China's current cosmetic regulatory system is founded on the overarching "Regulations Concerning the Hygiene Supervision over Cosmetics (1989)", supported by a series of subsidiary rules, standards and guidance documents issued by the former regulator, the Ministry of Health (MOH) and the current competent authority, National Medical Products Administration (NMPA).   

In the last two decades, China's cosmetics industry has undergone tremendous change. Currently, the Chinese cosmetic market ranks as the third largest globally and is also the worlds' emerging market, exhibiting the greatest average annual growth rate. To make the cosmetic regulatory framework consistent with the current industry situation, in the second half of 2013, the former CFDA (now NMPA) initiated a program to reform Hygiene Supervision of Cosmetics Regulation 1989 aiming to further standardize cosmetic production and operation as well as reinforce cosmetic supervision and administration and the written draft was released in 2015. On June 29, the final version of Cosmetic Supervision and Administration Regulation was released by China State Council  and will come into force on January 1, 2021. All stakeholders will be significantly affected by the revised regulation. The amendment is not simply a refinement of its predecessor but represents a complete overhaul, which will see the definition, classification and registration requirements of cosmetics completely changed. Once effective, the new regulation will necessitate that, both domestic and overseas cosmetic companies adopt new compliance strategies.

Part 1 Regulatory Framework and Competent Authority

1 Existing Main Cosmetic Regulations in China

2 Competent Authority

During the 2018 NPC conference, the Stated Council launched government institution reform, and established “State Administration for Market Regulation” to fully regulate cosmetics in place of three institutions: CFDA, AQSIQ and SAIC. There sets an independent Drug Administration Bureau named "National Medical Products Administration" under the “State Administration for Market Regulation”.

1) SAMR major responsibilities include:

• Market management

SAMR is responsible for development, oversight and enforcement of regulation, policy and standards related to market supervision. It will also develop standardization strategies to create an honest and fair market environment.

• Market entity registration

It is responsible for registration of market entities conducting business in China, including representative office of overseas enterprises.

• Quality and safety supervision

SAMR will carry out risk monitoring on product quality and safety, as well as implement national sampling inspection across the country.

• Standardization work

SAMR is obliged to notify new GB standards to the public and draft GB/T standards.

In addition, SAMR should coordinate with other ministries to optimize market supervision with major interactions summarized below:

• National Medical Products Administration is responsible for formulating cosmetic regulatory systems, as well as licensing, inspection and penalties for cosmetics research and manufacture. 

• SAMR should cooperate with Ministry of agriculture and rural affairs to establish mechanisms related to origin exit market access and traceability.

• National Health Commission (NHC) should give timely feedback on results of risk assessment studies to SAMR to guide policy.

• An information sharing system should be set up between SAMR and GAC to avoid redundancy and overlap of administrative duties and to aid in information dissemination related to safety and quality issues associated with import/export cosmetics.

NMPA's major responsibilities include:

• Safety Supervision Management

NMPA is responsible for cosmetics, drug and medical devices' safety supervision management, including formulating supervision policies, drafting regulations, supervising its implementation, as well as formulating management and service policies that encourage new technologies for cosmetics, drug and medical devices.

• Standard Management

NMPA is obliged to draft cosmetic standards, formulate a cosmetic classification management system and supervise its implementation.

• Registration Management

NMPA is responsible for formulating cosmetic, drug and medical device registration management system. It will also strictly conduct market entry review and approval.

• Quality Control

NMPA is responsible for formulating cosmetic, drug and medical device quality control practices. 

• Post-market Risk Management

NMPA will carry out monitoring, evaluation, rectifications and recalls associated with cosmetic adverse reactions, as well as undertake cosmetic safety emergency management.

• Supervision and Inspection

NMPA is obliged to formulate inspection rules, penalize illegal activities in cosmetic registration and manufacturing.

• Foreign Exchange and Cooperation

NMPA will participate in the formulation of international regulatory rules and standard.

3) NMPA consists of 9 subordinate departments, including a “Cosmetic Safety Supervision Department”(化妆品监督管理司), which will undertake cosmetics registration and filing, drafting and supervising the implementation of cosmetic standards, classification rules, technical guidelines and censorship, as well as conducting on-site and sampling inspection, penalizing illegal activities and monitoring adverse reactions.

5) China General Administration of Customs is responsbible for import and export inspection of cosmetics.

