Standards in China: Behind the Headlines

China’s approach to standards and conformance can create significant challenges for US companies doing business in China.by Elise OwenA recent string of high-profile standards-related events in China has focused attention on the importance of standards to global trade—and on the ability of US companies to enter and compete in the Chinese market. Recent “hot issues” related to standards and conformance in China include patents and intellectual property, environmental regulations such as restrictions on hazardous substances, supply-chain safety, information security regulations, and limitations on foreign participation in China’s standards development processes.

Standards, technical regulations, and the testing, certification, and other procedures needed to demonstrate compliance with them—collectively referred to as “standards and conformance”—serve as the unseen foundation for and international language of commerce. When applied and used well, standards and conformance provide the basis for interoperability of technologies, support innovation, and increase consumer trust and confidence; when misapplied, they can disrupt trade and create market barriers. When a country’s standards and conformance differ too greatly from international best practices, foreign and domestic companies alike face greater barriers to accessing international markets.

China’s top-down approach to standards and conformance

In China, several government bodies receive funding and have a mandate to decide not only which standards to develop, but also the processes and fora used to develop them. These bodies often offer incentives and other mechanisms to push standards of their choice into broad use within the Chinese market.

The top-down approach has helped China’s standards and conformance systems develop rapidly. China’s current systems are relatively new and have been built largely from scratch since China joined the World Trade Organization (WTO) in 2001. But China’s top-down approach has also made it more difficult for private stakeholders to participate in the standards-setting process. In some cases, a single leader or group of officials will make decisions without the benefit of the collective knowledge of all stakeholders and experts, leading to standards and conformance approaches that are impractical and unevenly enforced, limit access for foreign products, or entrench inferior or outdated technologies.

Low confidence in private-sector standards setting and conformity assessment

In China, a strong belief prevails that the government must solve important environmental, health, safety, and quality issues. Many Chinese decisionmakers believe that the government is more reliable and capable than the private sector to carry out effective standards and conformance, so the government often steps in to offer authoritative solutions. This system can create highly bureaucratic and cumbersome standards and conformance requirements, which in turn force US companies to repeat costly testing, inspection, or certification activities that they have already conducted for the US and other major global markets.

For example, under the China Compulsory Certification (CCC) program, which affects more than 20 percent of US exports to China, certification must be carried out in China by designated certification bodies (DCBs) affiliated with the PRC government. Conformity assessment work that has already been conducted by qualified private-sector organizations, including assessments that are typically accepted in the United States and other international markets, must be repeated by Chinese test labs and certification bodies. Because DCBs rarely have a presence outside China, companies that export products to China must arrange and fund travel for a Chinese agent to conduct pre-market inspections at the manufacturer’s location and submit to subsequent routine inspections after receiving the CCC mark. Though the costs associated with processing a CCC mark can be significant, especially for small and medium-sized enterprises, most companies report more pressing concerns about delays to market—particularly for new product scopes as they are added to the CCC catalogue—and disadvantages for foreign companies that must compete with Chinese entities, which enjoy more direct access to testing, inspection, and certification services. US companies have also expressed concern that proprietary product designs and manufacturing methods could be compromised during the certification process, given the close ties that many Chinese testing and certification bodies appear to have with Chinese manufacturers.

Openness and transparency

In the United States, openness and transparency are cardinal principles of the standardization system, but the Chinese approach to standards and conformity assessment has not traditionally placed the same value on openness, transparency, and broad stakeholder consultation. US companies that produce for the Chinese market frequently complain of sudden changes to requirements without advance notice and report challenges in identifying the standards, regulations, and other requirements for their products in China. They also find it difficult to identify and monitor the progress of, and provide input on, relevant standards and regulatory developments. This is particularly true of standards developed outside of China’s national standards (guo biao) structure, such as industrial standards and regulations used by individual PRC government regulatory agencies. Inadequate openness and transparency reduce domestic and international scrutiny of Chinese standards and conformance requirements, prevent experts from providing input on ways to make these requirements more effective and more practical, and remove pressure for these requirements to be developed in accordance with international approaches.

