February 12, 2002 -- China's new labelling regulations for genetically modified food products, set to take effect in March, contain no explicit
specification of a tolerance level for modified genetic material. The U.S. Department of Agriculture maintains that the rules will effectively
establish a zero-tolerance limit, similar to standards imposed by South Korea and the European Union. Under these rules, even Brazil,
where transgenic soybeans are ostensibly banned, will have a hard time exporting its crop to China.

Zero-tolerance means that the presence of any genetically modified commodities would have to be labeled and subject to safety
certificates. Current testing equipment can detect the presence of altered proteins within 0.01 percent.

“As drafted, these regulations fail to provide a transparent and predictable framework for
exporters and importers," read a joint February 7, 2002, statement from Ann M. Veneman, U.S. Secretary of Agriculture, and Robert B.
Zoellick, U.S. Trade Representative. "The result could be a halt in exports of farm products.  That is an unacceptable situation."

Last year, China accounted for more than 20 percent or $1 billion worth of all U.S. soybean exports.  The new regulations could also affect
U.S. corn and cotton exporters, who expect to benefit from new opportunities created under the World Trade Organization (WTO)
accession agreement signed by China, according to Veneman and Zoellick.

Beginning March 20, every foreign shipment of genetically modified products must apply for a
safety certificate from China's Ministry of Agriculture, including a
government statement from the originating country that it poses no harm to
humans, animals, or the environment. Labeling would apply to genetically modified oilseeds
as well as their processed derivatives such as soybean meal, soybean oil,
rapeseed meal, and rapeseed oil. Sales can be made only after the certificates
are issued. Upon arrival the imports must be quarantined while inspections are
conducted to verify the presence of any genetically modified material, as well
as diseases or other impurities.

The Ministry of Agriculture will accept no applications until March 20, and the deadline for the
first submission is March 31. The next opportunity for applications will not be
until September 30. Authorities are allowed up to 270 working days for each
approval, although subsequent approvals should take less time than the first
ones. The inspection alone could add up to a month to the process. So, after
implementation there probably will be a temporary halt in the orderly movement
of foreign oilseed products to China.

The government of Argentina's struggle with exchange rate policies has already stalled
export trade, and it could take considerable time for any country to assemble
the required import documentation for China.

Last year, genetically modified varieties accounted
for 68 percent of the soybeans grown in the United States and 88 percent in
Argentina.

Despite the absence of an official Brazilian sanction of transgenic soybeans,
buyers in China have also cancelled purchases from Brazil for April-May
shipment. A zero-tolerance standard would apply to the traces of genetically modified
soybeans that can be found in many Brazilian exports, according to USDA.

The risk of having any unlabeled imports testing positive would be quite costly, because without a
safety certificate they would be returned or destroyed. Thus, it would be
practically impossible for Brazilian exports to get the required safety
certificate from China if shipments are not identity-preserved.

A bill that would lift a court-ordered ban on biotech crop production stalled in Brazil's
Congress last year, but a new attempt at passage is likely soon, which would
permit exporters to make the proper applications.

The expected delays have caused USDA to reduce its forecast of Chinas 2001/2002
soybean imports from 14 million tons to 13.5 million. Prospects for soybean
meal imports were also cut to 200,000 tons. Simultaneously, a relatively steady
soybean crushing demand is seen, which would trim domestic carryout stocks to
four million tons.