Part 2 Cosmetic Products

Before being used, marketed or imported into China, cosmetic products must get approval from NMPA or provincial Medical Products Administration according to the product category.

1 Definition of Cosmetic Products

Cosmetic products refer to chemical products for the daily use intended to be applied on any external part of human body (such as skin, hair, nails, lips etc.) by spreading, spraying or other similar ways to keep the body clean, eliminate unpleasant odor, protect skin, and improve appearance and beauty.

Cosmetics have various definitions in different countries (regions). How to determine whether a product falls in the scope of cosmetics in China? You may take into consideration the following three aspects:

2 Classification of Cosmetic Products

Cosmetic products in China are divided into two categories.

2.1 The adjustment of the classification

In the second draft of Regulations Concerning the Supervision and Administration over Cosmetics, China has changed the classification and categories of cosmetics. In the draft, cosmetics are regulated as general cosmetics and special cosmetics. Special cosmetics include:

• Hair dye products;

• Hair perming products;

• Whitening products;

• Sunscreens;

• Other special cosmetics deemed by the NMPA.

The draft defines general cosmetics as all other cosmetics not classified as special cosmetics. The former CFDA is responsible for formulating and publishing the cosmetic categories inventory and will also adjust the scope of special cosmetics based on the monitoring of cosmetics adverse reaction and R&D outcomes. It is estimated that breast beauty products and slimming products are likely to be managed as pharmaceutical products once it is enforced.

In the draft for second public consultation of Regulations concerning the Hygiene Supervision over Cosmetics 1989, special use cosmetics are adjusted as following 5 categories:

• Hair dye products

• Hair perming products

• Whitening products

• Sunscreens

• Other cosmetics claimed new efficacies

3 Registration/Filing of Cosmetic Products

At present, imported and domestic special use cosmetics and new ingredients require pre-market registration with NMPA; domestic non-special use cosmetics are subject to pre-market filing with the provincial Medical Products Administration; and situation is divided for imported non-special cosmetics that through the specific 11 FTZs, imported non-SUC cosmetics are subject to filing management with provincial Medical Products Administration, while through other ports, imported non-SUC require filing management with NMPA.

3.2 Filing of Imported Non-special Use Cosmetics

China has implemented a new policy for initially imported non-special use cosmetics through Shanghai Pudong New Area since Mar 1 2017. The cosmetics only require filing with Shanghai MPA instead of registration with NMPA and the MPA grants a filing certificate to the applicant after a priliminary review of application dossiers, then the applicant can start to import. After a year NMPA officially expanded the practice of imported non-special use cosmetics filing management in Pudong to other 10 FTZs including Tianjin, Liaoning, Zhejiang, Fujian, Henan, Hubei, Guangdong, Chongqing, Sichuan and Shanxi. On Nov. 9, 2018, China National Medical Products Administration announced that registration of first-imported non-specials cosmetics shall be replaced by filing management nationwide from Nov. 10.

3.3 Registration Procedures for Imported & Domestic Special Use Cosmetics

Step 1: Assign a Responsible Agent in China (imported special use products)

The pre-condition for registering imported cosmetics is to designate a Responsible Agent (RA), who must be a Chinese legal entity. The RA could be:

• A subsidiary based in China;

• Importer; 

• A third party, like REACH24H Consulting Group.

» There are four possible results of technical review:

1. Approval;

2. Approval subject to amendment of the submitted dossier (if product Chinese name modifies or the description, format and writing of submitted documents need to be further improved);

3. Additional information requested (if contents of dossier need to be revised; additional testing data or a verification test is needed; etc.)

4. Rejection (if the dossier contents or product samples are false; the formula or testing result shows safety problem; etc.)

» The NMPA expert panel will extensively review the following aspects:

• Product label and name: the applicant should concentrate on mandatory labeling items, warning statement, the authentic Chinese translation of imported product label, appropriate efficacy claims and the correct SPF identification.

• Product formula: the use of prohibited ingredients listed in Hygienic Standard for Cosmetic 2007 is not permitted; cosmetics for increasing hair growth, slimming and breast beautification need a full description of efficacy ingredients and explanation and rationale for their usage, in addition to information of production process and quality specification.

• Hygienic chemical and microbiological testing data: all testing results analyzing the presence of heavy metals, microorganism, restricted and active ingredients must meet relevant requirements and confirm with formula statement.

