Wahaha’s Zong Qinghou: Prepackaged Food Electronic Supervision Codes Should Not Be Rushed

Zong Qinghou, Chairman and General Manager of Hangzhou Wahaha Group Co., Ltd., has put forward opinions and suggestions on applying electronic supervision codes to prepackaged food products.

On December 4, 2007, the General Administration of Quality Supervision, Inspection and Quarantine published on its website the Notice on Implementing Product Quality Electronic Supervision in Accordance with the Special Provisions of the State Council on Strengthening the Supervision and Administration of the Safety of Food and Other Products (Guo Zhi Jian Zhi Lian [2007] No. 582).

The notice stated that the General Administration of Quality Supervision, Inspection and Quarantine, the Ministry of Commerce and the State Administration for Industry and Commerce would apply electronic supervision to key products covered by industrial product production licences and compulsory product certification (CCC). Key product manufacturers were required to use electronic supervision codes on product packaging before products could leave the factory for sale.

This requirement has a major effect on prepackaged food producers, in practice creating a new administrative licence and market access condition. After carefully studying the notice and a series of AQSIQ documents related to the Product Quality Electronic Supervision Network — including the trial Implementation Opinions on Code Assignment, the trial Guide to Querying Registered Products, the trial Guiding Opinions on Quality Supervision and Anti-Counterfeiting Information Notification, and Guo Zhi Jian Zhi [2008] No. 83, the Notice on Deploying Work for the Product Quality Electronic Supervision Network in 2008 — Zong Qinghou set out views on whether electronic supervision codes are necessary and technically feasible for prepackaged food, viewed from the perspective of genuinely improving food safety supervision.

I. The Product Quality Electronic Supervision Network: food safety supervision and consumer impact

1. Whether the Product Quality Electronic Supervision Network can truly raise China’s food safety supervision level remains open to question, and its benefits and drawbacks need careful weighing. The product quality data recorded and provided by an electronic supervision code mainly covers the company name, product trademark, brand, shelf life, production date, inspection certificate number, production licence number and CCC certificate number. All of this information is already printed on prepackaged food labels, so consumers can obtain it easily and quickly by reading the label.

If regulators need to monitor product flows and sales, they can do so by examining company sales records and ledgers. The necessity of building another information reporting system that is essentially duplicative should therefore be examined. Existing quality management systems should be fully implemented and improved first; new regulatory systems should not be introduced too frequently. Production differences between industries and companies should be respected, and simplistic one-size-fits-all rules should be avoided.

1. According to the network’s own description, its function is to assign a ‘supervision code’ to every small packaged product that consumers can buy, and to use that code as an index for recording the product’s entire life-cycle information in a database. For products such as cars, televisions and refrigerators, supervising small packages may be an effective quality management tool. For prepackaged food, however, the approach greatly increases operational difficulty and cost, while its real value for food safety supervision is highly questionable. Food production has its own characteristics: a single batch can contain tens of thousands or hundreds of thousands of small packages. The safety of one retail package (a bottle or a carton) does not represent the safety of the whole batch. Even if the code data on that retail package is correct, it still cannot prove that the batch is safe. China’s current food quality and safety management system supervises by production batch, and this has proved effective in practice.
2. The State Council has issued a number of policies and rules to improve food safety, with the aim of protecting the interests of food consumers. The management measure introduced by Document No. 582 has, however, a complex and tangled impact on all parties. To comply, manufacturers — especially food producers with enormous numbers of small packages — would need to invest heavily in equipment upgrades, staffing, consumables and an almost astronomical number of electronic supervision codes. For food companies with low value-added products and already thin margins, the cost pressure would be severe.

Consumers would also bear part of the costs inevitably passed on by manufacturers. If they wanted to use the system to verify authenticity — not safety — they would need to pay for telephone calls, text messages or internet access. The electronic supervision code therefore would not help improve product safety supervision, especially for food; instead, it would add fuel to the recent sustained rise in food prices.

1. Under Guo Zhi Jian Zhi [2008] No. 83, ‘in view of the diversity of product packaging and the technical difficulty of code printing, and based on the original principle of one code per item, code assignment is divided into Category A and Category B. Category A is one code per item; for Category B, the packaging level at which each product receives a code is decided by the enterprise.’ Although 24 food categories fall within Category B, meaning that in principle codes may currently be placed on the next higher bulk package (the outer carton), this does not actively protect ordinary consumers. Ordinary consumers generally do not buy prepackaged food by the full carton; most buy only small quantities. In addition, after many supermarkets and other retail outlets open cartons and put the small packages on shelves, the outer cartons are discarded as waste, so the electronic supervision codes on them become useless.

