VZCZCXRO8984
RR RUEHCN RUEHGH
DE RUEHHK #2217/01 2360927
ZNR UUUUU ZZH
R 240927Z AUG 07
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 2712
RUEHBJ/AMEMBASSY BEIJING 1325
RUEHGZ/AMCONSUL GUANGZHOU 0821
RUEHCN/AMCONSUL CHENGDU 1170
RUEHGH/AMCONSUL SHANGHAI
RUEHSH/AMCONSUL SHENYANG 3621
RUEHIN/AIT TAIPEI 4645
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 03 HONG KONG 002217 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR CHINA OFFICE/TIM WINELAND 
STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION LAURIE 
HOPKINS/INTL PROGRAMS 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD PREL CH HK
SUBJECT: HONG KONG TOY MANUFACTURERS RESPOND TO U.S. 
TOY RECALLS WITH GREATER VIGILANCE 
 
REF: A) GUANGZHOU 887, B) GUANGZHOU 911 C) BEIJING 
5502 
 
¶1.  (SBU) Summary: Leaders of the Hong Kong Toys 
Council and The Toy Manufacturers' Association of Hong 
Kong told Econoffs that the U.S. recalls of China- 
produced toys in August served as a wake-up call for 
Hong Kong toy companies to immediately review their 
entire supply and production systems.  Cognizant that 
their production facilities are located almost 
entirely in mainland China, Hong Kong toy companies 
are sensitive to customer concerns and media reports 
regarding China's product safety record.  These toy 
association leaders affirmed their commitment to "full 
compliance" with international toy manufacturing 
standards.  They are urging their members to "double- 
triple" check each of their manufacturing steps, and 
to add quality inspection manpower and more stringent 
control systems to cover all aspects of their 
operations, particularly subcontracting.  The toy 
executives also emphasized that Hong Kong toy 
companies producing in the mainland comply with 
mainland China's inspection and regulatory 
requirements.  They told Econoffs that in response to 
the August recalls the mainland authorities hastily 
enacted a shipping stoppage on toys bound for export, 
but lifted the stoppage after production facility 
inspections were increased and additional laboratory 
testing facilities came on line. End Summary. 
 
Recalls and the Hong Kong 
-------------------------- 
 
¶2. (SBU) In early August the U.S. Consumer Product 
Safety Commission and Mattel initiated several 
voluntary recalls of toys produced in mainland China 
by Hong Kong-invested factories.  Toys were recalled 
due to two problems: 1) lead paint hazards 2) small 
magnets that could be detached and swallowed causing 
internal injuries.  In a meeting with Econoffs on 
August 22, Hong Kong toy executives were quick to 
point out a distinction between the two types of 
recalls.  The recall due to lead paint raises concerns 
about each aspect of the mainland China 
supply/production chain including supply sources, 
subcontractors, production methods, testing and 
certification.  The magnet recall resulted from design 
flaws in a number of toys that had been in production 
for several years.  According to toy executives, the 
volume and nature of these recalls, particularly in 
such rapid succession, caused "total chaos" at 
mainland China toy factories.  The executives 
classified the impact of the back-to-back recalls as a 
"wake-up call" to immediately review the entire supply 
and production system.  Cognizant that their 
production facilities are located almost entirely in 
mainland China, Hong Kong toy companies are sensitive 
to customer concerns and media reports regarding 
China's product safety record. 
 
¶3. (SBU) The Hong Kong toy association leaders reaffirmed 
their companies' commitments to full compliance with 
international toy manufacturing standards.  In 
response to the recalls, they claimed that Hong Kong 
toy companies are taking immediate and aggressive 
steps to ensure safety and compliance of their toy 
production facilities.  The associations are urging 
their members to "double-triple" check each of their 
manufacturing steps, and to add quality inspection 
manpower and more stringent control systems to cover 
all aspects of their operations, particularly 
subcontracting.  The toy companies are re-testing and 
certifying raw materials, equipment and products, in 
an effort to guarantee safety. 
 
¶4. (SBU) The executives stated that they have been in 
the toy business a long time and understand the 
serious nature of manufacturing toys for children. 
 
