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### Viewing cable 07HONGKONG2414, STAFFDEL NELSON PURSUES FOOD/TOY SAFETY AND TRADE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07HONGKONG2414 | 2007-09-17 01:29 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Hong Kong

`

    VZCZCXRO8818
    PP RUEHCN RUEHGH
    DE RUEHHK #2414/01 2600129
    ZNR UUUUU ZZH
    P 170129Z SEP 07
    FM AMCONSUL HONG KONG
    TO RUEHBJ/AMEMBASSY BEIJING PRIORITY 1439
    RUEHCN/AMCONSUL CHENGDU PRIORITY 1180
    RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0858
    RUEHGH/AMCONSUL SHANGHAI PRIORITY
    RUEHSH/AMCONSUL SHENYANG PRIORITY 3633
    RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
    RUEHIN/AIT TAIPEI PRIORITY 4675
    RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
    RUEHC/SECSTATE WASHDC PRIORITY 2938
    RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
    RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC PRIORITY
    INFO RUEHOT/AMEMBASSY OTTAWA PRIORITY 5116
    RUEHFR/AMEMBASSY PARIS PRIORITY 0303
    RUEHKO/AMEMBASSY TOKYO PRIORITY 4747
    RUEHWL/AMEMBASSY WELLINGTON PRIORITY 0262

` `

    UNCLAS SECTION 01 OF 04 HONG KONG 002414

    SIPDIS

    SENSITIVE
    SIPDIS

    PASS TO EEB/TPP/ABT PAUL SAXTON
    STATE PASS TO USTR CHINA OFFICE/TIM WINELAND
    STATE PASS TO CONSUMER PRODUCTS SAFETY COMMISSION LAURIE
    HOPKINS/INTL PROGRAMS

    E.O. 12958: N/A
    TAGS: EAGR ECON ETRD PREL TBIO HK CH
    SUBJECT: STAFFDEL NELSON PURSUES FOOD/TOY SAFETY AND TRADE
    ISSUES IN HONG KONG

    REF: A. HONG KONG 2217
         ¶B. WELLINGTON 0845
         ¶C. STATE 114788

    ¶1. (SBU) Summary: House Energy and Commerce Committee Staff
    Delegation Nelson visited Hong Kong and Macau at the end of
    August to investigate import food and product safety,
    intellectual property rights and unfair trade practices.
    Meetings with Hong Kong and Macau government officials and
    private sector representatives revealed that Hong Kong and
    Macau continue to improve their import safety regimes by
    adding testing facilities, providing training for
    manufacturers, and drafting new food safety legislation. Food
    and product safety problems linked to mainland China's
    production facilities, once reported to Beijing officials,
    are often quickly and severely addressed, according to
    western journalists, industry and government sources.
    Challenges remain, however, including compliance with
    internationally accepted standards; frequently shoddy supply
    and production practices; importing companies moving quality
    control responsibilities from audit teams to manufacturers;
    increasing mainland production and labor costs; and unceasing
    demand for "the best deal" by importers.  Increased labor and
    safety compliance costs will push prices of Chinese goods up
    ten-percent next year, said Hong Kong manufacturers.  All
    interlocutors in Hong Kong expressed a clear recognition of
    the seriousness and urgency of the product safety issue.  End
    Summary.

    ¶2. (SBU) The Consul General and staff briefed the staffdel on
    Hong Kong and Macau economic growth, ongoing trade security
    initiatives such as the Secure Freight Initiative (SFI), and
    Hong Kong and Macau efforts to protect intellectual property
    (the Hong Kong government passed a new copyright amendment in
    June).  DHS/ICE Assistant Attache highlighted successful
    partnerships with Hong Kong and Macau Customs regarding
    secure trade and enforcement of intellectual property rights.
     USDA Foreign Agricultural Service (FAS) Attache shared key
    elements of food and product safety, including a hands-on
    tour at a local supermarket to discuss food labeling and
    inspection practices.

