AmCham’s Retail Committee offers suggestions on making proposed regulatory changes more practical.

Whenever member economies of the World Trade Organization propose to alter existing regulations in ways that would potentially impact foreign products or services, a comment period of up to 90 days is available for other governments or concerned parties to raise objections or make suggestions for revision.

Recently Taiwan notified WTO of its intention to adopt a number of regulatory changes in line with amendments to its Statute for Control of Cosmetics Hygiene, and AmCham Taipei’s Retail Committee availed itself of the opportunity to issue a series of comments. Among the key recommendations:

• Avoid a “dual-control” model. For medicated cosmetics, the draft regulation would create a five-year transition period in which the current pre-market approval system would remain in effect while an additional post-market control mechanism would be introduced requiring cosmetics companies to submit highly detailed documents known as Product Information Files (PIF). Given that such a dual system would be unique in the world, it would pose an extremely steep compliance burden for the cosmetics industry. The Committee urges termination of the pre-market approval process, shifting the regulatory approach to one of post-market surveillance and industry self-regulation.
• Remove stipulations on evaluating and penalizing advertising thought to be untrue or misleading. The proposed regulation would authorize health-administration personnel to assess whether an advertisement or product claim is “seriously exaggerating or untrue,” with violators required to broadcast or publish apologies and corrective statements. The health-administration staff could also prohibit the distribution, display, and sale of the advertised product for an indefinite period.

This proposal, which is another case of Taiwan-unique behavior, raises some serious issues for a society dedicated to the rule of law. In making their judgment about the fairness or truthfulness of the advertising, for instance, the health-administration personnel would not be limited to considering safety or health-related content. The scope of their authority would far exceed their professional competence. Without the due process assured when such matters are handled by the courts, in addition, the compulsory “corrective advertising” and removal of products from store shelves could severely damage a company’s commercial reputation and ability to do business.

In urging an alternative approach, the Committee is asking the authorities to engage in broad-based discussions in preparation for establishing advertising guidelines and a system of industry self-regulation

• Simplify the labeling requirement. The draft would require labels to list full contact information – company names, addresses, and telephone numbers – for both the manufacturer and the importer. But inclusion of the importer’s information should be sufficient, as there is no need for a Taiwan consumer to contact a manufacturer located overseas. In fact, for some “private label” products, the identity of the actual factory may be considered confidential.
• Provide an adequate grace period. As the draft reclassifies toothpaste and mouthwash as cosmetics, industry will need enough lead time to undertake substantial product relabeling and possibly changes to the formula. The challenge is most acute for multinational companies that source products worldwide and share product labeling and formulations across borders. The Committee requests a transition period of at least five years.

The Committee expressed the hope that in the interest of avoiding unnecessary technical barriers to trade that would contravene WTO principles, the Taiwan government will modify the proposed provisions to promote commerce and maintain positive relations with its major trading partners.

• By Don Shapiro