This post is for all you Disney lovers out there. Work on Shanghai’s soon-to-be Disneyland began today with a groundbreaking ceremony. The CEO of Walt Disney Co., Robert Iger and the Party Secretary of Shanghai, Yu Zhengsheng were there with shovels in hand. The newest Disneyland will be located in the Pudong New Area of Shanghai and is estimated to be completed within five years. Along with the theme park will be two hotels, and a multitude of stores and restaurants. The estimated cost is about $670 million (4.5 billion yuan).
All the characters were present at the ceremony, dressed in traditional Chinese garments. Can’t wait to check this one out!
Source: http://usa.chinadaily.com.cn/china/2011-04/08/content_12294387.htm
In January, the Food Safety Modernization Act was signed into law and the FDA is currently working its way through the implementation process. Perhaps the most groundbreaking part of this law is the requirement for food producers and manufacturers and processors to verify and certify their suppliers’ food safety processes.
Why start worrying about imported food and ingredients now? Over the last decade, more and more food has become available on America’s shelves and a good amount of it is imported; 15% of food to be exact. Certain foods have much higher percentages; such as 75% of seafood, 20% of vegetables and 50% of all fruits are imported. The FDA however, hasn’t had the bandwidth or the manpower to inspect more than 1 percent of all the imported food in most recent years.
What does this mean for food manufacturers and producers with international supply chains, from say, China? The new law places the responsibility on the business owners to verify and certify that their international suppliers are complying with the standards set by the FDA in the U.S. The goal of the FSMA is to ensure that imported food is just as safe as the food that is produced domestically and will require a great deal of cooperation and partnership from many different countries and agencies.
What is compliance and how do businesses become certified? At this point, the FDA is still creating the guidelines for how to become certified. However, food safety experts have suggested implementing a preventative, risk-based plan like HACCP. Although the FSMA rules will require actions beyond having a solid HACCP plan, it is said to be a great starting point for companies working towards future compliance.
Industry experts also suggest that as companies prepare for compliance, they should undergo a “gap analysis” to locate weaknesses and shortcomings in their food safety plans. With the results from the gap analysis, companies will then be able to address the issues before an FDA inspection, which when paired with a HACCP plan can help expedite the process for compliance.
The FDA must accomplish the following tasks by the indicated dates: (taken from the FDA’s website)
– Preventive Controls for Facilities – June 2012
– Produce Safety Standards – January 2013
Inspection, Compliance & Response
– Rules and Process for Administrative Detention – May 2011
– Recall Authority (May be mandated only by the Commissioner of the FDA or the Secretary for Health and Human Services) – Currently Active
– Suspension of Registration Regulations – May 2011
Imports
– Foreign Supplier Verification Program Guidance – January 2012
– Accredited Third-Party Certification Program – January 2013
– Mandatory Certification for High Risk Foods – Currently Active (but the definition of “high risk foods” is still in development)
The latest update in FSMA:
As the first big accomplishment of the Food Safety Modernization Act, the FDA has released a user-friendly food recall database. The database is an easier way to allow consumers to access up-to-date information regarding current and past food safety scares. The database provides information sorted by type, such as food, drugs, animal health etc., but can also be searched by date, food type, or brand. If available, the product labels will be posted as well. This new database is one step in the long process of the food safety act’s implementation that will help create better communication between the governmental agencies and consumers.
You can also sign up for daily or weekly updates that deliver the most recent recalls directly to your inbox.
The database can be viewed and searched here: http://www.fda.gov/Safety/Recalls/default.htm
Despite fears that China’s efforts to decrease inflation would decrease economic growth, the production numbers still indicate a rise in China Manufacturing this March. March’s Purchasing Manager’s Index (PMI) rose from 52.2 in February, to 53.4 in March.
According to economists, China’s central bank will increase interest rates again this quarter to further curb inflation. Some argue that this will eventually hurt China’s overall economy in addition to slowing the growth, but only time can tell.
The manufacturing sector in the United States also grew this past March. It was the 20th consecutive month for manufacturing growth. In fact, it was also the 22nd consecutive month for overall economy growth as well. The PMI for March was 61.4 percent, which is down from February’s 61.4 percent, but any number above 50 indicates growth. The economy also grew by 3.1 percent during the last quarter of 2010.
Last month, China’s newest Five Year Plan (FYP) was developed at the Annual Sessions of China’s National People’s Congress. At the center of the 12th FYP is possibly their most ambitious energy goal to date. The new plan calls for a reduction of energy intensity by 16 percent over the next five years. As the goal is quite bold, it is possible considering that during the previous FYP, China managed to reduce energy by 20 percent.
