China Imposes New Export Restrictions for COVID-19 Medical Products

No.5 Notice

On 31 March 2020, the “Ministry of Commerce, General Administration of Customs and the National Medical Product Administration (NMPA) issued Notice No. 5 of 2020 – Notice on the Orderly Conducting of Medical Materials Export” (“Notice”). Taking effect from 1 April 2020, the Notice imposed export controls on Chinese manufactured COVID-19 medical products, specifically: COVID-19 detection reagents, medical masks, medical protective clothing, ventilators and infrared thermometers. The export requirements are two-fold, a declaration and evidence that the medical product is already registered in China (i.e. medical device registration certificate issued by the NMPA) and that it also meets the quality standard requirements of the importing country. The Notice also provided a template that must be completed for export and a comprehensive list of products in each category that already have NMPA medical device registration certificates (the list is on the NMPA website and will be updated regularly). The Notice relates only to medical products, which meet the definition of a medical device. It does not govern the export of non-medical products nor non-medical personal protective equipment (PPE).

Not surprisingly, the almost immediate introduction of these requirements has caused much consternation for medical manufacturers within China and for importers/suppliers in other countries. While these requirements are clearly aimed at maintaining the quality of exported medical products, it has left international suppliers scrambling to fill orders already on their books. In addition, some Chinese manufacturers have indicated that, whilst they may have approval from importing countries, their products are not sold in China and they are unable to meet the requirements due to not having the required NMPA medical device registration certificates. With products like surgical masks being Class II medical devices in China, the ability for rapid registration with the NMPA is difficult. 

Customs Confirmation   

On 5 April 2020, Officers from Customs, the Ministry of Commerce and the NMPA attended a press conference held by the State Council where they jointly announced that export checks will be conducted strictly in accordance with the Notice to control the quality of export products. The central NMPA had also met with their provincial medical product administrations to reinforce and implement the requirements of the Notice. In addition, China Customs have posted some guidance documents on their official WeChat Channel that outline the different requirements for the medical products in some international jurisdictions (principally the USA and EU). 

Enforcement of the Notice

These announcements have also been followed by active enforcement of the Notice, as evidenced by Beijing Customs seizing 300 test kits from a Beijing company on 1 April 2020 after they falsely reported its COVID-19 test kits as "rapid diagnostic test cards"; Shanghai Customs seizing 122,000 COVID-19 test reagents on 2 April 2020 after a Hangzhou company tried to export under the name of "rapid diagnostic test paper"; and Ningbo Customs discovering a Hunan company hiding 15 cases of surgical face masks in its export of plastic bags and wipes on 2 April 2020. These, together with other seizures, form part of the COVID-19 related medical product seizures reported in the media on 5 April 2020. The report says that, since the introduction of the Notice, China Customs had so far seized 11,205,000 COVID-19 prevention/detection medical products from various channels, including commercial, mailing, express, and cross-border e-commerce platforms. The bulk of these medical products (almost 10 million items) were surgical face masks and the seized goods were either produced by companies not on the NMPA approved list or did not possess a medical device registration certificate. Customs also highlighted that some companies have been attempting to disguise the medical products with other products or to declaring these products as “non-medical”.

Customs have also stated that they will be vigilant on enforcement of the requirements and will pay special attention to whether the product name and quantity is consistent with the export declaration. In addition, additional checks will be conducted to examine the product for mildew or spoilage, whether they have a valid shelf life, and whether they are broken or constitute infringement of intellectual property rights. There is also a commitment to look for hidden/fake/sub-quality goods.

Penalties for Breaching the Notice

While the Notice outlines the export requirements, Customs have also reminded companies that there are penalties for attempts to circumvent customs rules. If a company tries to export through false reporting of the goods, penalties can imposed, including seizure of goods, seizure of illegal income, monetary fine, or criminal liability for serious offences. For the export of fake/sub-quality goods, the penalties can be prohibition of export, seizure of illegal income, and a monetary fine of between 0.5 to 3 times the value of the goods. In addition to goods seizure and monetary penalties, potentially more problematic for companies is that Customs can put the company on a blacklist and impose stricter supervision over them (more regular checks). The offending companies will also have their names published on Customs websites and social media. 

Conclusion

It should be stated clearly that the Notice relates purely to medical products of the 5 types listed and not non-medical PPE. The ongoing and dire need for these medical products means that there is a continuing scramble to obtain them. However, the potential consequences of using substandard product means that quality is a key component for acceptance by the purchaser. The Notice is a clear attempt by the Chinese Government to ensure that exported medical products meet the standards they are required to meet for both China and other markets. While these requirements are potentially strict, they are pushing manufacturers/exporters/importers to understand that medical products need to meet specific standards to perform their function. 

The Chinese Government has stated that the requirements under the Notice are dynamic and may change as the COVID-19 situation progresses. However, at this point, they remain committed to enforcing the Notice and punishing those that do not abide by its requirements.