Product Recall Laws in China

1. Product Recall Laws in China Xiangwen Liu Partner King & Wood PRC Lawyers

2. Public Database for Product Recall Xiangwen Liu King & Wood PRC Lawyers | 2011

3. I. Legal Framework of Product Recall • General laws and regulations applicable to all products • The Law of PRC on Protection of Consumers’ Rights and Interests (1993) • Article 18: “Business operators shall, upondiscovery of serious defects of the commodities or services they supply which are likely to harm personal or property safety even though the commodities are appropriately applied or services are received in a correct way, immediately report to the administrative departments concerned and inform the consumers, and adopt measures to prevent from damage.”

4. I. Legal Framework of Product Recall • General laws and regulations applicable to all products • The Tort Law of PRC (2009) • Article 46: “Where a product is found to be defective after it is put into circulation, the manufacturer and the seller shall give timely warnings, recall the defective product, or take other remedial measures. If any damage is caused due to failing to take remedial measures in time or the ineffectiveness of the said measures, the manufacturer and the seller shall bear tort liability.”

5. I. Legal Framework of Product Recall • General laws and regulations applicable to all products • Special Provisions of the PRC State Council on Strengthening Safety Supervision and Administration of Food and Other Products (2007) • Article 9: “When finding potential safety risk in products that may cause injury to human health and life safety, manufacturers shall publicize relevant information to the society, notify sellers to stop the sales, notify consumers to cease using the products, recall the products actively and report the relevant information to the regulatory authorities concerned. Sellers shall cease to sell the products immediately. When finding potential safety risk in products that may cause injury to human health and life safety, sellers marketing such products shall cease to sell the products immediately, notify manufacturing enterprises or suppliers and report the relevant information to the regulatory authorities concerned.”

6. I. Legal Framework of Product Recall • Specific regulations concerning particular products • Provisions on the Administration of the Recall of Defective Auto Products (adopted jointly by AQSIQ, State Development and Reform Commission, Ministry of Commerce and General Administration of Customs in March 2004) • Food Safety Law (Article 53 on establishment of national recall system for food) (adopted by NPC in Feb. 2009) • Provisions on the Administration of the Recall of Food (adopted by AQSIQ in July 2007) • Provisions on the Administration of the Recall of Toys (adopted by AQSIQ in Aug. 2007) • Measures for the Administration of the Recall of Drugs (adopted by State Food and Drug Administration in Dec. 2007) • Measures on the Administration of the Recall of Medical Devices (adopted by Ministry of Health in May 2011)

7. II. Administrative Authorities General Administration of Quality Supervision, Inspection and Quarantine State Food and Drug Administration

8. III. Reporting Obligations • According to relevant recall laws and regulations, the manufacturer or the distributor shall notify the administrative authority immediately, if it obtains any safety hazards-related information which reasonably supports that the product is defective and unsafe. • Such information includes but not limited to: • product injury accidents; • claims or complaints from consumers; • recall of the same product in other countries. • The report can be made online or in written.

9. IV. General Recall Procedures • The detailed procedures vary with different products or industries involved, but generally speaking, the recall procedures in China can be divided into three phases: • Phase One: Defect Investigation The following circumstances may be deemed as product defects under PRC Laws: • irrational dangers with identical characteristics that widely exist in a certain batch, type or class of products due to design and manufacture, which may endanger the safety of the person or property; • non-compliance withrelevant national safety standards; • lack of clear and complete warning or indications on product labels or instructions, which may endanger the safety of the person or property;

10. IV. General Recall Procedures • Phase Two : Voluntary or Compulsory Recall • The manufacturer may recall the defective products voluntarily upon confirmation of the defects. • The administrative authority may issue a notice of compulsory recall under the following circumstances: • the manufacturer internally conceal food safety hazards or refuses to recall the defective products; • the defect is detected and confirmed to have potential safety problems in the state supervision spot tests; • the recall of defective products fails to reach the anticipated purpose due to the faults of the manufacturer, which has caused reoccurrence or expansion of damages. • Phase Three: Outcome Appraisal • Based on the progress reports and recall records submitted by the manufacturer, the administrative authority shall conduct an outcome appraisal to determine whether the recall measures adopted are sufficient to eliminate the risks and defects.

11. V. Legal Liabilities Illegal Conducts Administrative Liability Failure or refuse to conduct defect investigation Manufacturer: Warning, order to rectify and recall, fine up to 3 times of value involved Failure to recall the products voluntarily with the knowledge of the defects Refuse to recall the products upon receipt of the notice of compulsory recall Distributor: Warning, order to stop selling, and fine of 1,000 to 50,000 RMB Failure to report the recall progress to the administrative authority regularly The recall shall not exempt the manufacturer from the civil, administrative or criminal liabilities arising in connection with the defective products under other PRC laws. But where the manufacturer voluntarily recall products to eliminate the damages, its legal liabilities under other laws may be mitigated.

12. V. Legal Liabilities • Non-compliance with the recall laws may not constitute crimes in itself. But producing or marketing fake or substandard products is prohibited by the Criminal Law of PRC. Illegal Conducts Criminal Liability Producing or marketing fake or substandard products 15-years imprisonment or life imprisonment Fines up to two times of the amount of earning Producing or marketing toxic or substandard food imprisonment less than 10 years, life imprisonment or death + Producing or marketing fake or inferior medicines or Confiscation of property Producingor marketing substandard medical apparatus and instruments imprisonment less than 10 years or life imprisonment

13. THANK YOU. Xiangwen Liu Liuxiangwen@kingandwood.com