Other goals of the FYP include a plan to reduce pollution and reduce China’s dependency on fossil fuels. China is aiming to reduce carbon dioxide emissions by 17 percent and to increase the use of non-fossil fuels from 8 percent (current state) to 11.4 percent in 5 years.
When it comes to implementation, China has decided to encourage development and foreign investment in industries that will increase their ability to move towards these green goals. They will be executing programs to support growth in the high-end manufacturing industries such as clean energy, various service industries and environmental protection.
Of course, there are supporters and opponents of the newest FYP. Supporters of the plan include environmental protection groups and clean energy groups who are encouraged by China’s step towards a greener country. Some opponents say however, that the plan could be too ambitious and that some of the other goals included in the plan may be conflicting with their green initiatives; such as the target to build upwards of 40 new airports over the next five years.
Ambitious or not, achievable or not, changes are on their way for foreign investors and where different incentives will be placed in the upcoming years.
We found this very useful FDA interview on the provisions applied to importers under of the Food Safety Modernization Act. David Elder, the Director of Regional Operations from the FDA, covers the steps being taken for implementation.
Interesting Points from the video:
Manufacturers and importers must move forward with this information and start making decisions.
What Next?:
-Any real certifications will most likely not happen for at least 12 months or more… “Implementing this law will require over a dozen separate rulemakings and at least 10 guidance documents. The implementation of the legislation will take more than three years.” Source
-Importers will be in the process of setting up their verification system, but the exact rules and requirements of certification are in progress.
-Businesses in the food industry are urged to start thinking about what this means for them and begin preparing for more strict inspections and regulations.
Q: Why do I need to act now if it will take the FDA a few years to write any new rules?
A: Reviewing your company’s food-safety, record-keeping and product-tracking procedures can lead to performance improvements and innovation. By being in the forefront of efforts to improve food safety and providing credible information to regulators and consumers, companies can not only get a leg up on the competition, but begin marketing their food safety practices to the public.
Within one and a half years, all registered facilities will be required to conduct a hazard analysis, implement preventive controls and develop a food safety plan to document the monitoring, correction, and verification of preventive controls. The food safety plan and all related documents must be made available to FDA during inspections. As part of its food safety plan, a facility may be required to document sanitation procedures, a recall plan, a food allergen control program, supplier verification activities, and environmental sampling testing. Plans such as these take time to create and implement; it is never too early to be safe.
In preparation for the FDA audits, our partner company FactoryAudits.com offers comprehensive Food Safety Assessments that analyze your facilities’ HACCP plan implementation, chemical control processes, pest control processes, sanitation risks and hazards and much more.
Keep checking back with us as we will continue to post about the progression of this Act.
Did you miss Part One?… Food Safety Modernization Act: The Breakdown (Part 1 – The Facts)
Now that we have the background of the law covered, let’s dive into what this means to us and how it can impact our food sources and supply chains.
How will this law make imported food safer?
New authorities under the Act include:
What is required to become a certified facility?
The time line is dated from the date of the enactment (January 2011). The following items are to be completed by the FDA no later than the corresponding times. (According to the law at this point in time.)
As the Food Safety Modernization Act starts working its way through the implementation process, I thought it would be most helpful to post a breakdown of the act and what it means to importers and manufacturers of consumable products. As you will see, the Act is very new, but will definitely have a large impact on the regulations of the food industry and hence, the level of security in our food safety system. Read on for more details.
Note: There are two more parts in this series to come!
S. 510 FDA – Food Safety Modernization Act (FSMA)
Background
The Approval of the New FSMA Law: December 2010
Food Safety Modernization Act Overview
What are the 5 major elements of the law?
FSMA By the Numbers
Cost: $1.4 Billion – over next 4 years
Necessary Staffing: Over the next 4 years, the FDA will be hiring 2,000 new inspectors.
Inspection Schedule: The bill requires the inspection of 50,000 foreign and domestic food production facilities by 2015.
For your reference, you can read the full text of the act here.
Read part two of the series: Food Safety Modernization Act: The Breakdown (Part 2 – The Impact)
and part 3 of the series: Food Safety Modernization Act: The Breakdown (Part 3 – The Next Steps)
If you are planning on attending the 109th Canton Fair this Spring in Guangzhou, make sure to check out this great little guide I found on their website with all of the dates and information necessary to navigate your way through the huge expo grounds.
It has information on a lot of things like travel and hotels, but also has information on how to attend the fair. You have to get an e-invite and that can be done easily on their website through their BEST tool or Buyer E-Service Tool.
Phase 1: April 15-19, 2011 from 9:30-18:00
Phase 2: April 23-27, 2011 from 9:30-18:00
Phase 3: May 1-5, 2011 from 9:30-18:00
For a better run down of all the activities and a video, see our earlier blog post 2011 Spring Canton Fair Dates & Information.
