Thought I would get a bit more prepared for my trip to China. I might find something to do there other than climb the Great Wall.
China Manufacturers’ Duties (1)
China’s Product Quality Control Law (2), which went into effect in September 1993, holds manufacturers—or producers—responsible for product quality. Article 14 of the Quality Control Law requires producers to manufacture products that:
• comply with national and industry standards;
• do not pose an "unreasonable danger" to people or property;
• have the "properties that should be possessed by such products," except where explanations about defects have been provided; and
• conform with standards carried on the product or its packaging, or with the quality indicated by a sample.
Producers are liable for physical injury or damage to another’s property caused by a defective product. Article 31 stipulates that a victim may claim compensation directly from a liable producer, as well as from the seller of a defective product. While the law defines "defect" (3) as an "unreasonable danger" that "threatens personal safety or another’s property," the phrase "unreasonable danger" is not further defined. Additionally, while the requirement that products have the properties they should possess is not clearly explained, the law expressly prohibits adding improper ingredients or elements, or selling imitation or low-grade products as genuine or high quality.
Producers are also subject to several labeling and packaging requirements. All product packages must contain:
• product quality inspection certificates;
• product name, producer name and address, in Chinese;
• the primary ingredients;
• expiration date; and
• warnings in Chinese if the product is potentially dangerous.
Sellers or distributors under the Chinese law have the same responsibilities as producers plus additional obligations relating to marketing. For example, distributors must inspect products to make sure they are properly labeled, and make sure that their expiration dates have not passed. Moreover, while distributors are not responsible for compliance with industry standards, a distributor who knows that a product does not comply with the necessary standards may be subject to liability for personal injury or property damage caused by that product.
Compared with its counterpart in Taiwan, the Chinese law is more favorable to manufacturers and distributors because it provides defenses. A manufacturer will not be held liable if it can establish that (1) it did not put the product on the commercial market; (2) the defect did not exist at the time the product was put on the market; or (3) the defect could not have been detected at the time it was put on the market, because of limited scientific or technical knowledge.
The one defense available to a distributor is to demonstrate that another party, such as the manufacturer, was responsible for the defect. If the seller or distributor cannot locate the manufacturer, the seller must bear full responsibility for compensating an injured consumer. If the manufacturer can be identified, the product distributor has a recovery right against that manufacturer.
The Chinese law also has a statute of limitations and statute of repose for both manufacturers and distributors. Under the law, a claim must be brought within two years of the date that the defect was or should have been discovered. Moreover, a consumer may not bring a claim more than ten years after the product was delivered to the first consumer, unless, as Article 33 provides, "the clearly indicated period of safe use has not yet expired."
Injured consumers under the Chinese law can recover:
• medical expenses;
• lost income;
• and cost of living if unable to resume working.
In case of death, the liable party must pay funeral expenses as well as pensions and living expenses of the deceased’s dependents. The law also contains a potentially broad provision that requires that the liable party compensate the injured consumer for all other "major losses." See Article 32.
In addition to damage payments, failure to comply with national or industry standards can produce stiff penalties. Authorities will order manufacturers not in compliance to cease production and will seize illegal products and income derived from their sale. Moreover, a non-complying manufacturer (4) will be fined at least two times and as much as five times the illegal income amount. Manufacturers are strictly liable for non-compliance with national or industry standards, while sellers are liable only if they actually knew they were selling non-complying products. Chinese law does not provide for punitive damages (damages intended to punish the manufacturer). The closest analog in China would be what translates roughly as spiritual or hardship damages. The cap on these damages is RMB 50,000 (5), regardless of severity.
Alternative Dispute Resolution
Article 35 provides that, where a civil dispute concerning product quality arises, the parties concerned may seek a settlement through negotiation or mediation. Additionally, if negotiation or mediation is not feasible, the parties may apply to an arbitration organization for arbitration.
1. This article is based, in large part, on a portion of Bowman and Brooke LLP’s article entitled “International Product Liability Laws.” The article can be found at: http://library.findlaw.com/1999/Aug/1/129312.html.
3. “Defect” is specifically defined by Article 34 as “the unreasonable danger existing in [a] product which endangers the safety of human life or another person’s property; where there are national or trade standards safeguarding the health or safety of human life and property, defect means inconformity to such standards.”
4. This provision includes producers who mix “impurities or imitations into a product.” See Article 38.
5. This is $7,314.22 in United States dollars, as of 9/19/08. See http://www.lehmanlaw.com/resource-centre/faqs/product-liability/damages-caused-by-inferior-and-low-quality-products-are-a-chief-concern-of-consumers-in-china-how-does-chinese-law-protect-them-and-what-is-the-potential-liability-to-manufacturers-and-vendors.html.
