It is widely acknowledged that developments in China, the fastest-growing major economy in the world, have a crucial influence on the future of a wide range of global industries. It should not therefore be surprising that China also plays a pivotal role in the global seafood industry. In fact, China is now the world’s leading exporter of marine fish products, outranking Peru, Norway, the Russian Federation, the USA, Thailand and Chile in 2006. Despite these statistics, details of the fish re-processing industry (i.e. from imported materials) are not well understood owing to a lack of publicly available data. Better understanding of how fisheries resources are used by China, and the extent to which these processes are controlled by national and international regulations, is an essential component of effective global fisheries management. By illuminating the role China plays in fish reprocessing, the extent to which China must be involved in solutions to the problems of overfishing and illegal, unreported and unregulated catches (IUU) is highlighted.
This study has aimed to compile information comprehensively from a wide variety of sources in a fair and consistent manner around two major themes. The first describes the historical development and current structure and operation of China’s fish re-processing trade. This trade is examined by species and product by working backwards to source fisheries and forwards to end-markets. The regulation of the trade using product yield is then described and assessed. The second theme documents current systems for fish traceability in China to understand where there may be weaknesses which allow infiltration of illegally sourced fish. The ability of these systems to comply with existing and pending international fish certification and documentation schemes is also discussed.
Under both of these topics, the scope of this study is limited to fish from marine capture fisheries caught or re-processed by mainland China. Aquaculture and domestic consumption within mainland China are not covered. Although Hong Kong, Macau and Taiwan have special links with the mainland, these areas maintain their own systems of governance, regulations and trade statistics and thus are also outside the scope of this report.
China's Fish Re-Processing Trade
Determining which species in what quantities are being re-processed in China is not a simple matter. This is because of potential mis-declaration of imported raw materials, a lack of species-specific customs commodity codes for exported fish fillets, and large and growing amounts (nearly 400,000 tonnes in 2006) of unspecified frozen fish imports. In this analysis, China’s import statistics for fish raw materials, which are reasonably species-specific, were compared with “imports from China” as recorded by trading partners for salmon, whitefish and tuna. For these three groups combined, pollock and cod comprise 71 to 83 per cent of the total raw material input and 74 to 78 per cent of the total processed output annually for 2004 to 2007. Salmon, redfish, haddock, whiting, coalfish, hake and toothfish appear to be processed in considerable but smaller quantities.
Overhaul of China’s commodity coding system for fish products, as well as better integration of the China Inspection and Quarantine Bureau (CIQ), tasked with food safety monitoring, and the China Customs Administration (CCA), tasked with import and export control, both of which are believed to be under way, would allow for a much improved level of understanding of both China’s and the world’s global fish trade.
Information on the source countries of imported fish materials indicates that 97 per cent of China’s total salmon, whitefish and tuna supply derives from just 10 countries and 57 per cent derives from the Russian Federation alone. Further raw material supplies are provided by the Russian Federation in non-species specific categories. Salmon and whitefish production relies heavily on these imported materials but tuna processing may be proportionally more dependent on supplies landed by Chinese fishing vessels. Given the lack of information on fish landings in China, the situation for tuna remains unclear. Several instances of suspected mis-declaration of species were observed in which either the routing country (for example, the Netherlands, a commonly-used consignment point for north Atlantic raw materials) or China itself, was listed as the country of origin. In addition to these issues with species identity and origin, mis-declaration of quantities was also explored but no evidence for systematic under-reporting of imported quantities by China was found.
China’s fish re-processing industries are based primarily in Shandong and Liaoning provinces, with additional capabilities in other coastal areas such as Guangdong, Zhejiang and Fujian. Together, Shandong and Liaoning account for over 90 per cent of China’s imports of both salmon and whitefish and the top 10 importers in these two provinces account for over 30 per cent of the total imports. Shandong and Tianjin appear to be the main areas for tuna processing in China, 34 per cent of which is based on yellowfin (according to customs declarations). Tuna-processing operations appear to be separate, and perhaps more specialised, in comparison to those for salmon and whitefish, as only four of the top 50 importers of salmon and whitefish raw materials also import frozen tuna.
