In the last few years, China has enacted important product safety laws and regulations. Companies doing business in—and with—China should acquaint themselves with these developments.

Legislation

China does not have a single, codified product safety law. Manufacturers and sellers of products and other stakeholders in this area must follow legal requirements as set out in various laws and regulations, including the General Principles of the Civil Law, the Law on Protection of the Rights and Interests of Consumers, the Criminal Law, and laws on the Administration of Pharmaceuticals and on Product Quality. China issued important legislation on food and product safety in the past several years, including the Law on the Quality and Safety of Agricultural Products in 2006; several sector-specific regulations covering the recall of vehicles, toys, food, and drugs in 2007; and the Food Safety Law and its implementing rules in 2009, which represented a milestone in the formation of China’s product safety regime. These laws and regulations responded to the public’s rising concern about product safety in China, which was stimulated by several lurid product safety lapses, including the 2008 melamine-tainted milk scandal (see the CBR, May-June 2009).

Agency responsibilities

The PRC National People’s Congress and the State Council have assigned various agencies specific tasks in the regulation and supervision of product quality and safety, although there is some overlap. Central and local-level Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) offices oversee and regulate the quality and safety of products manufactured in China and products imported into China. The State Administration for Industry and Commerce and its local offices oversee quality and safety issues of all products. Other relevant authorities have the power to supervise product safety in their own industrial sectors. For example, the Ministry of Agriculture handles agricultural product safety, the Ministry of Health is in charge of food safety, and the State Food and Drug Administration manages food and drug safety.

General product safety requirements

Under PRC law, manufacturers must abide by compulsory state and industrial product safety standards with respect to food, drugs, agricultural products, food containers and processors (such as boilers and pressure vessels), and other relevant products. Manufacturers are liable for any personal injuries or property damage caused by product defects. Entities must obtain a government permit to produce or distribute certain regulated products such as vehicles, food, and drugs.

Legal liabilities

Failure to comply with PRC product safety requirements may give rise to civil, administrative, and criminal liabilities.

  • Civil liability  Under PRC law, if a product causes personal injury or property damage, the manufacturer must compensate any loss suffered by the aggrieved party. In addition, manufacturers assume strict legal liability under PRC law, which means that they will be liable regardless of whether there are any defaults on their part, as long as a causal link can be established. Distributors are subject to a lesser liability standard than manufacturers, however. Under PRC law, distributors are liable only if the product defects are the fault of the distributors.
  • Administrative liability  Manufacturers and distributors that fail to comply with product safety requirements face administrative liabilities. The relevant government authorities may impose administrative sanctions on the manufacturers and distributors, including by requesting rectification of defect, imposing fines, ceasing the operation, and revoking the business license.
  • Criminal liability  If the products are found to have caused death, serious personal injury, or serious property damage, the responsible manufacturers and distributors may be exposed to criminal liability. The responsible management personnel of the manufacturers or distributors may also be criminally liable.

Product recalls

Manufacturers and distributors must recall products if consumers complain about product defects or if the manufacturers and distributors are aware of defects that may cause personal injury or property damage. In the past several years, the PRC government has issued regulations on the recall of vehicles, drugs, food products, and toys. PRC law currently does not contain specific rules governing recall procedures of other products, though this may change soon. In April 2009, the State Council issued for comment draft Administrative Regulations on the Recall of Defective Products, which aim to address recall procedures for all products. According to the current draft, the manufacturer must conduct a product safety investigation if it is aware of a product defect and must recall products that contain defects that may harm human health and life. The draft also lists the requirements and procedures for manufacturers to recall such defective products. The final regulations will likely be issued this year.

[author] Barbara Li ([email protected]) is a partner in Baker & McKenzie LLP’s Beijing office. [/author]

Posted by Barbara Li