The Retail Committee applauds the Executive Yuan’s efforts to reduce regulatory obstacles and trade barriers to improve Taiwan’s business environment. As a group of retail companies operating on a global level, we appreciate the value of shared regulatory standards and practices across different countries. We understand that some differences will inevitably occur based on local needs and circumstances. But over the years unwelcome barriers to trade in doing business in Taiwan have appeared when unique regulations and standards have been implemented without sound science or legitimacy, when regulations receive contradictory or inconsistent interpretations, and when product integrity is put at risk after import.
A regulatory environment built on science, logic, and consistency is essential to Taiwan’s development as a flourishing economy. The Committee recognizes the Executive Yuan’s openness and willingness to engage in dialogue with our members in the recent years and urges the authorities to continue this practice to further generate synergy from public-private cooperation. As the improvement of Taiwan’s performance as a global player is a shared goal, the Committee is pleased to offer the following specific examples of areas where we hope to see change in the coming year.
Suggestion 1: Remove the requirement for ethnic compatibility assessments for foods for special medical purposes.
Food for special medical purposes (FSMP) is food rather than medicine. It is not essential to determine ethnic compatibility from the perspectives of pharmacokinetics and pharmacodynamics as is typically required for medicines, and there is no scientific evidence to support presumed disparities in the nutritional benefits and requirements. Taking infant formula as an example, the standard in Taiwan references the international standard from Codex in terms of compositional and nutritional requirements. We therefore urge the government to re-assess its requirement for ethnic compatibility assessments on clinical trials conducted outside Taiwan, and for clinical trials to be conducted in Taiwan for FSMP product registration of nutrition-supplemental foods.
Even for medicines that require bridging studies under pharmaceutical regulations, the Bridging Study Standard developed with ICH E5 guidance for evaluation of the acceptability of foreign clinical data also calls for assessment of whether the data meets regulatory standards, irrespective of its geographic origin. If the clinical data package is complete, contains a comparison between “relevant ethnic group” and “major ethnic group,” and assessment of the package indicates no ethnic differences (enrolled Asian, for example), it is not necessary to repeat the bridging studies.
To our knowledge, Taiwan is the only country with this kind of regulatory regime for FSMP products. The existence of a “Taiwan-unique” regulation should always be an indication that the practice in question deserves further scrutiny.
In light of the above, we strongly urge the government to agree to accept literature or study reports containing bridging information, literature or study reports containing data on the Asian group, or Asian countries’ post-marketing surveillance data as equal to clinical trials conducted in Taiwan or the assessment of ethnic compatibility at FSMP product registrations.
Suggestion 2: Create a dedicated dietary supplement category to advance consumer protection and growth of the functional food (dietary supplement) industry.
In 1994, enactment of the Dietary Supplement Health and Education Act (DSHEA) empowered the U.S. Food and Drug Administration to protect American consumers by requiring dietary supplement manufacturers to follow Good Manufacturing Practices (GMP) and distinguish dietary supplements from conventional foods through labeling. Similar legislation passed by the European Union in 2002 has since facilitated trade in dietary supplements between the U.S. and the EU. The experience of these two key trading partners of Taiwan shows that a dedicated dietary supplement category not only protects consumer rights but promotes development of the functional food industry.
In Taiwan, however, dietary supplements have been regulated as a type of food, coming under the Act Governing Food Safety and Sanitation. No recognition is given to dietary supplements’ additional health benefits beyond those of general food. Claims and advertising involving their effects on physiological functions or health conditions are prohibited, even when supported by sound scientific evidence.
Creation of a dedicated dietary supplement category would serve consumers’ right to information that could have a bearing on their health. It would also be justified under the principle of fair competition. Although dietary supplements are usually made with expensive functional ingredients, consumers cannot distinguish their advantages from those of conventional food products if both are lumped together under the same category.
The Committee appreciates the authorities’ commitment to developing the dietary supplement industry. On December 13, 2017, the Executive Yuan announced creation of a new industry classification called “Functional Food” for purposes of industrial development under the Ministry of Economic Affairs. At least the authorities have started to realize the value of this fast-growing industry, but MOEA’s recognition of a “Functional Food” category doesn’t affect the regulation of dietary supplements under the Taiwan Food and Drug Administration.
For its part, the TFDA on September 4, 2019 issued “Taiwan Guidelines on GMP for Health Supplements” – again an indication of only partial progress. While the general direction of this policy is consistent with the spirit of the Committee’s suggestion, it falls short of establishing a new category for regulatory purposes.
Given the right conditions, Taiwan is well-positioned to further develop its dietary supplement industry. It already has a strong food industry that is on a par with leading dietary supplement export countries such as the U.S., Japan, and the EU, and its consumers are knowledgeable and able to figure out diverse health claim information.
