[2] In a case where a person intends to engage in a business selling tea clor, which is a raw material product, whether a person shall report the business of selling the tea clorries under Article 6 (2) of the former Health Functional Foods Act (affirmative)

① The end of tea electronic skins constitute foods that contain tea-electronic fibers, which are functional ingredients, and that can be taken by consumers. At least, since the standard and standard of health functional foods (amended by Ordinance of the Ministry of Food and Drug Safety No. 2016-29, Apr. 20, 2016; hereinafter “standard and standard announcement”) meet the standard and standard requirements for raw material products, it is included in the concept of “health functional foods” as defined in Article 3 subparag. 1 of the Health Functional Foods Act.

② Article 3 subparag. 1 of the Health Functional Foods Act does not stipulate the methods or form of packaging of health functional foods as a conceptual element of health functional foods, but does not stipulate that the criteria, standards, and publication of specifications and “standards and specifications for apparatus, containers, and packages” (Notice of the Ministry of Food and Drug Safety) shall be packaged in small quantities on a one-time basis.

The common standards for the public announcement of standards and specifications are merely the purport that "health functional foods should be manufactured and processed easily in the form of static, capsul, refund, excess, volume, powder, letter, fluor, sast, sel, gel, diesel, naphtha, or film," and it does not purport that "the health functional foods should be manufactured and processed easily in the form of one-time food, and they should be packaged in the quantity per intake unit in accordance with individual standards and specifications."

③ Article 4(1)3 of the Act on Labeling and Advertising of Foods, Etc. and Article 2 [Attachment 1] of the Enforcement Rule of the Act on Labeling and Advertising of Foods, Etc. provides for the labels on the premise that functional health foods for raw materials fall under functional health foods. However, among the labels on functional health foods, the labels on the labels may be omitted.

[2] Examining the details of the relevant statutes and regulations on the business of functional health foods in light of the legislative purpose of the former Health Functional Foods Act (amended by Act No. 13201, Feb. 3, 2015; hereinafter “Health Functional Foods Act”), in cases where a person intends to engage in the business of selling tea or e-mail, which is a raw material product, he/she shall report the business of selling functional health foods under Article 6(2) of the Health Functional Foods Act. Specific reasons are as follows.

(1) In order to achieve the legislative purpose of the Health Functional Foods Act by securing the safety and improving the quality of health functional foods, administrative agencies need to manage and supervise all processes leading to the final sale of health functional foods, and accordingly, management and supervision shall be conducted on raw materials and products used as raw materials of final products.

(2) Article 10 (1) of the Health Functional Foods Act includes only final products in a health functional food subject to the obligation to manage to ensure safety and hygiene, which is to be imposed on a person who manufactures, processes, imports, or sells health functional foods (hereinafter referred to as "business operator") to ensure the safety of health and to maintain order in distribution, and to promote national health under Article 10 (1) of the Health Functional Foods Act (hereinafter referred to as "duty to manage health functional foods to ensure the safety of health and to ensure the safety of health," and "the obligation not to use the health functional food if the period of distribution expires," and only the final product

(3) In order for a person who has obtained permission to manufacture health functional foods to manufacture raw materials, he/she shall file a report on manufacture of items pursuant to Article 7 (1) of the Health Functional Foods Act. If an administrative agency is able to manage and supervise the manufacturing stage of raw materials products through permission for manufacturing business and a report on manufacture of items, it is reasonable to suggest that the administrative agency may also manage and supervise them at the distribution and sale stage of raw materials products thereafter.

④ Although the Food Sanitation Act regulates raw material products only as food, the regulations imposed on food sellers under the Food Sanitation Act are weak compared to the regulations imposed on health functional foods sellers. A seller of raw material products need to ensure the safety of health functional foods by imposing a business operator under the Health Functional Foods Act (Article 10(1)) and a duty to prohibit sale, etc. of health functional foods in violation of standards and specifications (see Article 24).

1. Case summary and key issue

A. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) Defendant 2 Co., Ltd. (hereinafter “Defendant Co., Ltd.”) that Defendant 1 operates as the representative in-house director (hereinafter “Defendant Co., Ltd.”) had completed the report on import business of functional health foods, imported jams (which falls under food as seed coatss) from India, and entrusted the pulverization to Nonindicted Co., Ltd. (hereinafter “Nonindicted Co., Ltd.”) which obtained permission for the business of manufacturing functional health foods.