Here is a great article on how the Chinese Legal System actually works:
By Ariana Eunjung Cha, The Washington Post
Monday, September 22, 2008
SHANGHAI, China — Not long after Che Yanjun’s twin sons drank contaminated baby formula and were hospitalized with kidney stones, the vice governor of the province came by bearing a basket of red flowers and an envelope of cash.
In China, such meetings are typically akin to settlement discussions in a victim’s compensation lawsuit. Getting the money requires signing a document absolving a particular company or the government of wrongdoing.
Che waited for the catch.
But as the official handed him the gifts, all she said was that her heart went out to him and that she would do everything in her power to take care of the babies.
“We are very shocked the government is being so good to us,” said Che, a 30-year-old construction worker from the western province of Gansu who received 2,000 yuan, the equivalent of two months’ salary, that day. The scandal over tainted milk powder, which has killed four people, including at least three infants, and sickened 6,244 more, has fueled such universal outrage that the Chinese government in recent days has thrown out its playbook for how it deals with such incidents.
In previous incidents of mass food poisoning, in mining accidents and even in the May 12 Sichuan earthquake, relatives of victims were silenced through bribes, intimidation or both.
In this case, parents of victims say they have been offered money but are still allowed to speak out freely and even organize grass-roots protest groups online — a major concession for a government that is deeply suspicious about organizations it does not control. More open protest and debate may be in China’s best interest because it keeps the pressure and blame on private companies and diverts attention from the government’s own failures to catch the contamination earlier.
Legal advocates have been authorized to assist parents seeking compensation. And on China’s network of online bulletin boards, anonymous citizens have been permitted to debate practically every aspect of the scandal with minimal censorship.
China’s largest Internet search engine, Baidu, said that in the interest of “revealing the whole truth to all,” it had rebuffed a half-million-dollar “public relations” payment from one of the mostly state-owned milk powder producers that had asked the online site to delete negative reports about it.
In an unusual move for a government that itself is routinely accused of online censorship, China utilized its official New China News Agency to help publicize the attempted bribery.
“Things are quite different this time,” said Li Fangping, a Beijing-based attorney who has volunteered his services to parents. “Civil society is responding more quickly, which I think is forcing the government to respond differently.”
On Thursday, China announced that its investigation had led to the arrest of 12 more people — all suppliers who allegedly sold milk containing the industrial chemical melamine. Hong Kong announced a recall of all milk, yogurt, ice cream and other products made by China’s Yili Industrial Group. Multinational companies operating in China, from Wal-Mart to Starbucks, were scrambling to ensure that the dairy products they sell are safe.
Of course, the government could clamp down on open debate suddenly, as it has done in the past. Allowing the debate to rage relatively unchecked so soon after last year’s recalls may be hurting the country’s reputation abroad, further undermining confidence in Chinese exports. But it may be a good way to provide an outlet for the growing anger of the middle class at home.
Much of the discussion so far casts the Sanlu Group — the first dairy company found to have problems with its milk powder — as the villain in the case. That perspective has been supported by orders from propaganda officials in a bid to preclude criticism of official actions.
The government has sent notices to domestic media outlets telling them they should use only official stories from the New China News Agency, prompting accusations of censorship, but many outlets have defied the ban.
On Thursday, state-run newspapers contained stories about panicked parents flooding hospitals with their babies in tow begging doctors to check for kidney stones and mothers crossing the border into Hong Kong to buy baby formula.
On the Internet, parents’ groups calling themselves things like the “Sanlu Victims Union” or “Condemning Sanlu Milk Powder” are proliferating. The Sanlu Victims Union says its goal is to gather 1,000 parents and march on Beijing to demand monetary compensation from the guilty companies.
“In the past, when facing a public incident, people tended to wait for the government to respond. But now they are learning to act to protect themselves,” said Li, who is part of a network of 73 lawyers from 23 provinces who are assisting the parents.
–ia Yuanhan, from Hunan province, is a member of the victims union and said he wants to ensure that the affected children’s medical care will be covered for life in case they develop complications as they grow older.
“I suggest the central government buy medical insurance for the victims and set up a special medical organization for those victims,” said –ia, whose 7-month-old son, Yangyang, had been drinking Sanlu milk since he was born.
There’s reason to worry, say parents such as Zhang Sanguan, because of the extreme medical procedures some of the babies have had to endure. Zhang’s 5-month-old son, Wanxin, had surgery Sept. 6, but doctors say he will need two more operations.
“During the operation, my son’s whole body is anaesthetized. I am so worried that this will affect his head,” Zhang said.