ASEAN, which is Taiwan’s main export market for dietary supplements, has implemented “ASEAN Guidelines on Claims and Claims Substantiation for Health Supplements” and looks to the new regulation to balance consumer protection and the encouragement of science and innovation. Using classifications derived from the EU and Codex, the Guidelines identify three types of product claims: general or nutritional claims, functional claims, and disease risk-reduction claims. Each type of claim needs to be substantiated by sufficient data from efficacy studies and relevant documentation. The evidence required for functional claims is stronger than that for general or nutritional claims, and the level of evidence for disease risk-reduction claims is the highest of all. Taiwan could take the ASEAN experience as an international best practice to learn from.
The Committee believes that a dedicated dietary supplement category is the most effective way to manage this burgeoning sector for the benefit of consumers. A progressive and science-based product-claim and advertising policy would provide the public with helpful and correct information while promoting the growth of the dietary supplement sector. We therefore urge the government to create this new regulatory category and label dietary supplement products in a way that distinguishes them from conventional foods.
Suggestion 3: Increase rule-making transparency and reduce the frequency of inconsistent regulatory interpretations.
To facilitate closer trade relations between Taiwan and the U.S., it is essential for the Taiwan government to ensure regulatory transparency in rule-making and the consistent enforcement of those rules. Such an environment will make Taiwan a more attractive destination for investment for foreign businesses in all sectors.
Although the Committee has made similar recommendations in past White Papers, we continue to find examples of problem cases. A recent instance involved rosemary extract and green tea extract, two ingredients found in various food products. Last year, the TFDA suddenly changed the classification of these ingredients from “food” to “food additive” without advance notice to the public. As a result of this lack of transparency, numerous shipments of products were declared “illegal” at the border, and importers were left to suffer the unexpected financial consequences.
Another area that creates confusion for business, and sometimes even for officials trying to enforce government regulations, is the posting of FAQ platforms on the websites of government agencies such as TFDA, especially when the content of the FAQ differs from the actual regulation. For example, the “Regulation on Labeling for Pre-packaged Food Products” states that the number of calories of a food product may be labeled as “0” if the food contains no more than 4 Kcal per 100g/ml. However, the FAQ states that a food may be labeled as “0 Kcal” if and only if the nutrients contributing to the total amount of energy also meet the condition for claiming “0” (such as 0g protein.)
We urge TFDA to further review the information provided on the FAQ platform with an eye to removing any interpretations that are inconsistent with or exceed the scope of the related regulation itself. Further, any changes to the FAQ that could have a broad impact should go through a prior public-release process for the purpose of regulation transparency and predictability.
With regard to an abrupt change in classification, such as from food to food additive, unless a proper risk assessment reveals a clear and present danger, the proposed new classification should go through proper due process and a reasonable grace period should be provided before it goes into effect.
Suggestion 4: Prohibit the sale of imported alcoholic beverages for which the original manufacturing lot code has been changed or removed.
The Committee continues to seek possible solutions to this longstanding issue, which focuses on the protection of consumers’ interests and food safety. It should not be tolerated under the guise of safeguarding business competition.
Article 32 of the Tobacco and Alcohol Administration Act (TAAA) expressly provides that packaged alcoholic products for sale must bear a lot code – a number indicating the quantity of a specific product manufactured at a certain time on a certain production line. In addition, Article 3 of the Consumer Protection Act (CPA) stresses government’s obligation to ensure proper enforcement of that legislation – part of which should be “ensuring that the labeling of goods or services is compliant with laws and regulations.”
On the basis of both the CPA and the TAAA, the Ministry of Finance (MOF) should enforce the law to ensure that imported alcoholic products retain their original lot codes to protect consumers’ interests and safety by facilitating tracing and recall in case of any issues. The codes created by the importers themselves do not identify the date of manufacture, production line, or product quantity.
Currently, some parallel importers are illegally removing the original lot codes and replacing them with their own serial numbers, describing their action as justified for the sake of business competition and protected under the Fair Trade Act. But it is unreasonable to assert that rigorous enforcement of another law could violate the Fair Trade Act. Besides, the MOF is not the authority administering the Fair Trade Act and should not exempt itself from the obligation to protect consumers’ interests in the name of business competition.
In the event of violations of the obligation to label products with lot codes, Article 50 of the TAAA stipulates that importers should take corrective action within a specified time or be punished with an administrative fine of not less than NT$30,000 and not more than NT$500,000. Before the correction is made, the importers may not continue selling the offending item. Furthermore, where the violation involves false labeling or misleading statements, the importers are to be summarily fined and required to recall the products and cease selling them.
In addition, Article 17 of the Foreign Trade Act states that importers must truthfully identify the source or country of origin of products, thus making disclosure of the provenance a legal obligation. As self-assigned codes do not enable identification of product provenance, they constitute the offense of untrue labeling.
Some officials have maintained that the Certificate of Age and Origin for Scotch Whisky (C&E 94J) issued by UK Customs should be able to serve as a substitute for the lot code. But since the C&E 94J does not contain information that would enable the authorities to trace a given batch of alcoholic products in case of an incident, permitting the C&E 94J to substitute for the original lot code would severely jeopardize safety control over imported alcoholic products.