Since entering the WTO, China has made significant improvements to the transparency of its system. As a WTO member, China has committed to notifying the WTO secretariat of new or proposed changes to technical regulations that could affect trade significantly and to consider comments from all other WTO members. The number of Chinese notifications has risen from 40 in 2003 to 184 in 2008 in part because China has adopted new technical regulations that aim to protect the environment, human health, and safety, and also because China has increased its capacity to meet its WTO obligations. Another positive example is China’s work with the American National Standards Institute (ANSI) to develop the StandardsPortal website (see Overview of the American National Standards Institute and Its China Program). China’s progress is promising, and it presents opportunities for the United States to share its perspectives and experiences with PRC regulators and standards developers on how openness and transparency can help accomplish their objectives more effectively, as well as provide technical assistance and practical guidance on increasing transparency.

Inconsistent implementation creates uncertainty

It is common for PRC officials to work out practical details of implementation and enforcement after a requirement has already taken effect. For instance, a regulation that requires a product to be tested in an “approved facility” may enter into force before facilities have been approved. This lack of clear implementation details tends to affect foreign companies disproportionately because they often lack the relationships with PRC standards agencies that domestic companies have and thus may find it more difficult to get clarification directly from the agency concerned.

Recent public health and safety scares involving imports of Chinese tires, food, toys, and other products have exacerbated this problem, because China’s response to such concerns has generally been to create more stringent standards and regulations. This approach fails to solve key concerns: incomplete implementation and inadequate enforcement of existing requirements. The resulting requirements are increasingly onerous, less likely to be enforced for domestic companies, and even less effective at reducing threats to the environment, human health, and safety.

Actions that US companies can take

US companies may feel overwhelmed by the scope of standards and conformance-related challenges they encounter when doing business in China, but most problems are solvable with the proper level of engagement and participation on both sides. Capacity building and cooperation initiatives carried out by the US government, ANSI, the US-China Business Council (USCBC, publisher of the CBR), and others are already helping to address differences and deficiencies between the US and PRC systems. Individual companies must also take preventive action to standards and conformance in China, because that is the most effective way to address these challenges. For example, companies should

• Identify the departments or individuals within the company who are responsible for standards or regulatory affairs and work with them to share information on standards and conformance issues across geographic responsibilities and business units.
• Establish and maintain relationships with PRC government agencies responsible for standards, conformity assessment, and regulations that affect the company’s products. Companies should meet with these agencies regularly to gain an understanding of these agencies’ needs, challenges, goals, and objectives and position themselves as a partner that can support these agencies.
• Establish and maintain relationships with Chinese industry through Chinese trade associations, technical committees, and conferences. Companies should work formally and informally to identify and pursue common goals and concerns for standards and conformance.
• Use resources provided by ANSI, the US government, USCBC, and others to gain “early warning” on possible standards and conformance developments that could affect their products. Companies should share potential concerns with these organizations to help focus information-gathering efforts and discuss concerns and share practical recommendations with PRC officials before standards, regulations, or policies are published.
• As standards issues in China are increasingly cross-cutting, coordinate and share experiences with companies in other industry sectors.

When standards and conformance issues do arise, companies should consider the following actions:

• Work with others to develop a coordinated approach  Use the resources of ANSI, the US government, USCBC, and other trade associations to support advocacy efforts and show a united front.
• Focus on the facts  Standards issues are typically complex. When discussing a concern with PRC officials, companies should know which policy or regulation is causing problems and how it differs from approaches in the United States, Europe, and other regions. It is more effective to present facts about how the requirement affects the company’s business than to share opinions about what PRC officials “ought to do.”
• Seek help from other PRC agencies  When faced with a problematic policy or requirement, it is tempting to approach the responsible agency directly to discuss concerns. Though this is an important first step, companies may want to consider other PRC government agencies that may share—or at least be more sympathetic to—company concerns. Companies should consider whether the problem they are facing could affect the competitiveness of Chinese industry, China’s ability to innovate, or China’s ability to obtain cutting-edge equipment to support societal needs, such as medical devices that save lives or agricultural equipment that helps increase crop yields.

