 to November 2015, 34 producers were found to have substandard products. This means either that the products which were not in line with the national safety standards, or that their nutritional composition failed to match that shown on the labels. Moreover 10 producers were listed at least twice, and these accounted for 26.5%+ of the total product count. The worst offender was Shaanxi Shengtang Qinlong Dairy Co., Ltd., from which 19 substandard batches were identified: this “indicates severe management problems in production”, said dairy commentator Song Liang: “If the government does not make serious efforts in verification, the damages will be serious once such substandard products flow into the market. Consumers cannot stand this”.

Substandard Infant Formula Identified by CFDA, January 2014-November 2015: "Top 9" Culprits

Source: China Food and Drug Administration & CCM

What are the problems putting these manufacturers on the “black list”?

In August, CFDA released the Announcement on Auditing Safety Problems in 6 Infant Formula Producers, highlighting specific problems:

Unable to maintain licensed production conditions: lack of strict management of plants’ cleanliness; staff’s direct exit and entry of workshops through emergency doors without washing hands, being disinfected and changing dress; infrastructure and production facilities not in line with the licensed production conditions

Food safety management principles not in place, involving all production links, from procurement, inspection of raw materials, warehouse entry, production, sample retention to ex-warehouse

Insufficient inspection of specific items and false production and operation records

“Excessive bacteria counts can be mainly attributed to substandard production conditions, and discrepancies in composition may reflect problems in measuring devices”, suggested Song Liang: “These were mostly small-scale enterprises. As the Ministry of Industry and Information Technology re-examined the dairy companies and renewed the production certificates in 2013, some such enterprises invested in enhancing their operations, but not to the extent that was possible for majors such as Yili”.

Other trade sources pinpoint insufficient penalties when such companies step out of line: “The government departments conduct the tests and announce the results as required, but such producers are allowed to continue producing. Apart from being “named and shamed”, they are not greatly affected”.

“There are likely problems in production management, but problems in the system of punishments cannot be ignored either”, said Wang Dingmian. Song Liang agreed: “The CFDA cedes the implementation of punishments to the local supervision departments, but their implementation is likely lessened due to local protectionism – so that weak punishments are further weakened, to the extent that they become meaningless to the producers involved”.

“If the enterprises are listed frequently and are still found to have substandard products, they should be forced to shut down their factories and stop production. If worse occurs, strict measures should be taken to revoke their production licenses”, advised Song Liang.

On 4 December, Shaanxi Province revealed its punishments for the blacklisted enterprises:

• Confiscation of Shengtang Qinlong’s illegal sales of about USD4,221 (RMB27,000) and imposition of a fine of around USD58,775 (RMB376,000)
• Confiscation of Xi’an Xiyangyang Biotech Co., Ltd. (1 time, but 16 batches)’s illegal sales of USD828.2 (RMB5,298) and imposition of a fine of USD54,242 (RMB347,000)

This level of penalties is not too serious for the businesses involved. However the level of these punishments is typical in China. According to the Food Safety Law, if products are found to infringe standards or present safety risks, the company incurs revenue seizure against sales of the offending products and a fine of 5 times the value of the illegal products. However, if the products are found to be incorrectly labelled, according to the Product Quality Law, the company should face the revenue seizure and a fine of 50% of the value of the illegal products. Many trade sources feel that stronger measures are required, such as suspending production, revoking production licenses, etc.

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta.

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.

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