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Legal guide for organic food exports to China

In 1973 on arrival in Beijing Gough Whitlam became the first Australian Prime Minister to visit China while in office.

The personal, political and trade relations that followed are extraordinary.

In 1978 Deng Xiao Ping introduced China's Open Door Policy for foreign businesses.

By 1980 four Special Economic Zones were up and running - Shenzhen, Zhuhai and Shantou in Guangdong, and Xiamen in Fujian. China stands at the top in 2014, regarded by 31% of Australians as the nation's best friend in Asia, according to a Lowy Institute poll (see graphic at end of article).

This month marks forty one years since Whitlam's brave diplomacy. His vision was singled out in eulogies following his death this month. The opportunities for mutual gain are certainly considerable for organic food trade between Australia and China.

Organic food market growth in China

The Chinese consumer market for imported organic food products(有机食品)is growing exponentially. Market research reveals that the Chinese organic food market is now 12 times the size it was six years ago. According to statistics, Chinese consumers in 2012 spent A$13.8 billion on organic food.

Branding and labelling, trade mark registration and certification are imperatives for Australian organic business operators seeking to export products to China. Before reviewing these in detail, consider these factors which explain the growing demand in China for organic food.

  • Need for quality control: Unethical local food manufacturers have sparked widespread food safety concerns and demand for imported food products. Industrial toxic materials or recycled leftovers have been discovered in food products, for example chemicals in eggs and cement in walnuts.
  • Higher income: The population of high income citizens has grown in major cities such as Beijing, Shanghai and Chongqing.
  • Aging population: Decades after the implementation of the one child policy, China’s aging population has a growing concern for natural and healthy food to prolong life and preserve health.
  • Increased health awareness: Awareness of health has increased due to higher rates of participation in higher education.

Branding tips for China

A report published by an international public relations firm confirms what is well-known - brand recognition has the strongest impact on the buying decisions of a majority of Chinese consumers. An effective brand message connotes quality and reliability.

Less known is research indicating brand messages of reliability and authenticity are strengthened for Chinese consumers when the original country of origin product packaging is used. This finding is relevant to instructions given to logo and packaging designers as well as those responsible for advertising and trade mark registration.

For some exporters country of origin brands or packing are not appropriate. If an exporter decides to use a Chinese translation of its trade mark (ie in Chinese characters) then that translation should be registered as a trade mark in China.Australian wine label Penfolds learnt this the hard way.

As in many other markets, exporters should expect rip-off branding. If a brand is infringed, its value and consumer confidence can diminish. Good design, copyright and trade mark protection should work together to become effective preventative measures.

  • Copyright protection: Product packaging designs are susceptible to copying anywhere, including in China. A company’s copyright ownership claim is strengthened by originality in packaging format, layout, logos, labels, arrangement of information, and use of colour. Exporters should work with lawyers who understand design, not just law. Lawyers should be at the table when all design elements are considered and logo and package designers are being briefed.
  • Trade mark protection: Trade mark protection should not be treated as a generic service. It is strategic. It is best to apply “legal design”, ie incorporate legal knowledge into design work. Don’t imagine you’ll get as much protection if you begin with a legally weak design and only then slap on “legal vetting” and trade mark registration.

China’s first to file trade mark registration system

It is even more important for a business to secure trade mark registration in China (中国注册商标) before introducing its products into the market. This is because China has a “first to file” (申请在先) trade mark registration system.

Once a trade mark is registered in China, prior local use of a trade mark will not enable a subsequent applicant to secure registration, as is the case under Australian statutory trade mark law.

The subsequent applicant’s only option to secure trade mark protection will be to buy or license the trade mark from its registered owner in China.

Say an Australian company has historically used OFOOD as a trade mark for its products and OFOOD is an Australian registered trade mark and a famous household name.

If a Chinese trade mark squatter obtains registration for the mark in China then despite the squatter’s lack of use of the trade mark, without a licence from the registered Chinese owner the Australian company will be committing trade mark infringement (exposing it to a lawsuit) if it uses the OFOOD trade mark in China.

This “first to file” system makes it imperative to act quickly to prevent competitors from using the trade mark registration system to get a free ride on the reputation and investment of others.

Unless a business is certain that it will never trade in China, it is advisable to apply for registration in China for any trade mark relevant to the business before any other entity does so.

Organic food certification procedure in China

To export organic food products to China, a business needs to apply for Chinese certification. As part of this process an auditor authorised by the Chinese government will audit the business’ products and business.

As in Australia, there are various organic certification agencies in China. Traditionally, the Chinese government has only recognised organic certification granted by one of its 25 local certification agencies (认证机构). It does not recognise any organic certification abroad.

However, two recent developments will help facilitate the certification of imported organic food products.

First, in early 2014 the Chinese government handed down a decision to allow auditors abroad to be trained to the Chinese organic standard to audit organic businesses abroad for Chinese certification purposes.

Second, in 2014 a trade access agreement was concluded between the National Association for Sustainable Agriculture Australia and the Beijing WuYue HuaXia Management and Technique Centre (北京五岳华夏管理技术中心) (“CHC”). Traders can now anticipate a speedier and less costly application process to obtain Chinese organic certification.

For a product to be certified organic, there are several requirements. An applicant must:

  • obtain the registered corporate qualifications at the State Administration of Industry and Commerce or related authorities;
  • obtain the administrative licence under any applicable laws and regulations;
  • meet the requirements of relevant Chinese laws and regulations, safety and hygiene standards, and relevant norms;
  • have been operating under a documented management system over organic products for at least three months; and
  • demonstrate that products awaiting certification are within the Catalogue for Organic Product Certification issued by China’s Certification and Accreditation Administration (“CNCA”).

After obtaining organic certification exporters are still subject to Chinese import rules and label regulations.The import procedures apply for any product imported with an “organic” label on its packaging. Before dispatching  organic food products exporters should confirm the latest import requirements with the relevant Chinese authorities.

Next steps for organic food exports to China

Looking back at Prime Minister Whitlam's 1973 visit we can say he was implementing the same advice the CBS News great, Edward R. Murrow, gave to diplomats on joining the U.S. State Department: "The really critical link in the international communications chain is the last three feet, which is best bridged by personal contact -- one person talking to another."

Business and countries benefit from communication and conversation over those last three feet. To do so for organic food trade they must traverse language, culture and legal differences.

In summary, a prospective exporter of organic food products to China should:

  1. Apply for trade mark registration in China, co-ordinated with its domestic advisers.
  2. Obtain from its domestic advisers copyright advice for logo and packaging design.
  3. Apply for organic food certification as required in China.
  4. Form a suitable business structure for conducting business in China (see 4 market entry options for trade in China).
  5. Prepare a suite of legal agreements for business relationships in China.
  6. Ensure compliance with import regulations and procedures in China.

Rosana She was born in Hong Kong, went to high school in England, and graduated from Sydney University with degrees in law and arts (media and communications). She is a lawyer with Dilanchian Lawyers & Consultants specialising in trade with China, intellectual property, information technology and general business law.


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