Some of China’s largest importers of fish raw materials are not processors but diversified import–export companies. These companies are sometimes servicing a variety of industries, such as textiles and machinery, and often supply to, and distribute fish on behalf of large (and probably small) re-processors. Although this service comes at a price, it may offer essential flexibility in the dynamic channelling of raw material to a network of factories as market conditions change. Although this situation is perfectly legal, the fact that fish may change hands one or more times while in China has implications for traceability by complicating the chain of custody.
Whether or not the imported fish raw material is owned by the processor determines its status with regard to import duties. If the material is foreign-owned, import duty need not be paid as long as the finished products are re-exported. If the material is owned by a Chinese party, 26 per cent duty may be levied and then rebated, or the traders/processors may qualify for an exemption from the duty if they maintain a clean trade record and the material remains under bond. It appears that as much as 60 to 70 per cent of the salmon and whitefish raw materials used in China’s re-processing industry are Chinese-owned despite the apparent drawbacks of high capital cost of materials and the potential tariff liability. In contrast, 70 to 85 per cent of the tuna processed in China is foreign-owned.
The regulatory system for customs duties is important because it alone provides a check on whether all material imported for processing is subsequently exported and thus, if effective, it should ensure an import–export mass balance is attained. The CCA monitors whether processed fish is re-exported through Trade Processing Manuals (TPMs) and the application of yield ratios to imported and exported amounts. For this study, salmon and whitefish gross (national) mass balance calculations were performed for 2004 to 2007. For salmon, the calculated yields (i.e. ratio of exported to imported quantity) ranged from 26 to 36 per cent annually, which appears low compared to industry norms and will be even lower if polyphosphates and/or heavy glazing are being used to bulk product weight. A similar analysis for whitefish showed different patterns for 2004–2005 and 2006–2007. A yield of 48 per cent was observed in the earlier period but in the latter period the yield suddenly increased to 60 to 70 per cent, close to the yield claimed by traders in interviews (65 to 73 per cent). Tuna is not well suited to this type of analysis because exports from China of processed tuna loins or other non-fillet portions may be recorded under the same codes as whole fish off-loaded (imported) to foreign ports by Chinese vessels. It is thus not clear how to define tuna quantities for the purpose of a re-processing mass balance exercise.
Fish Product Traceability in China
Even if traceability systems are well designed and generally well implemented, they can fail with lack of implementation at a single step. Recognising this, in combination with China’s integral role in global seafood supplies, it is important to consider whether China’s current traceability regulations are adequate to support international traceability expectations. In particular, the extent to which China’s traceability system can support new international schemes for documenting the legal provenance of fish raw materials was investigated. This analysis required an examination of the required documentation for fish imports into China; an explanation of how traceability of fish in the Chinese processing trade is maintained between import and re-export; and the documentation and procedures applicable when material is re-exported from China to its destination market. Four specific catch documentation schemes were then assessed to determine what requirements they placed on China’s traders and regulators and to what extent these requirements were currently being met.
The importation into China of fish raw material for processing requires a Certificate of Origin and a Health Certificate, neither of which currently meets most catch documentation programme objectives. Despite its name, the Certificate of Origin mainly serves to document the country of origin for the purposes of assigning tariffs and often provides no information about the exact location and circumstances of fish catch. Health Certificates are primarily concerned with sanitary issues and do not always contain information on the exact area of catch, vessel identification numbers, and whether the fish are whole or primary-processed, i.e. necessary to cross-check against quotas. Both documents would require substantial modification, including standardisation of formats among issuing authorities, before they could serve a catch documentation purpose. Of the two documents, the Health Certificate would have an advantage in that it is better standardised and issued by a smaller number of recognised authorities.
