EU and China to ease trade barriers by curtailing regulatory and disclosure requirements for cosmetic players

26 Sep 2023 --- EU and China have agreed to establish a working group that will “lower the administrative burden and far-reaching disclosure requirements” on EU cosmetic products sold in China. Valdis Dombrovskis, Executive VP of the European Commission (EC) and He Lifeng, Vice Premier of China’s State Council discussed these moves to improve international trade and macroeconomic policies at the 10th EU China High-Level Economic Trade Dialogue held in Beijing on Monday.

“The issue of effective market access for EU cosmetics has been raised by Dombrovskis during his visit to China yesterday,” an EC spokesperson tells Personal Care Insights.

Moreover, Dombrovskis stressed the importance of advancing the EU’s accessibility of the Chinese alongside rebalancing the EU-China economic and trade relationship “based on transparency, predictability, reciprocity and cooperation.”

“The EU-China trade relationship is one of the biggest in the world, and critical for both sides,” he says. “We are concerned about the imbalance in our relationships. The EU has a trade deficit with China of almost €400 billion (US$ 423.6 billion).”

The issue of cosmetics trade with China has been a growing concern for EU companies, especially for smaller players, who aim to extend their reach in Asia but are hindered by the Chinese Cosmetics Supervision and Administration Regulation (CSAR) requirements.

“While the CSAR requirements are overbearing and China justifies them by consumer safety considerations, e-commerce is possible for the same products, which proves that there are no consumer safety issues in play; rather, China wants access to the recipes behind the products,” flags the EC.

Chinese regulatory barriers
In 2020, almost 9% of EU cosmetic exports went to China, representing around €2.4 billion (US$2.5 billion).Valdis Dombrovskis, executive VP of the EC.

“China is the 3rd main market for EU cosmetics, after the US and UK. At the same time, the EU is the third market destination for Chinese products, after the US and Hong Kong. The implications of trade restrictions are significant for both jurisdictions,” says the EC spokesperson.

France’s finance minister, Bruno Le Maire, adds: “I’m not talking about peanuts [in reference to China’s business prospects]. For many French companies, China represents between 30 and 35% of their total revenues.”

A primary concern for EU cosmetics businesses is the intricate level of information, including detailed ingredients, required for the notification and registration of cosmetic products imported by China.

According to the EU, these regulatory barriers also pose a risk to intellectual property.

“EU cosmetics have the highest safety, environmental protection and efficacy standards. We, therefore, believe that China’s measures are not justified on consumer safety grounds. The EU expects China to adhere to international best practices,” adds the spokesperson.

Clarifying export controls on both sides
At yesterday’s dialogue, the EU and China agreed to “exchange information on export controls at a technical level to provide a platform to clarify each other’s measures.”International Forum on Beauty Economy and Sustainability. (Image credit: Delegation of the EU to the People’s Republic of China).

Acknowledging the “increasingly cumbersome labeling and licensing agreements” faced by cosmetics companies, the new working group will tackle these issues. 

This comes after the same issue was raised at other events, notably on December 29 last year at the International Forum on Beauty Economy and Sustainability in Beijing.

“The EU has also raised its concerns on Chinese CSAR rules at the WTO, together with other WTO members,” shares the EC spokesperson.

France backs stronger China ties
Prior to the Beijing meeting, France and China discussed easing market access. Last month, the two nations agreed to heighten mutual benefits, “committing to providing a level playing field for companies, particularly in the fields of cosmetics.” 

France is the center and basis for several cosmetics brands and companies worldwide. L’Oréal and its popular brands, Lancôme, La Roche-Posay and Vichy, saturate the cosmetics market.

“We want to have a stronger economic relationship between Europe and China, between France and China, which means to get access to all European goods,” said the French Prime Minister. China hopes the nation will lead in improving its relations with the EU.

Moreover, US Commerce Secretary Gina Raimondo visited Wang Wentao, China’s Minister of Commerce, to discuss promoting cooperation in commercial sectors for the two nations. They agreed to establish a new commercial issues working group that will address trade and investment solutions.(Image Credit: Permanent Mission of the People’s Republic of China to the UN and other International Organizations in Vienna).

They also agreed to “convene subject matter experts” from both sides to discuss protecting trade secrets and confidential business information during administrative licensing proceedings.

The Personal Care Products Council association supported Raimondo’s approach and is optimistic that the initiatives will help address long-standing issues hindering cosmetics trade and investment.

EC flags potential “trade hierarchy”
The spokesperson notes: “The EU has been monitoring the Chinese revised CSAR since it was announced” in May 2021.

The CSAR helps to improve trade barriers and does not discriminate between imported and domestic products. It also provides a “waiver of animal testing for non-special cosmetics, under certain conditions.”

However, the EC has concerns that China requires the registration of substances intended as raw material on the National Medical Products Administration’s database. This places a strict rule, which stipulates that the specifications of the raw material manufacturer and ingredient composition of a cosmetics company must be a “perfect match.”

Additionally, China requires the efficacy of cosmetics claims to be proven, however, certain cosmetics are only accepted if tested on local methods. The EC flags that this “seems to establish a hierarchy of test methods prioritizing local ones,” which forces companies to re-test products when they have already been tested in other countries.

To add, the EC also flags that legal entities are not recognized for establishing the safety and quality of the cosmetics, instead, it is based on a “natural person.”

“Certain Chinese GMP standards deviate from internationally agreed ISO Standard 22716 [good manufacturing practices],” highlights the EC.

“In addition, the new rules foresee the possibility of inspections to manufacturing sites in third countries, while no implementing legislation has yet detailed their scope or the powers of the inspectors.”

By Venya Patel