    Hong Kong Consular Corps on Product Safety
    -------------------------------------------

    ¶3. (SBU) Consular corps representatives from Canada, France
    and New Zealand discussed their import safety concerns, which
    they see as a global problem.  The discussion touched upon
    the August product recall in New Zealand involving
    formaldehyde found on imported Chinese-made blankets, the New
    Zealand government's ongoing imported and domestic food
    safety review, and unfolding developments in the U.S.
    Consular corps members and the staffdel agreed to ongoing
    information sharing on the import safety issue, and expressed
    a desire to understand more about the Japanese import safety
    regime, touted to be among the best in the world,
    specifically regarding food imports from mainland China.

    AmCham and Industry on Product Safety
    --------------------------------------

    ¶4. (SBU) The American Chamber Board of Governors and key
    committee chairs expressed interest in the effects of new
    U.S. legislation on user fees, product liability, and trade.
    Noting the negative impact of recent food and product recalls
    on "Made in China" products, the Amcham officials recounted
    that U.S. companies instruct import traders to get "the best
    deal," with sourcing decisions being made over one year in
    advance.  This can lead to decisions based primarily on cost
    as opposed to product safety. To further cut costs, many
    global firms no longer have audit teams in Asia, as this role

    HONG KONG 00002414  002 OF 004

    has been shifted to manufacturers.  Members conveyed
    first-hand knowledge of processing facilities moving to
    Vietnam and Cambodia to avoid the political baggage of the
    "Made in China" label.  While this may solve negative public
    relations aspects of the product safety issue, it does not
    necessarily mean the products will be safer, they noted.

    ¶5. (SBU) The Hong Kong Trade Development Council (TDC), The
    Hong Kong Toys Council, and Hong Kong Toy Manufacturers'
    Association also briefed the staffdel.  TDC stressed the
    important trade relationship between Hong Kong and the U.S.,
    pointing out the link to Southern China, where a vast
    majority of the "Made in China" manufacturers are Hong Kong
    or foreign-invested enterprises.  TDC and the toy
    associations believe that recent mainland China government
    product safety regulatory changes will result "in fewer
    mainland suppliers, but better and higher quality and safer
    products...at a higher price."  Hong Kong manufacturers also
    anticipate a ten-percent increase in prices next year, as
    rises in the mainland's minimum wage, and increased product
    testing and compliance costs are passed along to buyers.
    This would conflict with U.S. importers' desire for the
    lowest possible price, they added.

    ¶6. (SBU) The toy company associations reiterated their
    ongoing commitment to product safety and to human rights
    (reftel A).  Following the August recalls, toy manufacturers
    are investing in equipment for self-testing, and checking
    every batch of paint used in production.  In turn, they are
    emphasizing training and education for manufacturers and
    subcontractors, with a TDC-sponsored product safety seminar
    for all manufacturers scheduled for September 18 in Hong
    Kong.  When asked about two of the companies who produced
    toys caught up in the Mattel recalls, Foshan Lee Der and
    Early Light, they said: "Lee Der violated the law by
    producing and exporting goods that did not meet international
    standards.  Thus, the mainland authorities revoked the
    company's export license."  They were unable to provide
    comment regarding Early Light's situation because "the
    investigation is ongoing."

    Hong Kong Government on Product Safety
    ---------------------------------------

    ¶7. (SBU) The Hong Kong Food and Environmental Hygiene
    Department (FEHD) and Centre for Food Safety provided the
    staffdel with details on Hong Kong's food safety best
    practices.  Highlights included details of FEHD's "farm to
    fork" approach to import safety; discussion of their good
    relationship with the mainland China and Guangdong Province
    food safety officials; development of Hong Kong's new food
    safety legislation; and management of import testing and
    surveillance programs.  FEHD told the staffdel that of the
    64,000 food samples collected and tested in 2006, a majority
    imported from the mainland, there was a failure rate of only
    0.3%, or 192 samples, which supports FEHD's claim that the
    vast majority of Hong Kong's food imports are safe.

