By Mark Schaub, Serena Guo and Jane You Corporate & Commercial Group King & Wood Mallesons
The China market has been problematic for many international beauty brands.
On the one hand, by some measures China is already the world’s largest cosmetics market and is still growing fast. According to the Chinese National Bureau of Statistics, the consumer goods sales in December 2021 increased by a healthy 4.6% on a year-on-year basis. However, cosmetics grew by 9.0%.
On the other hand, the broad requirement in China for animal testing on cosmetics would damage the brand amongst Western consumers who consider cruelty free as a core criteria when making purchasing decisions.
This resulted in some cosmetic companies regretfully giving up their cruelty free position and some operating by way of exemptions to animal testing (i.e. cross border ecommerce sales or local manufacture with an exemption) in China. However, most decided it was not possible to enter the Chinese market until the regulations changed. With the promulgation of Administrative Provisions of Cosmetics Registration and Filing Documents (the “Provisions”) — the regulations for animal testing in China have changed … kind of.
Whirlwind History of Animal Testing
Ensuring the safety of cosmetics products is a mandatory regulatory requirement to ensure cosmetics products are safe for human use and not toxic or pose a danger to public health.
In the past, animal testing was common place in the cosmetics industry. Tests include the LD50 test; draize test; eye irritancy tests. All of which result in suffering and death on the part of the animal test subjects. Over the years growing public pressure resulted in international cosmetic companies to decide to stop animal testing by investing extensively in developing alternative testing methods that could be substituted for animal testing. Law makers turned against animal testing with many jurisdictions dropping mandatory animal testing and some restricting or banning testing (such as Israel, UK, EU, Australia, India, Turkey, New Zealand, Norway and certain USA states such as California, Nevada and Illinois).
Until the Provisions China still required mandatory animal testing subject to only narrow exemptions (i.e. cross border ecommerce and limited locally manufactured products with an exemption). As a result for many animal rights organizations and ethical beauty bloggers this meant that selling in China was short hand for animal testing.
What is “Cruelty Free”?
“Cruelty-Free” is not a defined legal term. Some cosmetic companies promote their products with such claims provided their finished cosmetic products are not subject to animal testing. Others only make the claim if no animal testing is conducted on raw materials. In addition, time is a factor as many raw materials would have been tested on animals years ago when first introduced. Accordingly, many organizations will apply a time frame when considering whether a cosmetics brand can claim to be “cruelty-free” – some may make the claim based on the materials or products not being “currently” tested on animals.
What do the Provisions Change?
On 26 February, 2021, China National Medical Product Administration (“NMPA”) officially promulgated the Provisions which exempted imported ordinary cosmetics from animal testing as of May 1, 2021. Special cosmetics are not exempt.
In order to avoid animal testing these ordinary cosmetics need to meet the below pre-requisites and avoid the exceptions:
- Ordinary cosmetics manufacturers need to obtain certification of the manufacturing quality management system (QMS – similar to GMP) that is issued by the government authorities or certification organizations of its country (region);
- Provide a product safety assessment that can fully confirm the safety of the products. (The assessment results will be reviewed by NMPA based on the risk management materials submitted by the applicants.)
However, the exemption will not be available to ordinary cosmetics manufacturers if:
- Products claims to be used for children or infants;
- Products which contain any new cosmetic raw materials or new ingredients that are still under the safety monitoring period;
- Any of the brand applicant, its Chinese responsible agent or manufacturer has been listed as being subject to supervision (i.e. the NMPA has such watch list in place).
For products to be exported to China but which have multiple manufacturing sites across the world, the Provisions require all manufacturers that will be supplying the Chinese market will need to obtain the above-mentioned QMS issued by their relevant home country authorities in order to be exempt from submitting toxicological test reports. Accordingly, one exemption will not cover the whole global supply chain. This will also mean that international brands may need to switch production for China dependent upon whether the country of origin has a bilateral agreement in place with the Chinese authorities.
What Does this Mean?
It is good news for animals. From May 1, 2021 international cosmetics companies can apply to sell ordinary cruelty-free cosmetics in mainland China through general import and general trade.
In a best case scenario this will open up the opportunity for distribution through physical stores or distributors (which despite the hype about online remains crucial in China). These cruelty-free brands will be able to be sold in physical stores in China after being registered/filed to NMPA and imported via general trade according to the Provisions.
Online sales will also change. At present cruelty free brands are effectively excluded from the mass online market (i.e. can only sell T-Mall Global rather than T-Mall). In our experience, consumer facing companies will sell far more on T-Mall than on T-Mall Global. Indeed international brands can establish their own shopping websites in China to sell products directly.
Another change may be in respect of the outsourcing of production to China. In recent years a number of international cosmetics brands transferred part of their manufacturing process to China in order to manufacture under a limited animal testing exemption which could be applied for in respect of domestically manufactured ordinary cosmetics. This change in regulation may make such practice less attractive.
Although Chinese cosmetics brands are becoming increasingly popular but the heritage of cosmetics can play an important role in the consumer’s relationship to a product. However, we anticipate that the roll out may be time-consuming and much will depend on the land of origin and the status of its negotiations with the Chinese authorities.
Points to Consider
International cosmetics companies will embrace the ability to export cosmetics to China without animal testing. However, it is important to note that this loosening is coupled with increasingly strict regulations, introduction of a trusted manufacturer concept, improved health and safety standards and also an expanded role and potential liability for the domestic representative. Importing cruelty free will now be possible but it will be coupled with greater obligations and paperwork.
In addition, it should be noted that a crucial issue is that the recognition of the QMS is on a bilateral basis between China and the relevant manufacturing country. This may mean that brands may need to outsource manufacturing to countries that are recognized. This may be an issue for countries that are politically out of favor with China. Time will tell but it is likely that for international cosmetics companies will find that they will not need to test on animals for most products whether exported to China or domestically manufactured.
 Article 16 of Regulations on the Supervision and Administration of Cosmetics: cosmetics that are used for hair coloring, hair perming, freckle removal, whitening, anti-suntan and anti-hair loss and those that claim new efficacy are special cosmetics. Cosmetics other than special cosmetics are ordinary cosmetics.