On 18 September 2023, China's State Administration for Market Regulation (SAMR) issued a revised draft of PRC Product Quality Law (the Revised Draft) for public comment by 18 November 2023.
The current Product Quality Law (the Current Law) was formulated back in 1993, and amended in 2000, 2009 and 2018. The new law was drafted, to further implement the responsibility of operators and improve product quality management system.
The Revised Draft consists of 111 articles in total (74 articles are contained in the Current Law), with many newly added provisions, including social supervision, obligations to report product quality and safety incidents and recall defective products, quality obligations of other operators than producers and sellers, such as product storage and transportation operators, third-party platform service providers for e-commerce, offline third-party operators, and service providers, and safety requirements for imported and exported products.
The notable provisions of the Revised Draft are listed below.
I. Operators’ Responsibility for Product Quality
The Revised Draft reaffirms that producers and sellers are responsible for the quality of the products they produce and sell, and adds the operators’ responsibility for product quality, namely, “the operators should comply with the product-related laws, regulations, and rules, be honesty and self-discipline, and accept social supervision and assume social responsibility” (Article 4).
The Revised Draft specifies that producers and sellers should establish and improve the internal product quality and safety management system, arrange suitable quality management professionals to implement quality and safety control and ensure product quality and safety. (Article 11)
Based on the Current Law, the Revised Draft further clarifies product quality labeling obligations - Products or their packaging quality marking should be true, clear, and marked in Chinese the following information: 1) product quality inspection certificate of conformity, certificate of conformity information can be contained electronically; 2) the name of the product, the producer’s name and address of the producer, the date of production, contact information and the actual place of production information, the implementation of product standards number; 3) the name and content of the main ingredients contained in the content should be marked, if needed according to the characteristics of the product and the use of requirements; those needing to let the consumer know in advance should be marked on the packaging, or provide consumers with relevant information in advance through other means; 4) for the products with limited use, the safe use period or expiration date should be clearly marked in a prominent position; 5) if the improper use of the products is likely to cause damage to the product itself or may endanger the safety of persons and property, the use of the product safety precautions, warning signs or warning instructions should be clearly indicated in a prominent position; 6) for the products under the management of licensing or compulsory product certification management, the appropriate quality mark, certificate number or license code should be marked; 7) Others that should be labeled according to the relevant national regulations. Imported products, in addition to 3), 4) and 5) above, should also be marked with the product name, origin, the domestic importer’s name, address and contact information. (Article 14)
II. Product Quality and Safety Incident Reporting and Defective Product Recall
Despite the existence of specific product recall regulations, the new law, as a superior law, refers to the relevant contents in general terms. Producers should report accident information to the market supervision and management department of the provincial people's government where the accident occurred, within two days after being informed of accidents such as personal injury or death, major illnesses and large property damage during the use of the product. Sellers and other operators, if finding that an accident in the products they operate occurs, shall promptly inform the produce, and at the same time report the accident information to the market supervision and administration department of the provincial people’s government where the accident occurs. Producers should carry out timely investigation of the accident, and report the accident investigation report within seven working days from the date when the accident information is reported. (Article 16)
If defects are common in products of the same batch, model or category due to design, manufacturing, or warnings, the producer shall stop production, report to the market supervision and administration department, notify consumers and relevant operators, and proactively implement recalls. Relevant operators should stop business operations involving the defective products and assist producers in implementing defective product recalls. (Article 17)
Further, the Revised Draft adds such provisions that operators engaged in the production, sales, storage, transportation and use of products for related services with major quality and safety risks shall establish a product quality and safety traceability system to ensure that the entire product process is traceable, and that producers and sellers are not allowed to forge or use quality marks or certificates such as access licenses, certifications, energy efficiency labels, and water efficiency labels. (Articles 18 and 19)At the government level, the Revised Draft states that the SAMR at or above the provincial level may organize, or entrust the lower level to organize defective product investigations on products that may have defects found in quality and safety risk monitoring, injury monitoring, supervisory spot checks, supervisory inspections, and quality and safety accident reports. If a defective product is found to be defective after investigation, the market supervision and management department shall notify the manufacturer of the recall. (Articles 39 and 40)
III. Producers and Sellers’ Quality Obligations