2) On June 12, 2014, Nonindicted Co., Ltd. reported the manufacture of functional food items with the following e-mail powder as a raw material product to the regional food and drug administrations. Nonindicted Co., Ltd. created the tea e-mail powder by means of crushinging the tea e-mail imported by Defendant Co. from July 2014 to May 2015, and packaged it in the unit of 20 km. The Defendant Co., Ltd sold the tea e-mail powder manufactured by Nonindicted Co., Ltd. to the manufacturing company, pharmaceutical company, and wholesale company, and the Nonindicted Co., Ltd delivered the tea e-mail powder in accordance with the Defendant Co.’s delivery order.

3) The end of the tea clock manufactured by Nonindicted Company meets all the standards and requirements of raw materials and final products using tea clocks as raw materials, which are defined by the former Standards and Specifications for Health Functional Foods (amended by the Ministry of Food and Drug Notice No. 2016-29, Apr. 20, 2016; hereinafter “Standards and Specifications Notice”) (hereinafter “Standards and Specifications Notice”). Consumers may assist the improvement of clocks and smooth operation of clocks in blood by taking the clock clocks themselves manufactured in a certain amount of more than a certain level.

4) The Nonindicted Company indicated the phrase “health functional food” and the design (mark) indicating the health functional food on the packaging of the end of the following e-mail, and stated that the end of the e-mail is used as raw materials and raw materials of health functional food.

B. The key issue of the instant case is: (a) whether the e-mail franchi produced by the Defendant Company entrusted to the Nonindicted Company constitutes functional health foods; (b) whether the Defendant Company should report its business as prescribed by the former Health Functional Foods Act (amended by Act No. 13201, Feb. 3, 2015; hereinafter “Health Functional Foods Act”) to operate a business selling tea e-mail franchis to the manufacturers of functional health foods.

2. Details of the relevant Acts and subordinate statutes and public announcement;

(a) Regulations on business related to health functional foods;

The purpose of the Health Functional Foods Act is to contribute to improving the health of citizens and protecting consumers by ensuring the safety and quality of health functional foods and promoting the sound distribution and sale thereof (Article 1). The State and local governments shall prepare reasonable policies so that all citizens can be provided with good-quality health functional foods and accurate information thereon, and guide and manage persons who manufacture, process, import, and sell health functional foods (hereinafter “business operators”).

A person who intends to engage in a business of manufacturing, importing, or selling functional health foods shall have facilities meeting the standards prescribed by Ordinance of the Prime Minister (Article 4(1)). A person who intends to engage in a business of manufacturing functional health foods shall obtain permission from the Minister of Food and Drug Safety (Article 5(1)), as prescribed by Ordinance of the Prime Minister, and shall report to the Minister of Food and Drug Safety the matters prescribed by Ordinance of the Prime Minister, such as a manual on manufacturing methods of the relevant products, when he/she intends to engage in a business of manufacturing or selling functional health foods (Article 7(1)). A person who intends to engage in a business of importing or selling functional health foods shall install facilities prescribed in Article 4 for each place of business and report to the head of a Si/Gun/Gu, etc. having jurisdiction over the location of the place of business (Article 6(1) and (2)). The detailed types and scope of manufacturing, importing, and selling

Article 2 subparag. 3 of the former Enforcement Decree of the Health Functional Foods Act (amended by Presidential Decree No. 26936, Jan. 22, 2016) classify the detailed types of the health functional foods sales business into “(a) general sale of health functional foods (excluding sales business of health functional foods)” and “(b) sale business specialized in distribution of health functional foods [limited to specialized manufacturers specialized in the health functional foods (limited to those designated as business operators under Article 22(2) of the Health Functional Foods Act)].”

(b) Regulations on functional health foods;

(i) manufacturing standards;

The Health Functional Foods Act defines health functional foods as “foods manufactured (including processed foods) using raw materials or ingredients useful to human body” (Article 3 subparag. 1). The Minister of Food and Drug Safety determines and publicly announces “standards and Specifications for the manufacture, use, preservation, etc., of health functional foods” and “raw materials or ingredients of health functional foods” for sale (Articles 14(1) and 15(1)). The term “standards and specifications notification” following the delegation of the Act provides for ① common standards and specifications of health functional foods, ② individual standards and specifications of health functional foods that may be used as raw materials of health functional foods, ③ the testing method of health functional foods.

In the "common manufacturing standards", health functional foods shall be manufactured and processed in the form of refined, capsule, refund, fruit, liquid, powder, sheet, fluore, fluore, gel, diesel, fluore, film, with the main purpose of taking functional ingredients or ingredients to obtain useful effects for the purpose of health of the human body. The standards and specifications of each standard component stated in the "individual standards and specifications" shall be classified into "raw materials products" that are not directly sold to consumers and "final products manufactured and processed by using them." However, the standards of each standard component indicated in the "individual standards and specifications" shall be applied.

The standards and specifications announcement sets out as one of functional ingredients functional components in individual standards and specifications, and sets out the requirements of the specifications and final products. The issue of detection of sexually and fungites, among the specifications of the primary e-mail, is the same as the raw materials and final products, and the content of the food fiber is different.

(ii)containers, packages and marks;

The standards and specifications announcement shall provide that the standards for containers and packages of health functional foods shall conform to the standards and specifications of the apparatus, containers and packages determined and publicly notified by the Minister of Food and Drug Safety (hereinafter referred to as "containers and packages announcement") pursuant to the delegation of Article 9(1) of the Food Sanitation Act. The announcement of containers and packages provides for the specifications of raw materials used in the manufacture and processing of food apparatus, containers and packages, and the method of testing containers and packages.

Meanwhile, Article 4(1)3 of the Food, etc. Labeling and Advertising Act (hereinafter “Food Labeling Act”) provides that functional health foods shall indicate the name of products, content quantity, raw material name, etc.: Provided, That in cases prescribed by Ordinance of the Prime Minister, only a part of them may be indicated (Article 4(1)3), and Article 2 [Attachment 1] [Attachment 2] 2 of the Enforcement Rule of the Act on Labeling and Advertising of Foods, Etc. may be omitted for raw materials supplied for the purpose of use in the manufacturing industry of functional health foods.

(c) discipline for operators;

Article 10 (1) of the Health Functional Foods Act provides for matters to be observed by business operators in order to ensure the safety of health functional foods, manage manufacturing facilities and products (including raw materials) so as not to cause harm to health and hygiene, maintain order in distribution, and promote national health (Article 10 (1) of the Health Functional Foods Act, such as selling products, displaying or keeping them for the purpose of sale, or using them in manufacturing health functional foods (Article 10 (1) 2), such as “to not exchange such products for the purpose of sale, display or keeping them for the purpose of sale, or use them in manufacturing health functional foods (Article 10 (1) of the Health Functional Foods Act),” “not to sell the products by promoting speculative spirit, such as providing cases of sale or free gifts (Article 3), and “other matters corresponding to subparagraphs 1 through 4, which are deemed necessary for securing the safety of health functional foods, quality control, and promoting national health and sanitation, as prescribed by Ordinance of the Prime Minister (Article 12 of the Health Functional Foods Act). Article 4 of the Enforcement Rule of the Health Foods Act provides for detailed matters to be observed.

A person may be subject to a corrective order where he/she violates any of the matters to be observed by a business operator prescribed in the subparagraphs of Article 10 (1) of the Functional Foods for Health Act (Article 29), or where he/she violates any of subparagraphs 2, 3 and 4 of this Article, he/she may be subject to business suspension, revocation of business permission, or closure of his/her place of business (Article 32 (1) 1), or criminal punishment for not more than six months (Article 4 subparagraph 3 and Article 45 subparagraph 2), or may be subject to a fine for negligence where he/she violates any of subparagraphs 1 and 5 of Article 47 (Article 47 (1) 4).

In addition, business operators shall manufacture, use, or preserve functional health foods, the standards and specifications of which are determined pursuant to Article 14(1) and (2) of the Functional Health Foods Act, and shall not sell functional health foods, or manufacture, import, use, store, transport, preserve, or display such functional health foods for sale, which do not meet the standards and specifications (Article 24(1)).

Where a business operator violates Article 24 (1), the head of a Si/Gun/Gu, etc. may order the relevant public officials to seize or discard the relevant functional health foods, or order the business operator to take measures to eliminate any harm to food sanitation (Article 30 (1)), to suspend business operations for a period not exceeding six months, to revoke permission for business operations, or to close the place of business (Article 32 (1) 7), to suspend business operations for a period not exceeding five years, or to suspend business operations for a period not exceeding 50 million won (Article 44 subparagraph 7).

3. Determination as to the instant case

A. Whether the end of the instant tea constitutes functional health foods

Examining the above provisions of the relevant Acts and subordinate statutes and the regulations on the business of functional health foods in a systematic and comprehensive manner, the e-mail francium produced by the Defendant Company by entrusting the Nonindicted Company to the Nonindicted Company shall, in itself, be deemed to fall under the functional health foods under Article 3 subparag. 1 of the Functional Health Foods Act. The fact that the Defendant Company sold it to the manufacturer, etc. of functional health foods as raw materials for functional health foods is not different. The specific reasons are as follows.

1) The end of the primary e-mail is a food that contains tea-electronic skin fiber, which is a functional ingredient, and is able to take by consumers. At least, it meets the standards and requirements for raw material products as set forth in the standard and specification notification. Thus, it is included in the concept of “health functional food” as defined in Article 3 subparag. 1 of the Health Functional Foods Act.

2) Article 3 subparag. 1 of the Health Functional Foods Act does not stipulate the methods or form of packaging of health functional foods as a conceptual element of health functional foods, but does not stipulate that the criteria, standards, and publication of specifications, containers, and packaging should contain a small quantity of health functional foods on a one-time basis.

The common standards for the public announcement of standards and specifications are merely the purport that "health functional foods should be manufactured and processed easily in the form of refined, capsul, refund, excess, volume, powder, letter, fluor, sast, sel, gel, diesel, naphtha, and film," and it does not purport that "in order to become a health functional food, small quantity shall be packaged in the unit of intake according to individual standards and specifications."

3) Article 4(1)3 of the Food Labeling and Advertising Act and Article 2 [Attachment 1] of the Enforcement Rule thereof provide for the labeling of functional health foods for raw materials on the premise that functional health foods fall under functional health foods. However, among the labeling of functional health foods, the labels such as “intakes, intake methods, and cautions at the time of taking” may be omitted.

B. Whether a business report is necessary even where a business operator intends to run the business of selling the instant tea, i.e., the instant tea.

Examining the details of the relevant statutes and notifications as seen earlier in light of the legislative purpose of the Health Functional Foods Act, even in a case where a person intends to engage in the business of selling tea flock, which is a raw material product, a report on the business of selling health functional foods under Article 6(2) of the Health Functional Foods Act should be made. The specific reasons are as follows.

1) In order to achieve the legislative purpose of the Health Functional Foods Act to ensure the safety of health functional foods and improve their quality, administrative agencies need to manage and supervise all the process from the process to the final sale of health functional foods, and accordingly, management and supervision of raw materials used as raw materials for final products should be conducted.

2) Under Article 10(1) of the Health Functional Foods Act, the duty to manage health functional foods to ensure the safety and hygiene and to ensure the safety thereof, which are to be imposed on business operators in order to ensure the safety of health functional foods, to maintain order in distribution, and to promote national health (Article 10(1) of the Health Functional Foods Act, and the duty to not use functional foods in manufacturing when the period of distribution expires (Article 10(1)1 of the Health Functional Foods Act).

3) In order for a person who has obtained permission to manufacture health functional foods to manufacture raw materials, he/she shall file a report on manufacture of items pursuant to Article 7(1) of the Health Functional Foods Act. If an administrative agency is able to manage and supervise raw materials products at the stage of manufacture by permitting manufacturing business and reporting on manufacture of items, it is reasonable to suggest that an administrative agency may manage and supervise them even at the stage of distribution and sale of raw materials products thereafter.

4) Although the Food Sanitation Act regulates raw materials only as food and may regulate them pursuant to the Food Sanitation Act, the provisions and degree of regulations imposed by the Food Sanitation Act on food sellers are weak compared to the regulations imposed on health functional foods sellers. A seller of raw materials also needs to ensure the safety of health functional foods by imposing a business operator under the Health Functional Foods Act (Article 10(1)), a duty to prohibit sale of health functional foods in violation of standards and specifications (see Article 24).

C. The lower court determined that since the e-mail franchis manufactured by the Defendant Company by entrusting the Nonindicted Company constitutes a health functional food under Article 3 subparag. 1 of the Health Functional Foods Act, and the act of selling such e-mail falls under the scope of business of “sales functional food” under Article 4(1) subparag. 3 of the Health Functional Foods Act, a business report should be made under Article 6(2) of the Health Functional Foods Act. Such judgment below is based on the legal doctrine as seen earlier, and it did not err by misapprehending the legal doctrine on the meaning of “health functional food” or “sales functional food

4. Conclusion

Therefore, all appeals are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Sang-ok (Presiding Justice)