• Toxicological data: the product should not cause obvious skin and eye irritation and elicit no obvious skin allergic reaction and /or phototoxicity; Infant or children products will be subjected to higher safety standards.

• Human safety evaluation: animal testing is required prior to human trials; human trials should demonstrate no obvious adverse reactions of cosmetics to the human body.

3.4 Registration Duration and Cost

The duration and cost of testing and the whole registration process depend on the category and property of cosmetic products.

In general, it takes 80 days for SUC to be tested and 6 months to be registered. Sunscreens and products for hair growth, body shaping and breast enhancement need more time since additional efficacy tests are required.

The registration cost consists of the testing fee, translation fee, notary fee and consulting fee (if a regulatory consultant is involved). NMPA does not charge any administration fee for registration.

3.5 Registration Dossier

The table below shows required documents for registration of imported and domestic special use cosmetics:

4 Labeling of Cosmetic Products

Cosmetics labels are subject to review by NMPA expert panel during registration and also checked by Custom when products arrive at the port. Many exporters lack adequate knowledge about correct Chinese compliant labeling for their cosmetics, demonstrated by a high volume of cosmetic products destroyed or rejected at the port due to substandard labels.

According to Instruction for Use of Consumer Products—General Labelling for Cosmetics (GB 5296.3-2008), the following information shall be indicated on labels of the imported cosmetics:

1. Product name (in line with Requirements on Naming of Cosmetics);

2. Name and address of the manufacturer, distributor;

3. Country of origin;

4. Approval ID number (the ID number on the administrative license or record-filing certificate, such as “国妆备进字J20130000”);

5. List of ingredient (all ingredients with concentration over 1.0% must be indicated with Chinese INCI names and listed in descending order of "quantity"; in absence of INCI name, the corresponding name in Chinese Pharmacopoeia, its chemical or botanical name can also be adopted);

6. Net content;

7. Production date and shelf life or the batch number and expiration date;

8. Warnings (for products containing restricted substance, e.g. Zinc phenolsulfonate, the term "avoid to contact with eyes" shall be indicated on the label; and special use cosmetics e.g. hair dye);

9. Instruction and storage condition (provided if inadequate storage impacts safety);

10. Other info (the local distributor or wholesaler can be indicated as well).

Two options are available for labeling the imported cosmetics. Companies can design the label especially for the Chinese market according to Chinese labeling regulations or use the original package with a China compliant over-label.

5 Claim of Cosmetic Products

Cosmetic companies cannot claim functions or features that the products do not possess. Medicinal or therapeutic function claims and any misleading wordings are prohibited. Local expertise will be necessary for balancing compliance with Chinese claim requirements and addressing the interests of manufacturers who rely on the added value derived from the inclusion of certain claims in their marketing strategies. Claims on some imported products, such as "hypoallergenic", "dermatologically tested" or "100% natural", would be challenged by NMPA's expert panel.

6 Custom Inspection of Imported Cosmetics

After the products are approved by NMPA, foreign firms can start exporting cosmetic products to China immediately. Distributors or importers in China need to apply for Custom inspection by submitting required documents, such as NMPA product approval license or certificate, product formula, Chinese label samples, etc. The inspection process includes on-site examination of the label and package, sampling and testing and the issuance of the certificate of Inspection and Quarantine of Imported Goods, which is the ultimate requirement for custom clearance.

7 Manufacture License of Cosmetics in China

Part 3 Cosmetic Ingredient

1 Cosmetic Ingredient Classifications

China divides cosmetic ingredients into:

1. New cosmetic ingredient; (need registration with NMPA)

2. Existing cosmetic ingredient.

Inventory of Existing Cosmetic Ingredients in China (IECIC)

Ingredients listed in the IECIC are regarded as "existing" substances, which need not approval by CFDA prior to use in cosmetic products.

The issue of IECIC can be traced back to 2003, since when the government started to regulate the allowable cosmetic ingredients through the positive list. On 27 April 2003, the Ministry of Health (MOH) released the IECIC 2003, which is an internally circulated list among related departments. A large number of recognized and globally accepted ingredients that have been scientifically established safety and have a long history of safe usage are not included in the IECIC, which creates a major issue for multinational companies. In order to facilitate the registration of new cosmetic ingredients, CFDA started to improve the existing ingredient inventory.  In 2012, the CFDA drafted three batches of existing cosmetic ingredients, totaling 3,667 ingredients. While in 2013 CFDA just finalized the first two batches, leaving the number of ingredients in the third batch a mistery. 

