China Cosmetics: 7 Recent Regulatory Milestones and Horizon Scanning

Overview

China currently boasts the world’s second largest cosmetic market with sales value close to 30 million Yuan last year, an 8.8% share of the global total. In parallel with outstanding trade performance, China’s regulatory system has undergone monumental reform, presenting investors with new opportunities and posing current industry stakeholders with new barriers to market access. This report will overview the pivotal government reforms implemented over the past two years, analyze current trends, current regulatory activities and any pending reforms in the pipeline all with a view to making an educated guess on where the opportunities lie in China’s market over the next several years.

Cosmetic Ingredient Reforms: Safety at the Expense of Innovation

The most significant change in the management of cosmetic ingredients in China occurred in 2014 upon the release of the “notice of adjusting the management of registering new cosmetics” and the “catalogue of cosmetic ingredients already in use” by the CFDA. The catalogue of existing cosmetics ingredients is the gold standard reference for determination of a cosmetic ingredients regulatory status in China and allows industry stakeholders to ascertain their regulatory compliance obligations in term of any cosmetic ingredient registration requirements. Despite widespread talk of major potential changes the catalogue was conservative in nature and new cosmetic ingredient registration remained largely unchanged.

Both China’s domestic industry and international stakeholders have been critical of the way new cosmetic ingredients have been regulated in China, mainly due to the difficulty in registering new cosmetics which are often indiscriminately deemed as high risk ingredients by the review commission. Indeed many ingredients widely used abroad with well substantiated safety profiles cannot be used in the Chinese market. The government’s overly conservative attitude towards new ingredients has fomented argument and industries have accused China’s government of stifling innovation and R&D. Nevertheless, with the industry growing at a breakneck speed, new ingredient management will surely be revisited in the near future. A more feasible management system for cosmetic ingredients could borrow the risk assessment principles adopted by China’s chemical and agrochemical sectors and allow new ingredients to be administrated in terms of its chemical and physical properties, use, practical application, toxicological profile and even environmental impact.

Tightened Control of E-commerce Sales Channels

Important new cosmetic regulations including the “Regulation of Cosmetic Supervision Management”, “Measures of Cosmetic Label Management (for public consultation)” and “Cosmetic Safety Technical Standard” in 2015 have increased control of cosmetics traded via E-commerce. In actual fact over the last several years there has been a largely unregulated but paradoxically government sanctioned trade channel allowing goods which fail to comply with even the most basic of Chinese cosmetic national standards to be sold via crossborder ecommerce. In the last month the government drafted “Detailed Rules of Supervision and Administration of the Safety of the Goods Imported via Cross-Border E-Commerce under Bonded Internet Shopping Model” which if promulgated without change will see this multibillion dollar regulatory loophole firmly plugged.

Tooth and Oral Mucosa Products Classified as Cosmetics

According to the newly revised “Regulation of Cosmetic Supervision Management”, toothpaste and oral cleaner have been newly classified as cosmetics, signaling enhanced requirements to market entry for these products. Before that both products can be placed on the market without acquiring pre-market permit.

Online Recordkeeping and Extended Trade Permit Validity

An online recordkeeping system was launched in 2015 to facilitate the process of recordkeeping for non-special use cosmetics, a modification that greatly benefits cosmetic importers with the time to finish administrative permit application considerably reduced.

Meanwhile, the validity period of cosmetic registration certificates has been extended to five years, lowering costs associated with certification renewal and facilitating SME market entry.

Alignment with the EU rule on Cosmetic Efficacy Description

Following the EU’s regulation on cosmetic efficacy description this year, the Chinese government is set to release similar guidance on cosmetic efficacy description requirements. The move will facilitate trade but any benefit must be tempered with caution given the increased regulatory requirements for accuracy of terminology.

International Stakeholders Face Increased Market Entry Costs

A prominent adjustment made to the renewed measure on cosmeitc safety management is an updated negative list of forbidden functional/efficacy claims when unsubstantiated by testing and other relevant scientific data. Interestingly under this regulatory reform the labeling of the term “organic” is banned, hindering the development of an industry which holds great promise given China’s historical battle with unethical industry practices, adulteration and use of illegal ingredients. Meanwhile, the renewed “Measures of Cosmetic Label Management” that came into force on 1 July this year requires all cosmetics must be in a package specifically designed for use in Chinese market meaning the previous practice of adding Chinese over labels is no longer permitted, hugely increasing market entry costs for imported cosmetics and was later postponed for further discussion after soliciting public and international comments. In addition, the information of the domestic responsible organization, manufacturer and contractor must be indicated on the imported cosmetic label.

Cosmetic Safety Technical Standard Ups Ante on Safety Requirements

In comparison to the “Cosmetic Hygiene Standard”, the “Cosmetic Safety Technical Standard” increases the limitations for maximum residue concentration of lead and arsenic in addition to new requirements for cadmium, dioxan and asbestos. Adjustment to ingredient requirements for prohibited and limited ingredients impose stricter demands on the safety of cosmetic finished goods, ingredients and manufacturing technology. Chinese companies are expected to be hardest hit by the elevated requirements which are aligned with international best practices.

In closing its worth noting that China’s cosmetic regulatory development is on a trajectory to “simplifying pre-market certification and strengthening post-market supervision”, while emphasizing the role of corporate ethics and self-regulation. Market entry will be facilitated but mistakes will be punished more severely by both regulators and China’s unforgiving consumers.