Regulatory changes in China benefit cosmetics industry - Hawksford

Dear Members and Friends of CICC,

The China Italy Chamber of Commerce (CICC) is glad to share with you an article about the Regulatory changes in China benefit cosmetics industry by its member Hawksford.

After years of negotiations between the PRC’s National Medical Products Administration (NMPA), the Cosmetic Supervision and Administration Regulation (CSAR) and global industry leaders, on 4 March 2021, Chinese regulators have finally confirmed that imported general cosmetics will be exempted from animal testing starting from 1 May 2021.

Two Pre-Conditions With Three Exceptions 

With the publication of the final version of the Provisions for Management of Cosmetic Registration and Notification Dossiers, China’s NMPA sets forth two main pre-conditions and three exceptions for general cosmetics to be exempted from animal testing. Brands wishing to access the Chinese market should meet both of these two conditions: 

• Hold a good manufacturing practices (GMP) certificate issued by the relevant authority of the country where the cosmetics are produced. 
• Present safety assessment results and testing proving the safety of the use of the cosmetics.

If any of the below three situations apply, brands and manufacturers still need to use animal testing to have their products imported into China via general trade: 

• Products dedicated to infants and children. 
• Cosmetics containing a new ingredient that is still in the three years monitoring period required by the regulators. 
• The manufacturer in charge of the production is among the ones listed by the NMPA for strict supervision due to poor results in the agency’s rating system.  

GMP Certificates and Hurdles Over Issuing Bodies  

GMP certificates for the cosmetics industry usually describe the basic principles of applying GMP in facilities that produce finished cosmetic products. These guidelines present general processes and the best practices in terms of operators, techniques and organisational factors that may affect the quality of finished goods to be distributed on the market. 

Regulatory bodies such as the US Food & Drug Administration (FDA), the International Cooperation on Cosmetics Regulation (ICCR) and the European Committee for Standardisation (CEN) usually approve and recognise the set of standards filed by the International Organization for Standardization and its certifiers, enabling manufacturers to apply one qualification for entrance into several regional and national markets. 
 
The issue with the pre-condition stated in the NMPA’s new regulations lies in the fact that very few national regulatory bodies for cosmetics/medical products actually issue GMP certificates, as these mostly come from cosmetics manufacturers associations or national bodies representing the regulated entities rather than the regulator itself. 

First Come First Served

Among the economies that are better positioned to take advantage of this new development, The French National Agency for the Safety of Medicines and Health Products has already started issuing GMP certificates for manufacturers grouped under the Federation of Beauty Enterprises and has launched an online platform to streamline the entire process.

On the other side of the English Channel, the UK, via the Department of International Trade (DIT), is in discussion with industry leaders and associations to launch a certification system with standards that satisfy the requirements by China’s NMPA. The DIT is also developing a ‘China Ready’ package, grouping market experts, consultants and its Chinese specialists together so as to ensure that the British beauty sector doesn’t miss out on this new opportunity.

The Italian Association of Cosmetics Enterprises is also continuing to follow up on a series of programmes to educate its members about the regulatory market updates and export strategies for China. Currently, there is no government authority or regulator in Italy other than this association that is able to certify GMP status for Italian manufacturers. 

A Common European Approach? 

Rather than acting on a national basis, EU member countries should refer to the EU framework and come up with a mutual solution that brings all the major players to an equal starting point.The EU has already unified, in fact, a series of best practices and minimum requirements that beauty products have to respect in the Common Market via Regulation CE 1223/2009, which came into force in July 2013 and does mention GMP standards as a benchmark.

As a matter of fact, the EU also hosts the body that first hailed the introduction of GMP standards in its territory, Cosmetics Europe, while trying to improve the quality of the cosmetics industry output via modern production techniques, packaging strategies and new manufacturing processes. If that wasn’t enough, the European Federation for Cosmetic Ingredients has also developed its own GMP standards for its chemical and natural raw materials suppliers for the beauty industry. 

Online Channels Poised to Spur Growth 

Figures by Statista show that the cosmetics market in China totalled CNY 425.6 billion in 2019 before dropping to around CNY 396 billion last year due to the pandemic. However, it is now set to bounce back and recover in 2021, reaching a record figure of CNY 455.3 billion. The next five years should bring exponential growth, with China already being the second-largest market in the world for cosmetics products. 70% of China’s beauty products sales are already performed online via e-commerce platforms like Tmall, JD.com and their cross-border versions due to initial regulatory hurdles on animal testing.

South Korea and Japan, the Asian counterparts with historical penetration and influence in the traditional retail sector, have long exploited the admiration of their audiences to eastern beauty standards and the inflow of travellers with higher replacement needs than fashion apparel. During the last Singles Day on Alibaba (11 November), a new local player and Yatsen’s beauty brand ‘Perfect Diary’ (完美日记) totalled CNY 100 million of sales in the first 9 minutes of a shopping frenzy, hinting at the market potential for cosmetics producers and retailers still considering entering the Chinese market. 

How Can Hawksford Help Beauty Brands? 

Hawksford has helped many global retail and beauty brands to expand throughout China and Asia. All retail giants have different strategies in Asia, but they have one thing in common: they prefer to work with one service provider that covers their needs across multiple jurisdictions. Hawksford’s considerable corporate services expertise, range of high-quality services in different Asian cities and track record for delivery is why so many retail clients trust us with their operations, enabling them to focus on what they do best – the business itself.

With healthy economies and increasing government incentives for retail growth, Asia remains the centre of the international retail market. We work with an unrivalled number of fashion, luxury and cosmetics brands from all over the world who entirely rely on us to take away the burden of back-office activities such as company incorporation and corporate compliance, management reporting/accounting, tax, payroll and immigration. Our mission is to ensure that brands can focus most of their financial and human resources on their success and expansion in Asia.

*this article is written by Fabio Stella and first reported by Hawksford.

Kind Regards,

CICC Team