The third batch was expected to be finalized. However, CFDA has chosen to abandon a batch-wise approach and instead published the integrated existing cosmetics inventory. After releasing two consolidated lists of IECIC 2014(draft) on 21 Jan 2014 and 11 Mar 2014 separately, the CFDA announced the release of the final version of the much anticipated Inventory of Existing Cosmetic Ingredients in China (IECIC 2014), containing 8783 ingredients that have already been used in cosmetic in China on 30 June 2014.

At the end of 2015, CFDA announced that they had amended the previous formal version of IECIC 2014 which was released on June 30th 2014. The main changes made by the CFDA is the correction of the ingredient naming errors made in the 2014 IECIC. There are also 9 new ingredients and 1 deleted prohibited ingredient (papaver somniferum seed extract). The total ingredients still equals 8783.

The 9 new ingredients are as follows:

• harungana madagascariensis extract;

• undeceth-3;

• decyl isostearate;

• tris(PPG-3 benzyl ether) citrate;

• chondrus crispus (carrageena);

• raspberry ketone glucoside;

• hesperidinase;

• PEG-50 hydrogenated palmamide;

• PEG/PPG-150/30 copolymer.

The inventory serves as the sole reference for determining the regulatory status of a cosmetic ingredient. Cosmetic companies and ingredient suppliers are strongly recommended to check whether their ingredients number among the inventory. All ingredients excluded from the list are subject to mandatory pre-market registration under new cosmetic ingredients regulations with the NMPA.

In case that an ingredient in the IECIC is also a restricted substance in the Safety and Technical Standards for Cosmetics 2015, it should be used in conformity with corresponding restriction requirements, such as application scope, maximum permitted concentration in the finished cosmetic products, warnings, etc. 

List of Approved New Cosmetic Ingredients

During 2004 to 2014, there were only 10 new cosmetic ingredients that got approval from MOH and NMPA, indicating the extreme difficulty in registration of a NCI in China. From 2008 to 2014, 4 years has witnessed a meagre 4 NCIs successfully approved by NMPA in spite of the continued submission of application dossiers. According to statistics from NMPA, more than 130 dossiers have been submitted for the administrative licensing of NCIs.

The List of 10 Approved New Cosmetic Ingredients during 2004-2014

Lists of Prohibited and Restricted Ingredients

China regulates substances banned and restricted in cosmetic products in a way similar to in EU Cosmetic regulation, which includes lists of prohibited and restricted substances, colorants, preservatives, and UV filters. In China, these kinds of lists are contained in the Hygienic Standard for Cosmetics 2007, the standard that all cosmetic products and ingredients must adhere to, which also contains methods of toxicological test, hygienic chemical test and microbiological test along with efficacy evaluation methods.

Substances that draw the most attention of the CFDA review experts are usually  substances banned from use in cosmetic products, such as Dioxane, Phenol, Acrylamide, Asbestos, Nitrosamines, etc.

If some prohibited substances are present in cosmetics as by products or impurities, which during the prodcution process cannot be technically avoided, an exception is made providing that the finished products meet the general requirements outlined in the Hygienic Standard for Cosmetics 2007. Namely, the finished products may not harm human health under normal, reasonable and forseeable conditions of use. For instance, Dioxane is banned but it is currently technically impossible to prevent residual carryover, so CFDA set a maximum limit of 30mg/kg, which is deemed toxicologically acceptable.

The Safety and Technical Standard for Cosmetics 2015 also prescribes limits for heavy metals and methanol in cosmetic products:

The release of Safety and Technical Standards for Cosmetics 2015

In an effort to develop regulatory protocols and standards which match the technical and supervisory capacity of the cosmetic industry, the CFDA is revising the 2007 Hygienic Standard for Cosmetics. To date the most significant progress made in amending this standard was the release of the revised body of the 2007 Hygienic Standard (renamed Technical Safety Standard for Cosmetics) in 30 Nov 2012. In 2015, two drafts were released for public consultation. Finally on Dec 23, CFDA annouced the promulgation of Safety and Technical Standards for Cosmetics, which will be taken into implementation since December 1st 2016.

• Making clear explanations of certain terms;

• Detailing cosmetic safety technical universal requirements:

• The limit of lead is adjusted from 40mg/kg to 10mg/kg. 

• The limit of arsenic is adjusted from 10mg/kg to 2mg/kg. 