So you are already sourcing from China…have you ever thought of sourcing from India? What about Vietnam? Are buyers trending away from China? What are the advantages and disadvantages of sourcing from other developing countries like these? Let’s explore!
A survey was recently released by Global Sources reporting on how China’s increasing labor costs and the fluctuation of the yuan have impacted buyers’ sourcing strategies overseas.
Over 380 buyers were surveyed and more than 50 percent of respondents said they have seen higher prices as a result of the yuan’s appreciation. But are they changing their strategy? The answer is yes… somewhat. More than 50 percent of buyers say they are planning to step up their sourcing from India and Vietnam sometime in the future. (It did not indicate whether or not they plan to decrease their China sourcing however.)
The truth is: Vietnam and India are becoming increasingly attractive for foreign enterprises due to their low-cost and abundant labor supply.
What does this mean to American companies?
Places like Vietnam and India could be a viable option for your company if you specialize in low-end products. Industries that are labor intensive can also be successful in these countries due to the large labor pool (bigger than China’s) and the low cost of labor. Industries like textiles (clothes, shoes, sheets etc) have been successful at increasing savings by moving production to countries like India where the workforce is robust and there is a large percentage of English speaking workers (20% higher than China’s workforce). Also, India’s income tax will decrease this year in order to be more competitive with China.
Although the numbers do indicate an uptick in sourcing from these developing countries, do be forewarned: This is not the ideal plan for everybody. India and Vietnam are still in their youth, and fall short in a number of critical manufacturing areas in comparison to the United States and China. The traditional means to becoming a manufacturing powerhouse no longer stand alone. Not only will a country need to be strong in labor, energy and materials, but the country will also need to have a strong-willed work force with innovative thinkers.
Another critical aspect that must be taken into consideration is the different countries’ logistics infrastructure. The logistics infrastructure in China for example is much more developed and sophisticated than in India or Vietnam. We typically find that sourcing from China is much more efficient because of the hundreds of billions of dollars invested over the last 20 years in roads, highways, ports and airports. With that being said, if quick turn-around and reliable, timely shipping and receiving are a must for your business, China might be a better choice.
| China | India | Vietnam | |
| Total Airports | 502 | 352 | 44 |
| Major Ports | 130 | 12 | 14 |
| Railways | 77,834 km | 64,015 km | 2,347 km |
| Roadways | 3,583,715 km | 3,320,410 km | 171,392 km |
It is to be noted however, that although India has the third largest road network in the world, about 2.6 million km or almost 75 percent of their roads are considered rural. Travel by roadway in India is also often times considered dangerous; people do not abide by traffic laws, roads are bumpy and uncared for and traffic is intensely crowded. In fact, the National Highway make up only 2% of the nation’s roadway length, but handles about 40 percent of the roadway traffic.
Beyond logistics, the 2nd most common issue when looking beyond China is your raw material supply chain. As nearly every major industry’s supply chain has shifted to China over the last 20 years, so have the raw materials companies/suppliers. When evaluating a move away from China, it’s important to understand whether or not your source of raw material is available in your next destination. If you don’t, you very well may end up finding out that while you are benefiting from cheaper labor elsewhere, you are offsetting those savings by your increased logistics and duties costs as you ship your raw materials in from China.
China also excels at supporting large-scale investment projects – something that Vietnam and India struggle with due to their infancy in the manufacturing arena as well as the large government bureaucracies that you must deal with. If a company wanted to expand and build a new facility to ramp up production in China, it could take 6 months, whereas in India it could take 2 to 3 years.
In conclusion, China is still the manufacturing powerhouse for most, and will remain so for quite a few years to come. However, we are likely to see a shift in the type of manufacturing China is involved in. They are now encouraging investments in high tech industries and research and development enterprises. Their goals is to move towards a more sophisticated manufacturing region that can garner higher wages and eventually propel more and more people into the coveted middle and upper classes.
We would love to hear how your company’s overseas buying strategy has changed (or hasn’t changed)!
Sources:
http://www.globalsources.com
http://www.2point6billion.com/news/2011/02/17/china-india-compared-by-al-jazeera-8606.html
https://www.cia.gov/library/publications/the-world-factbook/geos/in.htmlhttp://online.wsj.com/article/SB10001424052748703800204576159410421853214.htmlhttp://www.business-in-asia.com/ports_in_vietnam.html
http://understand-china.com/?manufacturing=logistics-4
http://indiatoday.intoday.in/site/Story/110495/Cover%20Story/wealth-does-not-create-roads-rather,-roads-create-wealth.html
