Chinese authorities say they are taking steps to address quality control and product safety issues associated with the country’s exports, amid growing international concern over the discovery of hazardous chemicals in certain products sold by China largely to the U.S. Some Western analysts say that if China does not follow through with reforms, it risks damaging its image among U.S. consumers and harming the $343-billion U.S.-China trade relationship. China currently ranks as the third-largest exporter worldwide by volume, behind Germany and the U.S. Chinese officials say they are taking decisive action to turn the situation around. This includes investing about $1.2 billion to increase monitoring and inspection of food and industrial products nationwide. The State Food and Drug Administration (SFDA; Beijing) plans for much of that investment to be channeled toward building or upgrading quality and safety infrastructure by 2012, including drug and medical device testing centers. The investment will also help authorities oversee and close factories that are not up to standards, media reports say. The Ministry of Commerce (Beijing) defended the quality of Chinese goods recently, saying that “problem products” are only a fraction of overall exports and that the issue needs to be kept in perspective. About 99% of Chinese exports to the European Union (EU), Japan, and the U.S. are “safe and up to the standard,” the ministry says. “China is a developing country. Its economic and technological level [is] still lagging behind the developed countries by a wide gap. With a small number of enterprises having little or no awareness of social responsibility, product quality issues are almost inevitable at the present stage,” the ministry says. Chinese authorities have responded to growing international scrutiny with criticism of the Western media for hyping safety problems. They also say that China is far from the only exporter with quality issues, and cite recent mercury and cadmium contamination of certain unspecified Indonesian seafood, which China has recently banned, according to local press reports. The U.S. has also had its own product quality issues, which were underscored earlier this year when contract manufacturer Tembec BTLSR (Toledo, OH) used melamine to produce binding agents that it supplied to feed ingredient distributor Uniscope (Johnstown, CO). Melamine is not approved as an additive for animal or fish/shrimp feed, says the U.S. Food and Drug Administration (FDA). The case remains under investigation, the FDA says. Tembec did not return recent calls for comment by CW press time, but it told CW in May that it is “cooperating fully with the FDA review” (CW, May 30/June 6, p. 11). The Chinese government, meanwhile, has issued “warning signs” to local companies manufacturing problem products and to individuals charged with their oversight, market watchers say. At least three senior Chinese officials have been executed this year after being found guilty of corruption. They include Zheng Xiaoyu, the former head of SFDA, who was found to have accepted bribes from eight pharma firms in exchange for approving counterfeit drugs. China also announced recently that it was blacklisting 429 exporters it says have violated regulations, according to Chinese press reports. The companies include Xuzhou Anying Biologic Technology Development Co. and Binzhou Futian Biology Technology Co., both of which are implicated in a U.S. pet food contamination scandal (story, p. 26). That scandal, which broke last March with the recall of more than 100 brands of pet food contaminated with melamine, was preceded by the discovery that Chinese suppliers had substituted diethylene glycol for glycerin in cough syrup imported by Panama and other countries. The substitution resulted in more than 40 deaths, FDA says. Counterfeit ingredients supplied by China have been discovered worldwide since last spring in a range of products, including other pet and livestock feed, as well as fish, pharma ingredients, toothpaste, and toys. The U.S. has responded with bans and recalls on certain products, and it recently sent government representatives to Beijing to request rapid action on improving food and drug safety. The U.S. is seeking to “pave the way” for a two-prong agreement with Beijing to improve the safety of products made in China, says the U.S. Health and Human Services (H&HS) office. One of the potential safety agreements would cover food and feed, and the other would cover drugs and medical devices. “Our U.S. regulatory agencies are concerned about what they see as an insufficient infrastructure across the board in China to assure the safety, quality, and effectiveness of many products exported to the U.S.,” says Mike Leavitt, H&HS secretary. “We believe that, with the technology, the scientific expertise, and the commitment each side has, we can work together to correct the outstanding issues.” However, H&HS and the FDA have themselves come under scrutiny for not keeping a closer eye on import safety. Several lawmakers have issued proposals to improve import safety, and have criticized the FDA especially. “We are importing twice as much food as we were a decade ago, yet the FDA examines less than 1% of it,” says John D. Dingell (D., MI). Dingell