HONG KONG 00002217  002 OF 003 
 
 
They pointed out that producing high quality toys that 
meet international quality and safety standards is a 
compex process that is often underestimated.  In themainland they also confront additional challenges uch 
as dealing with questionable subcontractors, 
fraudulent supplies certifications (as in the case of 
lead paint) and corruption.  They stated tha Hong 
Kong-invested toy companies are acting to inimize the 
chances that shoddy production and spply practices 
will adversely impact the quality f their toys. 
These executives also emphasized teir compliance with 
mainland China's inspection nd regulatory 
requirements. 
PRC Stops Shipments 
-------------------- 
 
¶5. (SBU) The toy executives said that the mainland 
Authorities' initial response to the August recalls 
was to enact a shipping stoppage on all mainland toys 
produced for export and increase laboratory tests and 
inspections for all toys.  Furthermore, the mainland 
authorities ordered that toys be certified according 
to mainland China's standards, rather than using Hong 
Kong and UK international standards (which was 
standard practice prior to the August recalls).  The 
toy executives said that the mainland authorities' 
actions effectively stopped toy shipments from 
mainland toy factories for more than a week causing 
total chaos during the toy manufacturers' peak 
Christmas shipping period.  The Hong Kong toy 
companies urged, and the mainland authorities agreed 
to resume using Hong Kong and UK certification 
standards, and the shipping stoppage was lifted.  The 
toy executives added that the PRC released an expanded 
list of government-approved testing laboratories, 
which should hasten compliance certification testing 
and allow for the resumption of normal shipping 
operations. 
 
Inquiries From All Sides 
------------------------- 
 
¶6. (SBU) The Hong Kong toy companies, and their 
respective industry associations, are receiving 
queries from regulators, suppliers, and buyers 
(particularly from the United States and EU), which 
escalate after each recall event.  In response, the 
toy executives are spending a great deal of time 
reviewing each part of the supply/production chain to 
assure quality compliance and are updating regulatory 
and testing requirements. 
 
¶7. (SBU) Given the significant Hong Kong investment in 
the toy sector and the possibility that the toy 
recalls could have a negative impact on Hong Kong's 
overall economy there has also been notable Hong Kong 
media coverage.  The toy executives explained that 
since the lead paint and magnet recalls occurred back- 
to-back, media interest was greater than would have 
normally been the case.  The volume of media inquiries 
remains high, but the toy executives told us that 
their responses are only directed to trusted reporters 
as they do not want their "words twisted" during such 
a sensitive period.  Their overall strategy has been 
to "take cover" and focus efforts on retesting all of 
their products. 
 
The Hong Kong Toy Industry 
--------------------------- 
 
¶8. (U) Hong Kong's toy industry, comprised of over 250 
companies, operates joint venture production 
facilities with Chinese partners and build-own-operate 
production facilities in the PRC.  In total, Hong Kong 
companies have invested in/own over 6,000 toy 
factories in China, primarily in the Pearl River 
Delta.  Many of these companies are original equipment 
 
HONG KONG 00002217  003 OF 003 
 
 
manufacturers (OEM) for U.S. and European companies, 
while others have their own product lines. 
 
¶9. (U) The Toy Manufacturers Association of Hong Kong 
(TMHK) was founded in 1996, with the goal of promoting 
the development of Hong Kong toy industry, while 
protecting the industry's interests.  The group has 
over 250 members. More information on The Toy 
Manufacturers' Association of Hong Kong can be found 
at: www.tmhk.net. 
 
¶10. (U) The Hong Kong Toys Council (HKTC) is division 
of the Federation of Hong Kong Industries, and was 
established in 1986.  The HKTC serves as an industry 
advocate and information clearinghouse, in addition to 
providing training International Council of Toy 
Industries (ICTI) on ethical manufacturing.  Early 
Light Industrial, involved in the most recent Mattel 
recall of die-cast vehicles is a member.  More 
information on the Hong Kong Toys Council can be found 
at www.toyshk.org. 
 
¶11. Meeting participants: 
 
- Mr. C.K. Yeung, Executive Vice President of TMHK and 
Vice Chairman of Blue Box Holdings 
-Mr. Bernie Ting, TMHK member and Director of Qualidux 
-Mr. Lawrence W.L. Chan, HKTC Chairman. 
 
CUNNINGHAM