VZCZCXRO4100
PP RUEHCN RUEHGH
DE RUEHHK #2466/01 2641016
ZNR UUUUU ZZH
P 211016Z SEP 07
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 2997
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 1469
RUEHCN/AMCONSUL CHENGDU PRIORITY 1192
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0875
RUEHGH/AMCONSUL SHANGHAI PRIORITY
RUEHSH/AMCONSUL SHENYANG PRIORITY 3644
RUEHIN/AIT TAIPEI PRIORITY 4687
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEAUSA/DEPT OF HHS WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC PRIORITY
RUEAORC/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 03 HONG KONG 002466 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
PASS TO EAP/CM AND EEB/TPP/ABT PAUL SAXTON 
STATE PASS TO USTR CHINA OFFICE/TIM WINELAND 
STATE PASS TO CPSC LAURIE HOPKINS/INTL PROGRAMS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD PREL TBIO HK CH
SUBJECT: HONG KONG IS WORKING TO IMPROVE CHINA PRODUCT 
SAFETY 
 
REF: A. STATE 114788 
     ¶B. HONG KONG 2217 
     ¶C. HONG KONG 2414 
 
¶1. (SBU)  Summary:  A series of recalls of potentially 
dangerous "Made in China" toys and defective consumer goods 
has resulted in intense international scrutiny of Hong 
Kong-invested China industries.  Hong Kong companies operate 
some 80,000 production facilities in mainland China, 
employing approximately 10 million Chinese.  Hong Kong toy 
companies are acutely aware of customer concerns and media 
reports regarding China's product safety record.  Toy 
association leaders have publicly affirmed their commitment 
to "full compliance" with international toy manufacturing 
standards, 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 (reftel B/C).  They also have highlighted the 
toy industry's close coordination with the Hong Kong and 
mainland China governments, and their cooperation with 
industry associations in Europe and the U.S.  The Hong Kong's 
Consumer Council reviewed existing product safety legislation 
and determined it adequate, and is working with the Customs 
and Excise Bureau to enforce product safety regulations.  The 
Hong Kong Trade Development Council (TDC) is working locally 
to emphasize the need for Hong Kong industries to comply with 
international product safety standards and internationally to 
assure trade partners that Hong Kong industries can and will 
play a positive role in improving compliance with product 
safety standards. 
 
¶2.  (SBU)  On September 18, TDC and Hong Kong's Toy 
Manufacturing Associations sponsored a Product Safety 
Conference attended by approximately 1000 Hong Kong and 
mainland China business representatives.  During the 
conference, Hong Kong toy manufacturers stressed that they 
are committed, in both public relations and practice, to 
producing toys in compliance with international standards. 
They will implement expanded testing and certification 
requirements to ensure product safety; they reminded buyers, 
however, that this will entail higher costs.  Hong Kong and 
Chinese manufacturers advocate "shared responsibility" 
throughout the production chain, but are skeptical that they 
will be met half-way by U.S. brands and retailers, buyers who 
have been historically unyielding on price.  End Summary. 
 
Hong Kong Government 
-------------------- 
 
¶3. (U) Hong Kong Consumer Council Officials told Econoffs 
that Hong Kong has two ordinances related to consumer product 
safety:  1) the Consumer Goods Safety Ordinance  2) the Toys 
and Children Protection Safety Ordinance.  These ordinances 
require that Hong Kong manufacturers and importers must 
comply with internationally accepted product safety standards 
in order to bring their goods into the Hong Kong market.  In 
light of the recent series of product recalls, the Consumer 
Council reviewed these two pieces of legislation and 
determined that they are in line with international practices 
and provide adequate enforcement powers.  The Consumer 
Council receives public complaints and queries, conducts 
research and educates the public on product safety issues. 
It also works with Hong Kong Customs, which has the authority 
to investigate suppliers and retailers and conduct tests of 
products, to ensure consumer product safety standards are 
met.  If consumer goods are deemed unsafe, the Consumer 
Council and Hong Kong Customs will demand a product recall. 
 
¶4.  (SBU) Hong Kong Trade Development Council (TDC) is 
actively promoting the positive role that Hong Kong 
industries can and do play in ensuring that products made in 
mainland China meet international standards and are safe.  A 
high-level TDC delegation will travel to the United States at 
the end of September, visiting numerous cities including San 
Francisco, Chicago, New York and Washington, and would make 
 
HONG KONG 00002466  002 OF 003 
 
 
it a point to discuss product safety issues with U.S. 
business and government officials.  Hong Kong TDC has also 
organized meetings between USG officials and Hong Kong 
manufacturers (reftel C) as well as sponsored conferences in 
Hong Kong to strongly urge Hong Kong businesses to comply 
with international standards and to focus on quality 
assurance. 
 