• The limit of cadmium is newly set as 5mg/kg. The limit of dioxane is 30mg/kg. 

• No asbestos should be tested out.

• Revising lists of cosmetic prohibited and restricted ingredients and lists of cosmetic permitted ingredients:

• Currently, there are 1388 kinds of prohibited ingredients, 47 kinds of restricted ingredients, 51 kinds of permitted preservatives, 27 kinds of permitted sun screeners, 157 kinds of colorants and 75 kinds of hair tints in Cosmetic Safety Technical Standard 2015.

• And revising physical-chemical inspection methods:

• 60 kinds of testing methods for prohibited and restricted ingredients in cosmetics are newly added.

• All testing methods are standardized and classified for more convenient reference.

• Few mistakes in the previous Hygienic Standard for Cosmetics have been corrected.

2 Definition of New Cosmetic Ingredient (NCI)

According to the article 9 of the overarching cosmetic regulation, a new cosmetic ingredient is a natural or artificial ingredient that is applied in cosmetic products for the first time in China. Before being used to make cosmetics, it must be approved by CFDA. Basically, an ingredient is deemed as "new" if not included in IECIC.

In the case that a new ingredient is identified as a new chemical under the China chemical regulation, it should be notified to the Ministry of Environment (MEP) before manufacture or import [See Chempedia China NCSN (China REACH)] for exhaustive compliance guidance].

In this instance, double registration under two different regulatory schemes is required prior to placing a cosmetic ingredient on the Chinese market. 

3 Registration of New Cosmetic Ingredients

The NCI registration procedure is similar to that of cosmetic products but more costly and time-consuming. Applicants can refer to the Guidance on Application and Review of New Cosmetic Raw Materials to fulfill registration, which details the registration dossier, required toxicological tests and testing exemptions. 

CFDA adjusts registration of NCI

In the past once CFDA announced the approval of a NCI, all subsequent companies wishing to utilize the substance were permitted. The old policy has been complained as unfair to the applicant who has paid extensive efforts to gain the permit, which will ultimately hurt companies' initiative to do registration. 

Under the new management scheme, cosmetic companies who want to utilize the same new ingredient are subject to separate registration. CFDA will no longer release online announcements to approve new cosmetic ingredients but issue “new cosmetic ingredient trial use certificate” for the applicant only. The period of validity is four years, during which applicants can manufacture, sell and use this new ingredient. If no adverse events are observed during the 4 years, the ingredient will be listed into IECIC allowing all cosmetics companies to freely utilize the substance. That is to say the applicant can enjoy the exclusive protection period of 4 years (CL news on 26 Jan 2014). 

► Registration Procedure

The registration procedure of new cosmetic ingredients is similar to that of special-use cosmetics shown in Figure 3.

► Registration Dossier

1. New cosmetic ingredient administrative license application form;

2. Research & Development Report:

• R&D background, processes and other related technical information.

• The name and source of the ingredient, relative molecular weight, molecular formula, chemical structure and physical-chemical properties.

• The intended use and application scope of the ingredient in cosmetics, safe use limit, warning statement, etc.

3. Basic description and diagram of the production process;

4. The quality and safety control requirements of the ingredients, including specifications, quantitative/qualitative analytical methods, impurities and their control measures;

5. Toxicological safety evaluation material, including:

• A summary of the evaluation;

• Toxicological testing data;

• Safety evaluation data on potential risk substances (i.e., prohibited substances).

6. The Power of Attorney and the Business License of the SFDA-recorded responsible agent by the overseas applicant;

7. Testing sample verification reports (to demonstrate the consistency or to prove the new ingredient was employed in the actual toxicological tests);

8. Analytical method validation reports (if the analytical method for identification and quality control was developed by the applicant itself, not derived from NMPA-published testing guidelines, the validation should be carried out by three separate NMPA-approved testing institutions);

9. Other supportive documents.

The toxicological safety assessment mainly focuses on identifying prohibited substances or toxic impurities present in cosmetic ingredients. For example, phenol is a common impurity in phenoxyethnol and a testing report of phenol would normally be provided either for phenoxyethanol itself or a finished cosmetic product containing this preservative. Dioxane, methanol, acrylamide and N-nitrosodiethanolamine are normally tested for certain ingredients and their safe concentration should be calculated to demonstrate their safety if trace levels are present in the finished formulation. Impurities that pose potential risks and toxicological evaluation data will be extensively reviewed by NMPA expert panel.

