VZCZCXRO3761
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0966/01 2420041
ZNR UUUUU ZZH
R 300041Z AUG 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6405
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000966 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PGOV CH
SUBJECT: Guangdong Cosmetics Manufacturers Reacting to Consumer 
Product Safety Concerns 
 
 
¶1. (U) SUMMARY: Cosmetics manufacturers in southern China are 
acutely aware of heightened consumer product safety concerns. One 
manufacturer told congenoffs that local authorities lack capacity to 
enforce safety and quality standards.  However, some firms are 
taking steps on their own to help foreign customers feel more 
confident in their products.  END SUMMARY. 
 
Cosmetics Makers Trying to Clean Up Their Act 
--------------------------------------------- 
 
¶2. (SBU) In an August 29 meeting, Ren Jie, the owner of Guangdong 
Irene Cosmetics Co. Ltd, told us that the cosmetics industry in 
China had been shocked by the flurry of consumer product safety 
problems and had since made changes to improve their quality 
assurance processes. According to Ren, Irene Cosmetics, with revenue 
in excess of USD $10.6 million, is China's largest perfume exporter 
to the U.S., and the fourth largest exporter of perfume to the U.S. 
in the world. Ren noted that officials with China's Administration 
of Quality Supervision and Inspection and Quarantine (AQSIQ) were 
taking product safety issues very seriously because they feared 
losing their jobs should problems arise under their jurisdictions. 
Ren believes that quality control in the industry will improve in 
response. 
 
Talking the Talk, But Can They Walk the Walk? 
--------------------------------------------- 
¶3. (SBU) Despite heightened concerns, Ren told us that the capacity 
to enforce safety and quality standards was still lacking. He 
explained that AQSIQ's local subordinate office, the Guangdong Entry 
and Exit Inspection and Quarantine Bureau, is supposed to test every 
batch of export products but is unable to do so because it is 
severely understaffed. Irene Cosmetics takes it own product samples 
and sends them to the agency. Ren said AQSIQ doesn't bother to check 
his firm's export containers, allowing him to export on his good 
reputation. 
 
Raising Quality to Meet Customer Demand 
--------------------------------------- 
 
¶4. (SBU) Ren cited an example of how Irene Cosmetics has improved 
product quality in response to a request from a U.S. client.  The 
firm introduced an additional purification process for the alcohol 
used in perfumes after a request by the company that sells Brut. The 
U.S. client requested this enhancement stating that the outdated 
equipment used in China's domestic alcohol manufacturing did not 
produce sufficiently pure alcohol. Irene Cosmetics initiated a 
secondary purification process combining a chemical and a boiler 
distillation step. Ren highlighted his advantage over competitors as 
the only Chinese perfume manufacturer with an alcohol boiler on the 
factory's campus. 
 
Colornow Strives For U.S. Export Business 
------------------------------------------- 
 
¶5. (SBU) The owner of Colornow Cosmetics Co., a small Guangdong 
based cosmetics firm, manufacturing mostly hair products, is also 
acutely aware of the consumer product safety concerns as he strives 
to secure orders from U.S. buyers. Frank Fang, Colornow's owner, 
told congenoff that over half of the firm's output is exported to 
international markets, but he has yet to export goods to the United 
States. Colornow is currently in the final stage of selection to 
fill a bath gel order for Target. The factory has passed the 
facility inspection, the testing of the first batch of product, and 
now hopes to receive the order this November. Fang feels that a few 
bad apples have made it hard on small manufacturers like him, who, 
he says, maintain high quality standards for reasons of national 
pride and because they simply have too much to lose. 
 
¶6. (SBU) However, Fang also indicated that some smaller export 
customers do little due diligence and testing of products made by 
Chinese manufacturers. He described how he had met foreign trade 
partners through internet forums.  Some of these customers made an 
initial inspection visit but thereafter used a testing agency to 
ensure product quality and safety. 
 
Trusting Suppliers 
------------------ 
 
¶7. (SBU) Colornow places a high degree of confidence in single 
supplier of ingredients.  Croda Ltd, a global specialty chemical 
company headquartered in the UK, is Colornow's only supplier for 
almost all of its inputs. Fang commented that many other local 
cosmetics producers also rely on Croda. He told congenoff that Croda 
is well known in China, actively promoting their products by hosting 
events usually attended by 100-200 business people. He deems Croda, 
with their worldwide production bases and international 
certifications to be trustworthy. However, Mr. Fang admits that has 
 
GUANGZHOU 00000966  002 OF 002 
 
 
no idea where Croda's ingredients are produced and performs only 
limited testing on the ingredients they supply. 
 
The High Price of Quality Control Failure 
----------------------------------------- 
¶8. (SBU) Colornow became sensitive to the importance of product 
quality standards after a bad experience with a new product shipped 
to the Netherlands. His customer rejected the shipment because it 
was defective.  Fang cited improper humidity and temperature control 
in production as the cause. It was an expensive lesson, as Fang had 
to compensate the client. Since then he has been assessed and 
certified by SGS, a leading third-party inspection company that 
follows U.S. FDA standards, and he has attained ISO 9001:2000 
certification. In addition, his firm pays to have its products 
tested by SGS periodically to make sure that they meet international 
standards. 
 
Different Standards May Be Harmful to Chinese Consumers 
--------------------------------------------- ---------- 
¶9. (SBU) Both cosmetics manufacturers indicated that there was a 
double standard in production and product safety standards for 
domestic goods versus those for export. In addition to frequently 
changing taste in packaging and preference for larger sizes among 
western consumers, Irene's Ren explained that safety standards were 
much higher for cosmetics sold abroad. When asked where his greatest 
concern lies in cosmetic product safety, he identified skin 
whitening creams, a staple in any Chinese cosmetics aisle, as the 
greatest risk. Ren said that the active ingredients in these 
products are most likely unsafe and could cause health problems and 
skin damage.  Because of these concerns, he no longer produces any 
products with skin whiteners.  Colornow's Fang explained that 
because Chinese customers perceive foreign products to be of higher 
quality, his firm's professional line of hair care products sold 
exclusively in China are conspicuously packaged and labeled 
completely in English. The Chinese directions for product use and 
ingredients list are discretely printed on the inside of the box. 
 
 
JACOBSEN