I got this email today from the Chinese Government:

Dear Bill,

Thank you for accepting to speak at the upcoming China International Food Safety & Quality Conference, September 24 – 25, 2008, Landmark Hotel & Tower, Beijing. We are honored to have you as a speaker on the program and look forward to your speech.…

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.

Distributors’ Duties

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.

Defenses

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."

Damages

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.

2.  See http://gr.china-embassy.org/eng/kxjs/kjfg/t146182.htm.

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:

Anger in milk scandal forces China’s hand

By Ariana Eunjung Cha, The Washington Post

Monday, September 22, 2008Continue Reading Product Quality Law of The People’s Republic of China

The milk crisis in China is exploding.  Now there are over 6,200 people ill and at least 4 deaths.  I’ll be landing in Beijing in a few hours (long distance ambulance chasing) and was struck by a quote from Chinese Starbucks customer Cathy Wang who called for the government to take the toughest action possible…

Although I leave for China soon, I spent the day working on a keynote speech for the San Francisco Food HACCP Conference in October.  Here is my PowerPoint: