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CBR May-June 2008 - Healthcare
UL-CCIC's testing facility in Suzhou, Jiangsu. Photo courtesy of UL-CCIC

Standard Bearer

Underwriters Laboratories opens its first joint venture in China

by Virginia A. Hulme

Turn over nearly any electrical appliance or tool sold in the United States, and on the back you will see . This familiar mark means that the product has passed the tests and inspections of Underwriters Laboratories Inc. (UL) and should be safe to use. Roughly 9,000 manufacturers in China, both Chinese and foreign-invested, are authorized to apply the UL mark. UL expects this number to more than double over the next five years, in part because companies are not just manufacturing in China these days. According to Doug Johnson, general manager of UL's joint venture (JV) in China, companies are beginning to develop advanced products in China, as shown by the fact that UL has received applications for such products.

Established in 1894 and headquartered in Northbrook, Illinois, UL develops safety standards and ensures that products destined for US stores, and ultimately US homes, meet these standards. The leading product safety testing and certification organization for the United States and Canada, UL has obtained American National Standards Institute acceptance for 65 percent of its 876 safety standards. For the last 20 years, UL has also offered management system certifications, such as ISO 9000 certification.


The lobby of UL-CCIC's testing facility in Suzhou, Jiangsu. Photo courtesy of UL-CCIC

The UL process is relatively simple: UL engineers test products according to UL and international safety and performance standards and evaluate the results using a pass/fail system. Products that meet requirements are authorized to use the corresponding certification mark. When products fail, UL alerts the manufacturers about which specific tests the products failed. This helps the manufacturer identify and correct the problem.

In 2003, 68,713 manufacturers had been authorized to apply the UL mark to their products. Once UL has authorized a product to carry a certification mark, UL inspects the factory that makes it to determine that the product still complies with the standard's requirements. If not, UL re-evaluates the product. UL conducts these "follow-up" inspections at least four times a year, though there are exceptions for products not manufactured year-round, such as Christmas lights. Though technically "unannounced," UL asks manufacturers to identify manufacturing "windows," during which UL conducts inspections.

UL in China: A long history of cooperation

The Suzhou testing facility currently performs tests in the most popular product categories, including small home appliances such as lights, fans, rice cookers, toasters, and electric tools.

UL is not just a US-based organization; since the 1920s UL has been active internationally and now has customers in 99 countries, affiliates and representative offices in 21 countries, and 127 inspection centers in 65 countries.

UL first came to China in 1980, when it established a cooperative relationship with China Certification & Inspection (Group) Co., Ltd. (CCIC), formerly the China National Import & Export Commodities Inspection Corp., to conduct follow-up inspections of Chinese factories. Authorized by the State Council and accredited by the State Administration of Quality Supervision, Inspection, and Quarantine and the China National Certification and Accreditation Administration (CNCA), CCIC performs commodity inspection, accreditation, testing, and certification, as well as inspection of containers and transport tools that contain imports and exports. Like UL, CCIC offers management system certifications, but does not test products for the China Compulsory Certification (CCC) mark (see the CBR, May-June 2003, Navigating China's Standards Regime).

UL-CCIC General Manager Douglas Johnson. Photo courtesy of UL-CCIC


UL-CCIC tests products for the different voltages found around the world. Photo courtesy of Virginia Hulme


Testing a light fixture. Photo courtesy of Virginia Hulme


UL-CCIC performs many electrical tests on special testing benches. Photo courtesy of Virginia Hulme

Under the cooperation agreement, UL tests products made in China at its nearest testing facility capable of performing the necessary tests for that particular product, usually UL facilities located in Hong Kong or Taiwan. Once a product passes the tests and receives the UL mark, CCIC conducts the quarterly follow up inspections.

In 2001, growing demand for product safety testing and certification services prompted UL and CCIC to begin negotiations to set up a JV. UL had already opened two representative offices in China, in the manufacturing areas of Guangzhou (1994) and Shanghai (1997), to answer procedural and technical questions and provide better service to customers in China. Still, having a testing facility in China would bring UL closer to its customers and would save customers time and money because they could pay in renminbi and wouldn't have to ship their products abroad.