    WSJ and NYT on Product Safety
    ------------------------------

    ¶8. (SBU) The Wall Street Journal (WSJ) and New York Times
    (NYT) reporters based in Hong Kong confirmed that
    accountability within the supply/production chain is
    difficult to guarantee for "Made in China" products exported
    to the U.S.  The WSJ reporter indicated that, "there exists
    little incentive for local and provincial level enforcement
    officials to find problems" in their processing industries.
    However, once a problem is identified to Beijing, General
    Administration of Quality Supervision, Inspection, and
    Quarantine (AQSIQ) enforcement is quick and harsh, said the

    HONG KONG 00002414  003 OF 004

    journalists.  When asked about the ability of PRC Vice
    Premier Wu Yi to lead the mainland's food supervision and
    enforcement efforts, the reporters said that she was the
    expected person to head such a campaign, given her history as
    the "Iron Lady", but with the new Party Congress set to
    convene in October, NYT said it was unclear whether she would
    continue to carry the food safety mantle.

    Macau Government on Product Safety
    -----------------------------------

    ¶9. (SBU) Macau SAR imports 90 percent of its consumer
    products from mainland China.  Consumer product safety is
    divided among four departments:
         -Macau Civil and Municipal Affairs Bureau (IACM) handles
    fresh food and livestock;
         -Economic Services monitors processed foods and imported
    goods;
         -Customs and Excise monitors and seizes products at the
    border; and
         -The Health Department oversees markets, restaurants and
    hospitals.
    Macau also has a Consumer Council which is the recipient of
    individual customer calls, and would issue a recall should
    one be required.

    ¶10. (SBU) IACM and Customs inspect and test high volumes of
    mainland imported food products, with inconsistencies in
    these products being directly reported to the AQSIQ in
    Beijing.  For example, IACM takes random samples from
    approximately one-third of trucks hauling fresh produce
    originating from mainland farms licensed to export products
    to Macau.  Should a residue of pesticide be found, even if
    not at an officially unacceptable level, notice of the
    finding is sent to Beijing.  IACM officials indicated that
    once such a report is filed, the offending farm's export
    license is immediately revoked and they are no longer able to
    export to Macau,"they just disappear." This message was
    reiterated by Economic Services regarding processed food and
    consumer products as well.

    ¶11. (SBU) Macau established a Food Safety Subcommittee in
    2004, as part of an effort to be designated a WHO "Healthy
    City in Asia," which recognizes communities for meeting
    criteria regarding healthy citizens and a health-conscious
    environment.  In addition, the Economic Services Department
    is currently drafting a consumer product safety regulation
    that directs companies to abide by international standards,
    and place liability at all levels: importer, manufacturer and
    retailer.  The draft is expected to be available before the
    end of the year, and Economic Services staff committed to
    sharing the document.

    Hong Kong and Macau: Intellectual Property Rights
    -----------------------------

    ¶12. (SBU) The staffdel met with Hong Kong private sector
    firms (Pfizer, Eli Lilly, Microsoft and others), industry
    organizations (Motion Picture Association/International
    Federation Against Copyright Theft-Great China and Business
    Software Alliance) and the Hong Kong Customs and Excise
    Department regarding intellectual property rights in the
    region.  The groups were able to provide the staffdel
    numerous case studies demonstrating successful and
    unsuccessful enforcement actions, both in Hong Kong and
    mainland China.

    ¶13. (SBU) Staffdel Nelson also met with Macau government
    officials at the Economic Services and Customs Bureaus to
    review IPR protection.  Customs officials confirmed their
    success in virtually eliminating optical disk fraud in the

    HONG KONG 00002414  004 OF 004

    last several years, and have turned their attention to other
    products, particularly pharmaceuticals.  Two pieces of
    legislation (55 and 99), aid in the prosecution and
    penalizing of retailers (10 cases in 2006).  Both Macau
    agencies indicated that they had strong working relationships
    with their counterparts in Hong Kong and mainland China.
    Cunningham

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