► Toxicological Test

Applicants need to entrust a NMPA-accredited lab to prepare toxicological data demonstrated table below. The table below is a sample from Shanghai CDC, showing required testing items, duration, sample quantity and testing fee for an NCI:

 The above table displays a full set of toxicological tests a new cosmetic ingredient may go through but in real case, some tests will be exempt according to the property and use of the NCI. 

In principle, it is mandatory for applicants to submit animal testing data. However, applicants could also provide the toxicological information utilizing read-across data, QSAR and available clinical or epidemiological data to prove the safety of the NCI. There is, however, a risk that this data will be inadequate and ultimately prolong registration as the NMPA expert panel may be unsatisfied with these kinds of data and require re-submission of animal testing data. 

Part 4 Animal Testing Issue

China's mandatory requirement of animal testing for cosmetics registration has been a long-standing controversy that makes current Chinese cosmetics regulatory framework incompatible with that of EU and Israel where such testing is prohibited for both cosmetic products and ingredients. The different animal testing policies have made global trade between these regions difficult. Chinese companies cannot sell cosmetics in EU if they are marketed in China and the European companies that stick to "cruelty-free" status cannot enter the Chinese market. 

Under the existing regulatory regime, cosmetic companies are obliged to assign NMPA-approved labs to perform animal tests on their cosmetic finished products or ingredients even if they have been assessed as "safe" and used or marketed in other countries. Testing results drawn from non-animal testing methods are not likely to be trusted and accepted by NMPA technical review experts. However, the past few years witnessed a turning point for animal testing policy in China. 

Removal of mandatory animal testing requirements for domestically-made non-special use cosmetics

The abolishment of the obligatory animal testing requirement for domestic non-special use cosmetics is the most significant cosmetics policy shift in 2013. Toxicological tests can be exempted as long as the ingredients and the finished products are proven to be safe after risk assessment.

Although it is still uncertain whether the new change will be extended to imported products, it is nonetheless a major milestone for China on its way to the modernization of its animal testing policy and alignment of its regulatory framework with the global cruelty-free trends. 

Latest Developments in Alternative Testing Methods in China

On Nov 11, 2016, China included 3T3 NRU Phototoxicity Test as a toxicology test method into Safety and Technical Standards for Cosmetics. Then on Aug 15, 2017, Skin Corrosion: Transcutaneous Electrical Resistance Test was accepted as in vitro test method for skin corrosion.

On Feb 5, 2018, China opened public consultation on 2 new draft standards for 2 additional alternative testing methods to public consultation namely:

1.  Skin Sensitivity: Direct Peptide Reactivity Assay

2.  Eye Irritation(Corrosion): Short Time Exposure

On Jun 27, 2018, China opened public consultation on 2 new draft standards for two more alternative testing methods namely:

1. Skin Sensitivity: Murine Local Lymph Node Assay: DA

2. Skin Sensitivity: Local Lymph Node Assay: BrdU-ELISA

Currently, Eye Irritation (corrosion): Porcine Corneal Opacity Permeability and Genotoxicity: In Vitro Micronucleus are under research. The research on Eye Irritation (corrosion): Fluorescent Leakage test and Skin Sensitivity: 442E(h-CLAT), 442D will commence soon.

On Sep 19, 2018, China Working Group for the Validation of Alternative Methods was newly established. This working group is organized by NIFDC and covers 15 units including cosmetics testing institutions, scientific research institutions and representatives of the cosmetics industry.

The working group's major goal is to improve the validation and utilization of alternative testing methods which can act as viable surrogate markers in the assessment of potential toxicities, adverse effects and hazards of cosmetics and ultimately reduce China's reliance on the use of animal testing. Feasibility criteria are based on the inherent characteristics of China's cosmetic industry, consumers and product lifecycle.

Although China has not yet established a Center for the Validation of Alternative Methods, the establishment of the working group is also a major step forward.

Animal testing for non-special use cosmetics may be exempt

On 27th May 2019, China National Medical Products Administration (NMPA) released a draft version of Administrative Measures for Filing of Non-special Use Cosmetics. The regulation stipulates: if the production enterprise has obtained the Good Manufacturer Practices certificate and product safety risk assessment results can fully confirm this product's safety, the toxicological testing for this product is not required, except in the following situations...

