VZCZCXRO5744
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0993/01 2430841
ZNR UUUUU ZZH
R 310841Z AUG 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6424
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 000993 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PGOV CH
SUBJECT: CHINA'S NEW PRODUCT SAFETY REGULATIONS DELAY EXPORTS OF 
U.S. MANUFACTURER 
 
REF: BEIJING 5271 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly.  Not for release outside U.S. government channels.  Not 
for internet publication. 
 
¶1. (SBU) Summary: A U.S. manufacturer in Guangzhou contacted ConGen 
Guangzhou after exports to the United States were delayed at the 
port due to new inspection requirements.  After an initially 
haphazard approach, the Chinese inspectors focused on ensuring the 
quality and safety of the raw materials used by the manufacturer. 
The shipments were released after one week, but the firm was 
informed of new ongoing documentation and inspection requirements. 
The owner of the firm expects additional new requirements will 
follow.  End summary. 
 
¶2. (SBU) On August 20, 2007, Charles Hubbs, the U.S. owner of 
Guangzhou Fortunique Limited, contacted post after the firm's 
exports were delayed by Chinese inspectors implementing new product 
safety regulations.  Fortunique is an OEM manufacturer of medical 
devices, such as surgical gowns and drapes.  It exports US$10-12 
million to the United States every year, shipping approximately 30 
to 40 containers per month.  The firm's major U.S. customers include 
Cardinal Health, Medline Industries and DeRoyal.  Fortunique employs 
more than 600 workers at its factory in Panyu District, Guangzhou. 
 
New Inspection Requirements 
--------------------------- 
 
¶3. (SBU) Referred by the American Chamber of Commerce in South 
China, Hubbs contacted ConGen Guangzhou because a container of 
medical devices made by Fortunique for export to the United States 
had been delayed at the port by Chinese inspection officials.  In a 
meeting with congenoffs on August 21, Hubbs explained that officials 
from the Panyu Entry-Exit Inspection Quarantine Bureau (PEIQB), a 
subordinate unit of the General Administration for Quality 
Supervision, Inspection and Quarantine (AQSIQ), notified Fortunique 
that it would be subjected to new inspections under product safety 
regulations issued on July 26, 2007 (reftel).  Hubbs said his firm 
had not been informed of any new inspection requirements until the 
container was stopped. 
 
¶4. (SBU) In addition to inspecting the export products, the PEIQB 
officials also planned to review the firm's procedures for safety 
and quality assurance.  They requested voluminous documentation from 
Fortunique that included all of its U.S. Food and Drug 
Administration (USFDA) registration documentation, client 
specifications, and safety-related documentation provided by 
Fortunique's suppliers of raw materials.  Hubbs told us his staff 
was up most of the night preparing the documentation. 
 
Lack of Standards or Expertise 
------------------------------ 
 
¶5. (SBU) PEIQB's apparent lack of any standards for assessing the 
safety of the medical products was particularly troubling to Hubbs. 
He explained that the officials at first wanted Fortunique to help 
them develop standards.  One official told Hubbs that he should be 
manufacturing some products in a cleanroom environment.  Hubbs 
argued that this was completely unnecessary to meet USFDA standards. 
 He described the inspectors' initial approach as haphazard, noting 
that they focused on any product labeled "surgical" regardless of 
how it was used. 
 
Focus on Raw Materials 
---------------------- 
 
¶6. (SBU) Hubbs told us that after the local inspectors conferred 
with officials from Beijing, their review focused on the safety of 
raw materials.  He said they asked Fortunique to provide additional 
documentation from all of its suppliers on the quality of raw 
materials.  Hubbs speculated that such requirements would force 
firms like his to buy more raw materials from large firms, which 
might be better able to provide thorough documentation. 
 
A Week Lost and More Requirements 
--------------------------------- 
 
¶7. (SBU) After Fortunique staff prepared the documentation and held 
a series of meetings with inspection officials, the firm's export 
shipments were released for shipment on August 24 after more than a 
week's delay.  According to Hubbs, Fortunique was able to meet the 
inspectors' requirements to resume exports but must prepare more 
data on the raw materials it uses.  In addition, inspection 
officials will begin a new program of regular inspections of his 
factory's facilities. 
 
 
GUANGZHOU 00000993  002 OF 002 
 
 
No History of Problems 
---------------------- 
 
¶8. (SBU) Fortunique would welcome consistent standards established 
by Chinese food and drug authorities in coordination with USFDA. 
Hubbs said such standards would have a much stronger impact on his 
competitors in China.  He expressed confidence that Fortunique's 
record on quality and safety would withstand scrutiny under 
international industry standards.  According to Hubbs, Fortunique is 
registered with USFDA to produce class 1 and 2 medical devices and 
its customers are some of the biggest medical device suppliers in 
the United States.  He declared that Fortunique is ready to provide 
Chinese agencies with assurances from clients that its products meet 
their specifications and comply with USFDA regulations. 
 
More to Come? 
------------- 
 
¶9. (SBU) Hubbs believes that this was only the first hurdle for 
firms like his.  Once Chinese officials have further addressed the 
safety of raw materials, he expects them to focus on other issues 
related to product design and specifications.  He said his 
experience had been a "good wake-up call," and other U.S. firms 
should prepare for similar experiences.  The inspection officials 
told him that the Chinese government's primary focus in product 
safety efforts was Guangdong for now.  Hubbs speculated that 
inspection agencies would experiment with new procedures here and 
then apply them to other parts of China.  As he put it, they will 
"throw a lot of mud" at firms here, then take "whatever sticks" and 
apply it nationally. 
 
JACOBSEN