China’s Cosmetics Regulations, Import Tariffs May Improve In 2018 (Or Not)

“It’s an optimistic time for our industry in China,” PCPC’s Francine Lamoriello, executive VP of global affairs, observed in an interview. While there have been positive signs, recent government reorganization and escalating trade tensions with the US potentially complicate matters.

Welcome changes may be coming in China for cosmetics companies, though visibility is poor and volatility high.

In other words, the China opportunity for foreign brands remains predictably unpredictable.

Francine Lamoriello, executive vice president of global affairs at the Personal Care Products Council, noted in a recent interview that cosmetics regulatory reform figures among the State Council’s legislative priorities for 2018.

That’s encouraging, as PCPC has been pushing for years for regulatory regime changes in China consistent with Western models to promote transparency, alleviate burdens and even the playing field between foreign and domestic players. The group took a delegation of members to China in late 2017 to spur on those discussions. ( (Also see "PCPC’s Global Priorities: A Q&A With Executive VP Francine Lamoriello" - HBW Insight, 29 Sep, 2017.))

In April, the China Food and Drug Administration was folded into a new “super ministry” of formerly segmented agencies called the State Administration for Market Regulation.

PCPC isn’t counting on updates that fully harmonize China’s regulations with those in the US or Europe, but a framework “more closely aligned with other countries” could be on the horizon, according to Lamoriello.

She suggested that China’s premarket approval pathways for new cosmetic products and ingredients could be among elements targeted for reform, as well as the country’s animal testing requirements, which continue to pose significant challenges for multinational companies in an increasingly “cruelty-free” global marketplace. (Also see "Canada’s Animal-Testing Ban Would Require Authorizations For Last Resort Studies " - HBW Insight, 22 Jun, 2018.)

Regarding the latter, Cruelty Free International announced a pilot program June 22 aimed at greasing the skids for cosmetics companies looking to enter the Chinese market without compromising their animal-friendly status. According to CFI, which is launching the project in partnership with Shanghai-based consultancy Knudsen&Co, Chinese authorities have lent their support to the initiative. (Also see "CFI Announces Gov-Supported Program To Streamline China Entry Without Animal Testing " - HBW Insight, 22 Jun, 2018.)

While PCPC is optimistic about signs of progress in China, the trade group recognizes that a recent government reorganization could slow down the works.

In April, the China Food and Drug Administration was folded into a new “super ministry” of formerly segmented agencies and functions, including the State Administration for Industry and Commerce (SAIC) and the General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ). ( (Also see "Bigger, Bolder, SMAR: Decoding China's All-In-One Regulatory Agency" - Pink Sheet, 12 Apr, 2018.))

Called the State Administration for Market Regulation, the new body is intended to achieve efficiencies, cut costs and reduce burdens for companies, SMAR’s new Commissioner Zhang Mao told China's state-run Xinhua News Agency.

MAR’s priorities also include addressing uneven or weak enforcement, especially at local levels, he said.

According to Lamoriello, “there’s going to be new players, new agencies, we’re not sure where everyone is yet” for cosmetics.

Regardless, PCPC anticipates that the new cosmetics regulatory program could be unveiled in the second half of the year.

“We’re going to continue our engagement with the Chinese government, and we’re even working on some training programs at the provincial level,” the exec added. “It’s an optimistic time for our industry in China.”

Cosmetic Tariff Cuts Promised As Of Late May

Reportedly, China pledged in late May to slash “most favored nation” import duties on a range of consumer products, including cosmetics, to open up its internal market in accordance with its own economic goals and discussions with trading partners.

Tariffs on cosmetics would be reduced from around 8.4% to 2.9% under the plan, which was slated to go into effect July 1.

At the time of the announcement, China and the US were still negotiating terms to avoid the Trump Administration’s threatened tariffs on Chinese goods, which the President has characterized as punishment for unaddressed intellectual property abuses on China’s side.

The picture has changed since. China now could face new tariffs on up to $450bn of exports to the US as tensions continue to escalate, following vows of retaliation from the one-party communist state vis-à-vis an initial round of US tariffs scheduled for implementation in July.

Where this leaves cosmetics, specifically US imports that otherwise were earmarked for tariff reductions in China under the changes targeted in May, is unclear.

The Office of the US Trade Representative wasn’t much help.

“USTR cannot speak for what China’s tariff plans are; we refer you to China for questions on their decisions,” a spokesperson said.

With talk of a full-blown trade war heating up, US cosmetics don’t appear to be in China’s crosshairs in the moment. According to reports, retaliatory tariffs currently being explored by China include duties on agricultural products, autos, aquatic goods, chemical products, medical equipment and energy products.

According to a 2016 report from the US Department of Commerce’s International Trade Association, US personal-care and cosmetic exports to China totaled $392.6m in 2015, up 64% from 2010, representing approximately 3% of total US exports.