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AAFA Restricted Substances Seminar Rosie Zhang International Compliance Group Dongguan September 21, 2006 Overview of Current Laws in China Regarding RSL

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Content RSLs impact on Chinese Apparel and Footwear exports Legislation Process on RSL after Chinas Entry of WTO World Factorys Prospect of Eco- friendly Production

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RSLs impact on Chinese Apparel and Footwear exports 1) Nowadays, environmental protection plays more and more important roles in the international trade. After Chinas entry into WTO, environmental standard, safety certificate and other green trade barriers have replaced textile quota and become the main barriers to Chinese export. Todays topic (RSL) is about one of the new trends.

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RSLs impact on Chinese Apparel and Footwear exports 2) According to the survey by the Ministry of Commerce, in 2002, there are 71% of export enterprises in China, that encountered restrictions of foreign technical trade barriers in different degree. 39% of export products were affected, causing a loss of over $17 billion, which is corresponded to 5.2 % of total annual export volume. The respective figures in 2000 were 66 %. 25 % and $11 billion.

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The Recourses of Technical Barriers under the WTO Legal Regime 1) Protecting human, animal or plant life or health, and conserving exhaustible natural resources, can be cited as reasons for bypassing normal trade rules according to GATT/WTO Article 20, General Exceptions.

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The Recourses of Technical Barriers under the WTO Legal Regime 2) Technical Barriers to Trade (TBT) Agreement allows countries to adopt technical regulations, standards and conformity assessment procedures for environmental protection, provided non-discrimination, transparency and other requirements are met.

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Other Agreements that Contain Environment Related Provisions Agreement on Agriculture Agreement on Trade-Related Investment Measures Agreement on Rules of Origin Agreement on Subsidies and Countervailing Measures Agreement on Trade-Related Aspects of Intellectual Property Rights General Agreement on Trade in Services

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Trade-related Environmental Regulations in Developed Countries Laws and regulations on Air pollution control Noise pollution control Management of chemicals Management of pesticides Control of pollution caused by waste Protection of natural resources and fauna and flora Environment standards

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Major International Standards regarding RSL 1): ANSI, ASTM, AATCC standard ISO standard EU standard, a combination of DIN (Germany),BS(UK),NF (France) standard Japanese national standard (JIS), Russian national standard (FOCT) Oeko Tex Major international buyers internal standards Standards set by international trade association chamber of commerce such as AAFA

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Major International Standards regarding RSL 2): Overview of various standards regarding RSL, the common ground is apparels and footwear should not contain any hazardous or harmful substances which cause harm or potential harm to human beings.

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What is Green Trade Barrier? Green trade barriers are a kind of technical trade barriers, which are means or measures taken by importing country to restrict goods directly or indirectly from abroad for the reason of protecting health and safety for human beings, fauna and flora, even for the purpose of banning trade.

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Characteristics of Green Trade Barrier Wide coverage Relative and temporal effects Difficult to judge the rationality of the measures Protection of the environment and human, animal and plant safety, or Trade protectionism Advancing technical progress

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International Law to Domestic Law - Green Trade Trend Requires Chinese Legislation To establish Chinese national green safeguard mechanism through legislation by following the international laws, regulations, standards and practice To modify national environmental policies and regulations to comply to the signed international environmental agreements To follow WTO general principles and rules

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Purpose of Legalization of RSL To protect environment To protect of consumers health and safety To protect of workers health and safety To achieve world trade liberalization

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Current Regulatory Rulings and Standards regarding RSL in China Implemented on 1st Jan.2003 Implemented on 1st Oct.2004 Implemented on May 2005) GB5296.4 1998 GB18401 2001 GB18383 2001 GB/T18885-2002 (Implemented on 1st Jan.2003 GB18401 (Implemented on 1st Jan.2003 SN/T1649-200 (Implemented on 1st May 2006 SN/T1522-2005 (Implemented on 1st May 2006

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National General Safety Technical Code for Textile Products Code separated products for babies, products with direct contact to skin and products with indirect contact to skin into A, B and C three categories. 5 major health &Safety related standards: formaldehyde content, pH, color fastness, odor and aromatic amines released by azo dyestuff during decomposition have been specified Textiles in accordance with the code will be labelled with GB 18401-2003 mark.

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Technical Requirement on Eco-textile (1) No chlorine bleach (2) No TBT/DBT and fire retardant (3) No PCP& TecP (4) No odor of mildewed, gasoline and toxic aromatic amine (5) No AZO dyes, carcinogenic dyes, allergenic ayes (6) Formaldehyde, heavy metals content, PH value, color fastness and pesticide residual content shall meet Oeko-100 Standard.

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The Safe Item Examination Norms for Import & Export Textile Products General safety standards were quoted from GB18401- 2003 National General Safety Technical Code for Textile Products Appendixes were listed with safety related technical requirement and limitation standards from other countries and regions (organizations) List of hazardous dyestuff, pesticide, chlorine benzene, chlorine toluene, PVC plastizers (phthalates) and forbidden fire retardant materials was directly quoted from Oeko-Tex Standard 100-2005

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Conclusion China shall accelerate the establishment of its own standardization system according to the situation of the country and in accordance with international standards. World Factorys future is Eco-friendly Production.

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Thank you for your attention! ICG Asia Head Office Wrap/UCEC Accredited Monitor Social Compliance & C-TPAT Audit Social Compliance Capacity Building & Training Health and Safety Capacity Building & Training 86 21 6248 1082 86 21 6248 0161 Email:zhangr@humanrightscompliance.com www.humanrightscompliance.com