Product Safety Conference 
-------------------------- 
 
¶5. (SBU) On September 18, TDC hosted a Product Safety 
Conference and brought in Brenda Jacobs, trade attorney at 
Sidley Austin and former trade agreement counsel at the U.S. 
Department of Commerce, and Alan Schoen, risk consultant at 
Marsh and former Director of Compliance for the Consumer 
Product Safety Commission (CPSC) to explain the U.S. import 
safety environment, including actions resulting from the 
White House Import Safety Working Group and the U.S.-Sino 
Product Safety Summit.  Jacobs and Schoen explained the 
likelihood of new legislation which could ban certain 
products, require third-party inspection, and increase civil 
and criminal penalties for violations.  They predicted 
expanding U.S. certification requirements, and increasing 
buyer demands, from detailed purchase orders to 
indemnification provisions in contracts.  Jacobs proposed 
that manufacturers "turn the negative news into positive 
action" by conducting an internal review of quality systems, 
drafting a written compliance manual, expanding in-house 
training and using third-party inspection reports as a 
marketing tool.  She also said, "now is the time to push back 
on U.S. retailers" on price, citing a recent Associated Press 
survey indicating that a majority of Americans acknowledge 
that their own consumer demand for the lowest price is part 
of the problem. "Now is the time to have these discussions, 
as the environment is right," said Jacobs.  Schoen also 
predicted that the CPSC will get an increase in resources, 
funds and staff, which will be accompanied by strengthening 
of outdated safety standards. 
 
¶6. (SBU) Carter Keithley, President of the Toy Industry 
Association, USA (TIA) addressed the conference via video and 
described the "perfect storm" created by consumer product 
quality issues, U.S. presidential election politics, and a 
focus on an under-funded and under-staffed CPSC.  TIA's 
analysis of events, in consultation with its members, 
concluded that the industry's toy safety standards were 
excellent, but the toy inspection process had "failed the 
industry."  TIA implemented a program to repair the 
inspection process in the near term and strengthen the 
inspection framework over the long term.  To get through the 
holiday season, the industry is conducting exhaustive testing 
on products to reassure compliance, coupled with extensive 
outreach to reassure the public.  Looking toward 2008, TIA is 
developing standardized testing procedures, establishing lab 
testing criteria, and encouraging the USG to require 
inspection of all toys in the U.S.  (Note: This message was 
well-received by the conference participants, as they sensed 
they had an advocate in the U.S. looking out for the 
industry's interests. End note.) 
 
¶7. (SBU) An industry panel featuring four key toy company 
executives (TS Wong, Honorary President of The Hong Kong Toys 
Council and The Hong Kong Manufacturers' Association; 
Lawrence Chan, Chairman, The Hong Kong Toys Council; CK 
Yeung, Executive Vice President, The Hong Kong Toy 
Manufacturers' Association; and Vincent Tam, Executive 
Committee Member) focused on actions taken to date in 
response to global product safety concerns.  The group 
highlighted the industry's close contact and communication 
with the Hong Kong and mainland China governments, and their 
coordination with industry associations in Europe and the 
U.S.  Each emphasized that the industry was very clear about 
the problem, and is taking measures to increase quality 
control and testing to address that problem.  As industry 
associations, their primary role has been information 
 
HONG KONG 00002466  003 OF 003 
 
 
dissemination and member training, both critical in 
addressing the constant changes in regulations and processes 
by governments worldwide. The group told their peers that 
they should take quality control very seriously. 
 
¶8. (SBU)  Open discussion between presenters and the audience 
included topics such as: 
--What manufacturers must do to improve the "Made in China" 
label; 
--What to tell U.S. retailers, product brands and buyers 
about price increases associated with increased testing and 
quality assurance practices; 
--Is the USG also lecturing U.S. importers and retailers 
about product safety (Note: this question was asked in 
impassioned Cantonese with much encouragement from fellow 
attendees. End note.); 
--How can manufacturers handle unsafe product designs; 
--How can manufacturers eliminate problems in the supply 
chain. 
The presenters' responses centered around performing due 
diligence on suppliers, focusing on quality, meeting 
international standards and increasing testing.  The audience 
generally agreed that these solutions would cost money. 
 
Third-Party Testing In Hong Kong - A Growth Industry 
--------------------------------------------- ------- 
 
¶9.  (U) Intertek, A Hong Kong-based product testing company, 
briefed us on the year-to-date in toy safety -- 247 recalls 
in the U.S., with 154 (62 percent) involving products 
imported from mainland China, totaling 33.6 million units. 
Intertek advocates conducting regular checks and audits on 
suppliers, examining documentation to ensure validity, 
randomly selectly and testing raw materials, initiating both 
pre-production and pre-shipment testing and performing due 
diligence on finished products.  Companies like Intertek can 
provide these services for a fee.  The company is hosting 
many training seminars in mainland China (Shenzhen and 
Shanghai). 
 
¶10. (SBU) Modern Testing Services (MTS), invited Econoff to 
tour their Hong Kong testing laboratory.  MTS is a global 
technical services company, specializing in laboratory 
testing, product inspections, facility assessment, and 
training.  The $18 million, 300-person company provides these 
services to a broad range of companies and industries, 
including apparel, textile and toys.  X-ray and wet chemical 
testing is available to toy manufacturers (for a fee) to 
verify product composition and compliance as well as the more 
traditional torque-tension, flammability, and strength tests 
are performed.  MTS is experiencing growth in the consulting 
side of its business, where it visits factories i China to 
conduct quality control audits and traning sessions. 
 
 
 
Cunningham