chairs the House Energy and Commerce Committee, which is investigating the safety of U.S. food and drug supply, particularly “the declining ability of the FDA to conduct inspections and perform laboratory analysis.” Dingell has announced a proposal to establish a user fee that would be imposed on imported food and drug shipments. Funds generated by the fee would be used in part to hire additional staff at FDA laboratories, he says. Europe is also pressuring China to improve product safety. The EU’s commissioner for consumer protection, Meglena Kuneva, visited China in July and met with Chinese officials, urging them to “take corrective action at the source, addressing the responsible manufacturer directly, and to report quarterly the results of the enforcement actions carried out to the European Commission,” the EU says. “We want to build confidence with the Chinese,” Kuneva says. U.S. chemical firms say they are monitoring closely the issues surrounding Chinese imports. The problem stems from China’s “amazingly rapid expansion—really an explosion in its manufacturing sector to supply exports, as well as its internal market,” says Joe Acker, Socma president. “We started to hear a little bit of this surfacing toward the end of last year. People importing from China said that, as their requirements increased, the Chinese factory’s ability to supply became stretched, so it contracted out to other Chinese manufacturers to meet supply,” he says. U.S. importers were not always aware of the outsourcing, however, and some began to see “a change in or mix of quality,” he adds. The current situation is “alarming,” however, Acker says. “Socma has had concerns over the quality of active pharmaceutical ingredients coming from emerging markets for some time, encouraging the federal government to strengthen the inspection regime for ingredients manufactured overseas,” he says. Long-term, the issue is likely to raise costs down the supply chain, because prices of materials imported by the U.S. from China will likely rise as Chinese factories improve operations by, for example, upgrading testing equipment, he adds. The National Association of Chemical Distributors (NACD; Alexandria, VA) says it is also concerned. “NACD recognized early that impressions of China’s commitment to health, safety, and environment have not been viewed favorably around the world,” says Chris Jahn, NACD president. “Unfortunately we have all seen recently that some foreign companies are looking after profits more than safety and quality.” NACD is “concerned about how to ensure a safe supply chain out of foreign countries. We are looking at how our Responsible Distribution Process (RDP) can assist our members, suppliers, and customers in providing the quality controls necessary,” Jahn says. NACD members have visited China, India, and Singapore to provide information about RDP, and NACD is working through the International Council of Chemical Trade Associations (Brussels), Jahn says. “The purpose of these sessions was to impress upon both producers and distributors in these countries that NACD members not only expect quality products but they also expect their suppliers and customers to be responsible to health, safety, and environmental concerns,” he adds. The bottom line is that any company must “take steps to ensure control over their own manufacturing processes,” Acker says. “They must ensure that their suppliers and their suppliers’ suppliers are properly manufacturing the products to contracted specifications. For many companies, this includes looking toward the U.S., for primary manufacturing and for backup suppliers if companies in China—and elsewhere—are unable to meet standards,” he says. The process has already begun, Acker says. Several Socma member firms have received inquiries from potential customers regarding the Socma members’ ability to supply certain chemicals that the customers currently import from China, he says. “Understand these are not orders; these are inquiries, which can be a far cry from an order,” he adds. “But companies are putting in backup plans and are assessing their alternatives, though they may hold their alternatives in abeyance until, and if, they have a problem.” Biting back: China has closed two factories associated with U.S. pet food contamination. Meanwhile, China’s quality scandal has damaged a level of trust that it once had with both U.S. consumers and businesses, says Anthony Ridnell, CEO and owner of food, pharma, and specialty chemical distributor TRInternational (Seattle). “In the end, the FDA can’t be responsible for what goes on outside of this country,” he says. However, tougher U.S. regulations that apply equally to U.S. and foreign firms that do business in the U.S. would be welcome, “because that would provide a level playing field,” he says. Ridnell, like Acker and Jahn, is optimistic that China will correct the quality problems associated with its exports. “People have acted quickly, and it seems that the governments of both nations are doing what they have to do,” Ridnell says. The result of their actions is likely to “raise the bar” on quality control across the board and restore trust, he adds. “I don’t think China is going to kill the Golden Goose,” Acker says. “It has a lot at stake here.”