Once imported, fish raw materials for processing are regulated by the CCA and by the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) through its local CIQ offices. Perhaps the most important regulation from a traceability perspective is the CIQ requirement that each shipment of imported raw material be assigned a unique raw material batch number and that there be no mixing of material from different batches during processing. When material is exported, the export application lists the original raw material batch and the import application numbers. In theory, both CIQ and the importer should maintain files which link these identification numbers to the original (i.e. source country) Certificate of Origin and Health Certificate. However, there is no requirement to reference or attach these documents to the export application.
Considerable advances in China’s traceability systems appear to have occurred over the past few years. However, implementation will certainly vary between large and small, and urban and rural enterprises. AQSIQ and CIQ are driving these advances but they are fundamentally focused on sanitary concerns and may be unwilling or unable to shoulder additional responsibilities associated with documenting fish provenance. The CCA is primarily concerned with tariffs and may also not welcome additional responsibilities for checking fish provenance documentation. In many cases, traceability of fish provenance once fish is exported from China is obscured under China’s current rules of origin which classify all products which have changed four-digit tariff classification (e.g. from frozen fish (0303) to fillets (0304)) as products of China.
The first of the international schemes for documenting legal fish provenance considered by this study was the MSC eco-label. Although the scope of MSC certification goes well beyond simple legality, documenting that the products derive from an MSC-certified fishery should in theory also document that the fish were legally caught. The MSC chain-of-custody standard imposes a number of traceability requirements which are similar to those required by CIQ; those MSC requirements which are stricter than CIQ regulations should pose no problems for Chinese processors already compliant with these regulations. Conversely, some MSC chain-of-custody certificates held by Chinese processors have been withdrawn in recent months for reasons which appear to suggest there may be problems with day-to-day implementation of basic, CIQ-mandated traceability requirements. In this sense, continued strengthening of oversight by CIQ should deliver improved traceability in general, as well as better compliance with MSC chain-of-custody standards.
The second international scheme examined was the Northeast Atlantic Fisheries Commission (NEAFC) Port State Controls. These allow NEAFC fish to be landed in designated ports only after confirmation from a foreign fishing vessel’s flag State to the port State that the catch is legal. Since this scheme does not provide any documentation to accompany legally landed fish through the supply chain, if the standard import paperwork appears credible, Chinese import officials may inadvertently clear IUU fish from the NEAFC area for processing, allowing subsequent entry to external markets as a product of China. Traders interviewed for this study stated that they would like to be able to access NEAFC documentation in order to confirm that fish they bought had been cleared by the Port State Control Scheme. NEAFC may also consider specific outreach to Chinese regulators to alert them to irregular shipment patterns which may suggest IUU activity.
Under a new ICCAT Catch Documentation Programme for bluefin tuna landings and trade, China will be required to issue a catch document for all bluefin tuna it lands or imports (i.e. lands in a foreign port); track the catch documents associated with any tuna raw materials it processes through to reexport; and issue a re-export certificate when the tuna leaves China. It is unclear whether China would consider CIQ, CCA or another agency (e.g. the Bureau of Fisheries) as the responsible authority for validating these documents. Designation of the responsible authority in response to the ICCAT requirements will provide useful insight into the nature of China’s response to the demands of other international catch certification programmes.
A forthcoming European Union (EU) regulation to combat IUU fishing will require that China obtain and manage catch certificates for all fish raw materials potentially destined for EU markets. It will also be necessary for China to designate an authority and develop a mechanism to link catch documents with import and re-export applications. Such initiatives by China may require time and support. Another issue that will confront a number of countries, including China, is how to document the use of partial amounts under the same original catch certificate when shipments are split by fish size or for processing at different factories. Unless otherwise foreclosed, discrepancies between catch certificate amounts and shipment amounts could lead to some processors claiming certified status for the entire amount on the attached catch certificate even though they received only a portion of those fish. Under a worst case scenario, non-certified fish could be added until the full amount on the catch certification is reached and then the entire amount could be claimed to be certified.
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