According to the MOF, 1.73% of the imported whisky products entering Taiwan in the first half of 2019 – the equivalent of around 1 million bottles if the figure can be trusted – were missing lot codes. The MOF should explain how it could inspect, trace, and recall the imported whisky if any food safety issue were to arise.
In an effort to resolve this issue, the NDC’s Regulatory Reform Center convened a meeting on May 13, 2019 attended by representatives of this Committee and the MOF. It was agreed at the meeting that the MOF would instruct the Customs Administration to devise an enforcement mechanism to enable customs officials to monitor the removal of lot codes, as long as it didn’t add to their work load or slow customs processing.
The Committee followed up by letter to the MOF on May 30, 2019, inquiring about the progress, but never received a substantive reply. Instead, the MOF communicated that the idea of setting an enforcement mechanism is still under study. Considering the importance for food safety of product-tracing, the delay has been dismaying.
Suggestion 5: Regulate traditional Chinese medicinal materials used as food and food ingredients under the Act Governing Food Safety and Sanitation.
No provision in the Pharmaceutical Affairs Act authorizes the formulation of regulations or directives regarding “substances such as plants which may be used either as food or food ingredients or as traditional Chinese medicinal materials.” In the absence of such legal authorization, the “Items of Traditional Chinese Medicinal Materials Which May Be Used as Food Ingredients and the Principles of Administration Thereof” formulated by MOHW are not official administrative regulations or directives to be regarded as mandatory.
If the above Items and Principles were intended as interpretations of the subparagraphs of Article 6 of the Pharmaceutical Affairs Act, they should not exceed the literal meaning of the law or add any restriction not found in the law – for example, restrictions on food types, consumption limits, or labeling of precautions.
MOHW has stated that for violations of the Items and Principles, “penalties will be imposed pursuant to the Act Governing Food Safety and Sanitation.” However, judicial interpretations by the Council of Grand Justices have confirmed that the “constituting criteria” for penalties imposed for violations of administrative regulations must be clearly enumerated in the administrative regulations in order to meet the constitutional principle of legal reservation. Such criteria do not exist in this case.
The flaws in the Items and Principles result from the MOHW’s broad inclusion under the Pharmaceutical Affairs Act of “traditional Chinese medicinal materials not required for registration” as Traditional Chinese Medicines (TCMs).” Within the meaning of the Pharmaceutical Affairs Act, however, “TCM drugs” are limited to medicines that 1) substantively function to affect the structure and functions of the human body such as for diagnosis, treatment, and reduction or prevention of human diseases or are recorded in the Chinese Pharmacopeia or in the pharmacopeias or formularies of other countries, and 2) have been “registered.” Substances that are not required to be registered – and can be used as food or food ingredients and be included in TCM prescriptions – are generally referred to as “traditional Chinese medicinal materials.” But they are not the “TCM drugs” regulated under the Pharmaceutical Affairs Act. They should not be equated with “TCM drugs” and may only serve as their raw materials.
Regulating the substances habitually referred to as “traditional Chinese medicinal materials” but having the properties of food is beyond the authority of the current administrative agency for TCM drugs.
In response to questions raised by this Committee, MOHW said it would stipulate the legal definition of “traditional Chinese medicinal materials” separately in draft partial amendments to the Pharmaceutical Affairs Act, adding provisions authorizing the competent authority to formulate regulations and directives regulating items and usage restrictions concerning “those which may be used as food ingredients.”
By default, the draft treats “traditional Chinese medicinal materials” as the “drugs” set forth in the Pharmaceutical Affairs Act, but wavers in this position by repeatedly excluding registration, outer package labeling requirements, etc. from coverage under the Pharmaceutical Affairs Act. In addition, the competent authority uses terminology such as “existing pharmacopeias” or “consistency with TCM theories,” which violate the principle of legal certainty, to define the essence of traditional Chinese medicinal materials. Based on its misunderstanding that traditional Chinese medicinal materials should be regulated as “drugs,” it even applies the penal provisions of the Pharmaceutical Affairs Act rather than the Act Governing Food Safety and Sanitation to actors that use “traditional Chinese medicinal materials used for food” to manufacture “food products.”
In reality, under Article 15-1 of the Act Governing Food Safety and Sanitation, the central competent authority is authorized to regulate the manufacture, processing, and formulation of raw materials used for food. Therefore, if MOHW intends to regulate what it refers to as “the methods by which the substances ‘that can be used as food and also as TCM drugs’ and are usually referred to as ‘traditional Chinese medicinal materials’ may be used,” it may prepare relevant regulations and directives on the basis of that Article. But it may not impose restrictions on food operators based on the “Chinese Medicinal Material Items Which May Also Be Used for Food,” released by MOHW on February 22, 2018 – and which was not formulated pursuant to authorization under the Pharmaceutical Affairs Act or even the Act Governing Food Safety and Sanitation.
If MOHW continues to have the same administrative agency regulate traditional Chinese medicinal materials used as food ingredients through amendments to the Pharmaceutical Affairs Act, it will exceed its mandate under its organic law and set an unconstitutional example.