Creating optimal market and regulatory conditions for the benefit of consumers, retailers, and suppliers.
The Committee thanks the Executive Yuan for instructing the various government agencies to provide a public notice and comment period of at least 60 days for draft laws and regulations so as to align them with international standards and achieve transparent government operations. This change in the Administrative Procedure Act (APA) is a praiseworthy progressive measure aimed at addressing the past issue of overly short consultation periods.
The purpose of the 60-day consultation period is to solicit opinions from the various stakeholders. To achieve sincere and meaningful consultation, government agencies need to be open to considering stakeholders’ views and opinions, taking them into account in preparing the final version of the proposed regulations. The agencies should be impartial regarding the views expressed and consider objectively whether to incorporate them in the final regulation. If some elements of the proposed regulation cannot be changed, this should be clearly communicated so that participants can provide meaningful input by focusing their efforts on other aspects.
The Retail Committee has welcomed the willingness of the Taiwan Food and Drug Administration (TFDA) to consult with industry on proposed new regulations. Other government agencies have sometimes also invited industry representatives to express their opinions on draft laws and regulations. In the majority of cases in the past year, however, the Committee has found that industry’s opinions have been largely ignored, with no explanation given as to why those opinions were rejected. The process appears to be one-way communication conducted merely to fulfill the formality of the APA requirement.
The Committee urges the government to enhance the transparency of the overall regulatory consultation process, including public disclosure of the rationale behind the decisions reached and explanations of how stakeholder input is being used in formulating the final rules. Open-minded, transparent governance is the key for Taiwan to advance to the next level of development.
Suggestion 1: Ensure that legislation on technical standards is based on sound science and harmonized with trade partners.
Twice during the consultation period, the Committee submitted comments on the draft “Regulations Governing the Management of the Review, Registration and Issuance of Permit Documents for Food and Related Products.” In particular, we expressed concern regarding the proposed testing requirements for foods for special medical purposes, such as the demand that clinical trials be conducted in Taiwan to test the ethnic/racial compatibility of the formula food products. Besides Taiwan, few jurisdictions have ever demanded such a racial compatibility assessment for food.
Local clinical testing is hardly the only way to assess nutritional suitability. We urge the government to accept clinical tests conducted overseas to assess the suitability of such products in meeting the nutritional requirements of the intended users. As to the argument that the testing needs to be done in Taiwan because of presumed disparities in the nutritional benefits of the products for different ethnic/racial groups, there is no scientific evidence to support that assumption, which is not accepted by any of Taiwan’s major trading partners.
The “Guidelines for Determining Food Labeling, Promotions and Advertisements Involving False, Exaggerative or Misleading Elements or Medicinal Efficacy” includes a list of allowed product claims for foods. Such a positive list of product claims easily gives the trade and public the impression that only these exact words and phrases are permitted. If that were the case, it would constitute a restriction on freedom of speech. The Committee urges the government to allow the functions of food products and ingredients to be communicated to consumers without restriction if based on scientific evidence. We request that the authorities clarify that the claim wording listed in this regulation is not meant to be exhaustive and is provided for reference only.
Suggestion 2: Establish a dedicated regulatory category for dietary supplements and allow more latitude for health-function claims and advertising.
The current regulatory regime does not treat dietary supplements as a separate category from general foods. Instead, some are regulated as belonging to the category of “food in tablet or capsule form.” Current food regulations fail to recognize the functions of dietary supplements, which have additional health benefits beyond those of general food. Even when those claims of health benefits are supported by sound scientific evidence, the health authorities prohibit such claims and advertising involving the effects on physiological functions or health conditions. Under the current Act Governing Food Safety and Sanitation, any such health claims can be penalized for being exaggerative or misleading.
The Retail Committee has long been urging the government to create an independent and comprehensive food category for “dietary supplements” and allow health-function claims based on scientific evidence. If health benefits can be proven, suppressing that information is unfair to consumers. Moreover, with Taiwan soon to rank as an aged society, dietary supplements can play an important role in preserving the health and well-being of the elderly.