II. Technical difficulties in implementing Guo Zhi Jian Zhi Lian [2007] No. 582

Food companies that implement this regulation would face major difficulties, as detailed below:

1. The text allows the electronic supervision code to be applied as a label in the early stage. In reality, many existing packages are already printed full-bleed, with no space for an added label; a substantial period would be needed to redesign the entire package before implementation. Some small packages may still have no room for an electronic supervision code even after redesign.
2. A company may have as many as several hundred different small packages. Implementing the regulation involves packaging design changes, ordering, inventory control and other work, and requires a considerable transition period. It would be impossible to complete within six months of publication, especially without clear implementation guidelines — local quality and technical supervision bureaus are not yet able to guide companies in this work, and it is unclear when they will be able to do so.
3. Implementation involves manufacturers, the packaging printing industry, label and printing equipment suppliers, CITIC Guo Jian Information Technology Co., Ltd., and local quality and technical supervision departments. Neither schedule control nor technical capability can be achieved by food producers acting alone. Because extensive coordination across many parties is required, imposing penalties only on manufacturers is unreasonable.
4. Packaging materials come in many forms. At present, the vast majority of package printers lack the capability or equipment to pre-print or inkjet the electronic supervision code in advance, so food producers would need to inkjet-print the code during production. Every production line would need dedicated variable-code inkjet equipment. With hundreds of thousands of food producers nationwide and production lines numbering in the millions or even tens of millions, the equipment investment and extra operating costs would be staggering.
5. Food products cover an extremely wide range: tens of millions of styles and varieties, and consumer units numbering in the billions or tens of billions, requiring hundreds of billions of pieces of information. There are serious concerns about whether the current electronic supervision network design can ensure timely daily data maintenance and secure database operation. If technical or other problems prevent companies from entering information and activating barcodes in time, products could not be launched and sold as planned. If consumers cannot retrieve correct information and mistakenly believe genuine products are counterfeit, companies would have to spend enormous resources resolving the resulting trouble. The impact on consumers’ normal lives and on social harmony and stability is difficult to estimate.
6. Beverage packaging has long supply lead times, ranging from six months to two years. General packaging material loss is 1%, while printing loss can reach 10–15%. For high-volume beverage producers, online detection and rejection of invalid or missing electronic supervision codes would therefore be very difficult.
7. Production lines vary greatly from one manufacturer to another. How can it be guaranteed that all will have matching labelling equipment within a short period? Manual labelling would be completely unrealistic for the high-speed lines used in the food industry.
8. Under the regulation, the supervision code data uploaded by companies to the electronic supervision network database covers outbound product batch information, quantity, product specifications, wholesaler names, wholesale sales regions and other details. CITIC Guo Jian would therefore be able to obtain each company’s trade secrets easily, including product varieties, output, distributors and sales regions. As a corporate entity, does the company have the right to do so, and is its legal basis sufficient? How can it be guaranteed that such secrets will not be misused? If they are illegally disclosed, how will legal liability be assigned? These are concerns for every food producer.

Based on the above, we believe that implementing this regulation for prepackaged food would consume substantial social resources and greatly increase social costs. It would instead add fuel to the recent rise in food prices, run counter to the resource-saving society called for by the Party Central Committee, and fail to deliver the expected improvement in product quality and, in particular, prepackaged food safety. The necessity and technical feasibility of an electronic supervision code system for prepackaged food therefore deserve re-examination and should not be rushed. We earnestly ask relevant government leadership departments to consider the matter carefully, and suggest that, in light of the actual conditions of prepackaged food companies and products, the food and beverage industry should suspend implementation of the electronic supervision code system.

If implementation must proceed in the near term, we suggest broader pilot programmes. Nationwide rollout across the food industry should be considered only when the technology is fully mature and it can be guaranteed that companies’ trade secrets are protected, production capacity is not affected, production costs do not rise significantly, and the system genuinely plays a major role in ensuring food safety. A simplistic one-size-fits-all approach must absolutely be avoided.

—This article is reprinted from China Packaging Network (pack.cn), original link: http://news.pack.cn/show-362214.html