There is a big possibility that imported non-special cosmetics will be exempt from mandatory animal testing.Animal testing is still mandatory for the following products: children's products, products which contain the new ingredient that has filed and been approved but not included in the IECIC, products manufactured by enterprises which have bad records.

Part 5 Cross Border E-commerce

In addition to the general trade that shall complete pre-market approval in advance, China also developed another trade channel for international stakeholders’ entry into its cosmetic market, and that is Cross Border E-commerce (short for “CBEC”), which generally refers to the online purchase of a select list of goods that are imported from overseas countries via China government-sanctioned third-party e-commerce platforms such as Tmall Global, Vipshop, Kaola, JD using the bonded warehouse mode or the direct mail mode.

1 Development History

Over the years, China has flip-flopped on its CBEC policies. For a long time, commodities imported via CBEC channel were supervised as personal goods and were subject to personal postal articles tax. In 2016 China initiated a regulatory reform on CBEC policies which was scheduled to be effective on Apr. 8, 2016 to mainly address 3 key issues: taxation, positive list and supervision method. However, as the reform sparked huge controversy among the public, two-year buffer period was granted for stakeholders to prepare for the new regulatory scheme until the end of 2018. During the grace period, a transitional policy that “temporarily” exempted the verification of customs clearance sheet and pre-market approval for first imported cosmetics, infant formula, medical device, special foods (such as health food and food for special medical purposes) via CBEC channel was launched in 15 CBEC pilot cities. Besides the supervision method, the new tax scheme and positive lists were in effect in the 2016 CBEC reform.

2 CBEC New Policies

At the end of CBEC grace period in 2018, China determined to further extend the transitional policies of CBEC retails beyond the January 1st, 2019 deadline. Given no new deadline has been specified, ChemLinked expects current measures to remain stable in the short to medium term.

As per the official circulars, the regulatory updates mainly include 3 aspects:

(1) The continuation of previous supervision method

Commodities imported via CBEC channel has been essentially regulated as personal articles, exempt from mandatory registration or filing requirements of first-imported cosmetics, infant formula powder, medical device and special food (such as health food and food for special medical purposes).

Additionally, the number of CBEC pilot cities where the new policies apply has also been increased from the previous 15 to 37.

(2) The increase in the number of the positive list

The previous two lists of products permitted to be imported via CBEC were merged into one list and were appended to include 63 types of new commodities in great demand. For the full list of cosmetics, please refer to the cosme-list.

(3) The increase in the transaction limits for both single purchases and total annual purchases

The consumers’ transaction limit of CBEC commodities was raised from 2000 RMB to 5000 RMB per transaction and from 20,000 RMB to 26,000 RMB per person per year.

3 CBEC New Tax Rate

According to the CBEC tax scheme, commodities imported in this way are subject to a comprehensive tax which is a combination of three taxes—tariffs, VAT (value-added tax) and consumption tax.

1. Within the transaction limits, consumers are eligible for preferential tax policy in which the import tariff rate is temporarily fixed at 0.0%, and the import VAT and consumption tax are levied at 70% of the statutory tax payable. The calculation rules are:

CBEC Comprehensive Tax Rate = [(VAT rate + Consumption tax rate) ÷ (1 - Consumption tax rate)] × 70%

Significantly, since China officially dropped the VAT rate of imported goods from 16% to 13% on April 1, 2019, the CBEC comprehensive tax was accordingly reduced and the updated rates are as follows:

2. On the contrary, the products imported via CBEC will be taxed in full in line with the general trade mode in any of the following cases:

• A single transaction is over 5,000 RMB but within the annual limit of 26,000 RMB, it is allowed to be imported via CBEC but is subject to full tax.

• Any excess beyond the annual limit will be regulated as general trade.

4 CBEC vs. Animal Testing

Under the current regulatory regime, the significant time and financial investment associated with standard pre-market approval along with the necessity to produce Chinese labels and toxicology test reports can all be avoided because CBEC-imported cosmetics are regulated as personal articles and not subject to cosmetics regulations. Thus it offers an excellent market access route for international cosmetic stakeholders who intend to circumvent animal testing and mandatory general trade registration requirements in consideration of ethical issues and/or expedited market access.

5 Future Trends

As widely predicted, the prosperity of CBEC business is expected to continue in the second half of 2019, fueled by a series of favorable policies including China State Council’s plan to expand the positive list of CBEC imported commodities and the convening of the 2nd China International Import Expo.