The partners signed their JV contract in June 2002. Johnson attributes the brevity of negotiations to the fact that the two partners have worked together for more than 20 years and know each other well.

The new JV

The venture, UL-CCIC Company Limited, is a 50-50 JV with total investment of $15 million. Set up in January 2003, UL-CCIC is headquartered in Shanghai, with branches in Beijing, Guangzhou, Suzhou, and Shanghai. (Parent company UL still maintains a representative office in Guangzhou; the old UL Shanghai representative office became a UL-CCIC branch.) UL expects its share in the JV to rise to 70 percent in early 2004, as under China's World Trade Organization (WTO) commitments majority foreign ownership was to be allowed in this sector by December 11, 2003. Equipment, training, processes, and systems are all based on UL requirements; CCIC invests in the JV and provides it with 25 percent of its senior managers. Factory follow-up inspections remain outside the purview of UL-CCIC; UL still contracts those out to CCIC.

UL also offers management system certification, commercial inspection and testing, and electromagnetic compatibility services, as well as related training programs. And in May 2003, CNCA authorized UL-CCIC as a registered agent to assist domestic and overseas customers with the CCC application process, allowing UL to serve not only companies producing for export, but also those producing for the domestic market or importing into China.

UL chose to locate its testing facility in Suzhou because of the city's central location on China's east coast, within the Yangzi River Delta, where manufacturing is heavily concentrated. The heart of the JV, the Suzhou testing facility currently performs tests in the most popular product categories, including small home appliances such as lights, fans, rice cookers, toasters, and electric tools. The facility's capabilities will gradually expand to perform tests on just about anything exported from China.

In fact, UL-CCIC is looking to become a "one-stop" test site, not just for goods destined for the US market, but for goods exported around the globe—and aims to have a share of the European safety certification market by 2005. But UL-CCIC is not the only testing company with this idea; some of its competitors, such as TUV Rheinland Group, also hope to become a test site for China's exports to the rest of the world. Because UL is less well known in China than it is in the States, the company is raising its profile by providing training programs for existing and potential customers, and is working with trade associations, in addition to traditional advertising and trade-show participation efforts.

UL-CCIC is held to the same high standards as any other UL affiliate. UL-CCIC managers report not only to General Manager Johnson, but also to managers at UL's regional headquarters in Hong Kong. UL-CCIC employees also access the same company systems, such as intranet and e-mail, as other UL employees worldwide. And of course, the JV shares the same public safety mission. Johnson estimates that the venture will turn a profit in 2005 and break even on the total investment in 2006 or 2007.

Ramping up capacity

UL is rapidly expanding capacity, especially at the Suzhou test facility. In October 2003, UL-CCIC had 155 employees, of which nearly 100 were hired in the last year. Just over 70 of the new employees are located in Suzhou. By 2009, the venture expects to employ around 400 people, most of whom will work at the Suzhou facility. The testing facility is currently 4,400 m2, but will double in size by the end of 2005. UL-CCIC has no immediate plans to set up more test centers in the near future, but may consider branches in other cities, particularly in western China.

UL-CCIC has had no problem finding qualified engineers for its testing facility, but they still must be trained, usually in cooperation with UL facilities in Hong Kong, Taiwan, and the United States. Each engineer learns the standards, tests, and how to evaluate test results for a number of products. Training can take time; some engineers go to UL's Hong Kong facility for six to eight weeks to learn a particular standard, and any related substandards. For instance, an engineer may be qualified to evaluate tests for the information technology equipment (ITE) standard, but within ITE are numerous substandards. Experienced engineers often acquire standards expertise in a variety of product categories.

Johnson explains that as the engineers in the Suzhou facility get up to speed, they will take over most of the work currently being sent to UL testing facilities in Hong Kong and Taiwan.

Customers already have high expectations, and UL has had to explain that the Suzhou facility cannot perform every test right away. Eventually, the organization plans to be able to meet more than 80 percent of the demand for UL testing services in China. Fortunately, UL-CCIC has a board of directors that understands that quality is just as important as speed in this business, and that integrity is everything. Thus UL-CCIC is improving the quality and timeliness of its services quickly—without cutting corners or compromising integrity.




Virginia A. Hulme (vhulme@uschina.org) is associate editor of the CBR.

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