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Overview of the American National Standards Institute and Its China Program

As coordinator of the US standards system, the American National Standards Institute (ANSI) offers a neutral forum where companies, nongovernmental organizations, academics, government officials, and others work through consensus processes to develop US policies and positions for standardization. ANSI represents the interests of US companies and other stakeholders internationally, promotes standards and conformance approaches that support international trade and investment, and helps companies navigate foreign standards and conformance processes.

ANSI has worked cooperatively with China under a memorandum of understanding established with China’s national standards body nearly 30 years ago. In 2006, ANSI established a dedicated China Program that aims to

• Address overarching standards and conformance issues in China;
• Help companies and organizations address sector-specific issues; and
• Provide information and resources to help ANSI members succeed in China.

Two key aspects of the ANSI China Program are StandardsPortal and the ANSI Manufacturer Member Roundtable in China.
StandardsPortal (www.standardsportal.org)

StandardsPortal is an online resource designed to facilitate trade and exports by answering key standards and conformity assessment-related questions:

• What technical requirements must a product meet to enter and compete in the US, Chinese, and international markets?
• How can I receive “early warning” about changes to these requirements?
• How can I ensure that my company’s perspectives are heard and considered in the development of the standards, technical regulations, and conformity assessment policies that could affect my business?

Launched in 2006, StandardsPortal includes English- and Chinese-language information on both countries’ standards systems and related national policies. It also provides information about and access to foreign and international standards, resources to make use of such standards, and detailed information about how to participate in the development and modification of such standards. StandardsPortal provides companies with English-language access to search the full catalogue of PRC national standards, China’s plans for future developments and amendments to national standards, and policies and procedures on standards development in China. ANSI has also compiled case studies on the experiences of US organizations that have resolved standards and conformance issues in China and posted them to StandardsPortal.
ANSI Manufacturer Member Roundtable in China

The ANSI Manufacturer Member Roundtable in China provides a forum for manufacturing companies to discuss challenges and strategies, exchange information across industry sectors, and provide perspectives on issues that affect their China operations, including

• China Compulsory Certification regulations;
• China’s restriction of hazardous substances;
• China’s new energy-efficiency requirements; and
• Other priority issues for companies doing business in China.

The roundtable’s monthly meetings, which alternate between Beijing and Shanghai, are conducted primarily in Mandarin and frequently feature briefings from PRC government officials and other top experts.

—Elise Owen
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Case Study: Foreign Participation on Chinese Technical Committees

To increase transparency and consistency among Chinese national technical committees, the Standardization Administration of China (SAC) released an announcement in 2008 that formalized the operating procedures of Chinese technical committees. Transparency in China’s standards, conformity assessment, and regulatory system has been a key area of concern for the American National Standards Institute (ANSI) and its members, and China’s effort to formalize and post technical committee operating procedures publicly—as part of broader initiatives to make the Chinese system more transparent—is a positive development.

One clause in the recent SAC announcement raised concern, however. This clause stated that “it is permitted that the foreign enterprises can send people as observers to take part in activities of related technical committees.” Typically in such PRC documents, an option not explicitly “permitted” is not allowed. The new regulations thus created concern for many US companies that had made significant investment to gain access to standards development in China and that had either already lost voting rights on Chinese technical committees or feared that they would under the new policy.

ANSI raised these concerns with SAC, using the jointly established StandardsPortal website as a compelling example of how US-based standards developers welcome—and even recruit—participation from international experts and how this strengthens standardization in the United States. The issue was also raised by the US government during the 2008 meeting of the US-China Joint Commission on Commerce and Trade. In early 2009, SAC revised its policy to indicate that representatives of entities legally registered within China may participate in Chinese national technical committees as voting members at the discretion of the technical committee chair. With this announcement, the voting rights of companies on Chinese technical committees that had been in jeopardy were restored.

—Elise Owen
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[author] Elise Owen is director of the China Program and director of International Development at the American National Standards Institute (ANSI). She is based in Washington, DC. [/author]