The Committee also notes that the existence of a licensing process for Health Foods does not minimize the need for a dedicated category for dietary supplement. Since Health Food licensing began in 1999, applications for Health Food licenses have been limited to only 13 health functions and as of mid-May only 437 products have been approved, compared to more than 6,000 in Japan. Clearly, there are many more than 13 kinds of health benefits from dietary supplements. But the inappropriate Health Food option has kept Taiwan’s dietary supplement market from developing to the level of our trade partners. The Retail Committee strongly urges the government to establish a dedicated food category for dietary supplements and allow functional claims based on scientific evidence.
Suggestion 3: Eliminate inconsistent interpretations between agencies or within the same agency.
For Taiwan to be regarded in the world market as a reputable trade partner, its laws and regulations must be interpreted and enforced consistently to foster a stable and predictable business environment. Unfortunately, Retail Committee members have frequently encountered examples of inconsistent regulatory interpretations and enforcement.
One example is the inconsistent interpretation of the applicable commodity tax rate on juices containing natural flavors. While Customs had ruled that a certain juice was not “diluted” and applied an 8% commodity tax, the Ministry of Finance (MOF) later ruled the same juice to be “diluted” and therefore should have been taxed at 15%. Suddenly importers had to pay a heavy sum to cover the tax difference for the quantity imported over the previous five years. This inconsistency in interpretation and enforcement of tax law threw the importers’ operations into chaos. The incident caused considerable financial damage to industry, whose costs could not be calculated accurately, as well as reputational damage to the Taiwan government. We urge MOF and Customs to review the commodity tax collection practices to avoid different rulings and to ensure regulatory consistency.
Another example is the day-to-day ruling on Chinese-language labels by the TFDA at the border. While Chinese food labeling is required under Article 22 of the Act Governing Food Safety and Sanitation, and the accuracy of the Chinese wording is required under Article 28 of the same law, there is a discrepancy in the standards used by TFDA inspectors. Some demand that the content of the Chinese nutrition tables should be identical to that of the original language; others demand that the Chinese nutrition table should be based on test reports. More often than not, there will be numeric differences, depending on which practice is used. This discrepancy not only leaves importers confused, but also results in long delays at the border spent explaining the differences, revising labels and/or relabeling products. It also causes an increase in storage costs, shorter shelf lives, and even dissimilar Chinese labels at the point of retail, thereby confusing consumers. The Retail Committee urges Taiwan FDA to have consistent interpretation of regulations across all levels and announce a clear guideline to the industry to follow.
Suggestion 4: Prohibit the sale of imported alcoholic beverages for which the original manufacturing lot code has been changed or removed.
The Committee is grateful to the National Development Council for facilitating the working sessions held between the industry and the National Treasury Agency (NTA) under the Ministry of Finance (MOF) to seek possible solutions to this longstanding issue after it was raised in previous years’ White Papers.
Food hygiene and safety management is a key issue attracting attention worldwide, including in Taiwan. Most governments require prepackaged food, drugs, and other consumer goods to be labeled with a manufacturing lot code in order to maintain traceability. The Taiwanese government generally follows the same principle, but the scope of regulation does not extend to alcoholic beverages. There have been numerous incidents where the original lot code was removed or altered by importers. In the event of a product defect, suppliers will be unable to recall products and respond quickly. The practice is contrary to the protection of consumer rights and may threaten the integrity of a brand and its products.
In an effort to better safeguard consumers’ well-being, the MOF in July 2016 started asking importers to voluntarily register original lot codes that were removed from or altered on alcoholic beverages. However, the lack of penalties has made the provision ineffective, creating a loophole in food safety regulation. According to the website of the NTA website, as of the end of 2018, approximately 4% of the whisky on the market lacked a lot code, which is equivalent to nearly 1 million bottles of whisky.
Allowing importers to remove or alter original lot codes and instead use their own serial number is a clear violation of three WTO agreements: the national treatment principle of the General Agreement on Tariffs and Trade (GATT), the national treatment provisions of the Agreement on Technical Barriers to Trade (TBT), and the trademark protection, geographical indications, and national treatment provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).
The Committee calls for strict enforcement of Article 32, Paragraph 1, Subparagraph 6 of the Tobacco and Alcohol Administration Act, which requires all alcoholic beverages be labeled with the original lot code in order to identify manufacturing information and develop a relationship of trust in the supply chain. When the original lot code has been removed or is not clearly legible, the products should not be imported or sold in the market, as product traceability is then impossible.