The Revised Draft further refines the quality obligations of producers and adds sellers’ obligation to label products sold on the Internet. Producers should establish a product quality management system and truthfully record the incoming inspection and acceptance of raw and auxiliary materials and parts, and product sale. The record retention period shall be no less than two years, and the record retention period of products with limited use shall be no less than Six months after expiry of safe use period. And producers should inspect their products for sale in accordance with relevant standards. Sellers of products sold through the Internet and other information networks should also show the product identification information, license or compulsory product certification in the product sales pages. (Articles 21, 22 and 27)
IV. Other Operators’ Quality Obligations
The Revised Draft adds quality obligations for other operators, including product storage and transportation operators, e-commerce third-party platform service providers, offline third-party operators, and service providers. For example, E-commerce third-party platform service providers shall require the platform network sellers to submit their identity, address, contact information, administrative licenses and other real information, verification, registration, the establishment of registration files, and regular verification and updating. If they find that online sellers on the platform have violated the provisions of this Law, they shall stop them in a timely manner, immediately report to the local SAMR, and cooperate in the investigation and disposal. (Articles 28, 29, 30 and 31)
V. Product Quality Supervision
The Revised Draft extends the current Law in the product quality supervision and sampling system, and further refine the enforcement authority. The SAMR at or above the county level may exercise the following powers when investigating or dealing with acts suspected of violating the provisions of this law: 1) conduct on-site inspections of parties suspected of engaging in business activities that violate this law and their related places; 2) investigate and learn from the legal representative, actual controller and other relevant entities and personnel of the parties concerned about the situation related to business activities suspected of violating this law; 3) check and copy the relevant bank accounts, contracts, bills, account books and other relevant information of the parties; 4) order operators not to transfer, conceal, or destroy products that may have defects or other quality problems; 5) seize or detain the products that are reasonably believed to be incompatible with mandatory standards for protecting personal and property safety, products that do not meet licensing or compulsory product certification management requirements, products with other serious quality problems, and the raw and auxiliary materials, packaging and production tools that are directly used in the production and sale of the product; and 6) seize the places suspected of engaging in illegal business activities. (Articles 35 -41)
The Revised Draft also adds the provisions on “interview” - if the SAMR at or above the county level determines that there are potential product quality and safety hazards in the production and sales process of the product, it may conduct interviews with the legal representatives or actual controllers of product producers, sellers, and other operators. The person being interviewed should take immediate measures to make rectifications and eliminate hidden dangers. Further, if a local government fails to perform its product quality and safety duties and there are regional major product quality and safety hazards, the market supervision and management department of the higher-level government may interview the person in charge of the lower-level local people's government. The local government being interviewed should immediately take measures to make rectifications. (Articles 44 and 45)
Regarding the complaint and reporting system, the Revised Draft stipulates that any organization or individual has the right to complain and report violations of product quality laws. The SAMR at or above the county level shall announce the channels for accepting consultations, complaints, and reports, and handle them in a timely manner. (Article 47)
Regarding the safety requirements for imported and exported products, the Revised Draft stipulates that products that do not meet the quality and safety requirements of this law, or that have been determined by the market supervision and administration department of the State Council and the entry and exit customs supervision and administration authority of the State Council to have evidence proving that there is an unreasonable risk endangering the safety of people and property, shall not be imported, and that export products should meet the requirements for personal and property safety and comply with the relevant laws, administrative regulations and contractual agreements of the importing country. (Article 48)
Further, The Revised Draft adds a chapter on quality supervision of special consumer products used by special groups such as children, pregnant and lactating women, the elderly, and the disabled. Before these special products enter the market, producers should analyze and evaluate their safety risks. Children’s products in the catalog must be inspected by a legally qualified third-party product quality inspection and testing agency before they can be sold. Manufacturers of children’s products are also required to clearly indicate “children’s products” and the applicable age range on the products or their packaging, and mark the product model and batch. (Articles 49 - 53)
VI. Compensation for Damages
The Revised Draft separately enumerates liability for product quality breach of contract, liability for repair, replacement and return, and tort liability for defective products. (Articles 70, 71, 72) Regarding the seller’s liability for compensation, according to Article 73 of the Revised Draft, as long as the seller commits the following acts, it shall be liable for compensation, regardless of whether it causes losses to consumers: 1) selling expired or spoiled products; (2) intentionally delaying or unreasonably refusing the consumers’ request for repair, rework, replacement, return, replenishment of product quantity, refund of payment and service fees, or compensation for losses. If a product is found to be defective after it is put into circulation, and the producer or seller fails to take remedial measures in a timely manner or the remedial measures are ineffective, causing the damage to be expanded, the producer or seller shall bear tort liability for the expanded damage. (Article 74)
Victims whose personal or property safety is endangered due to product defects may exercise a prior relief under the Revised Draft, by requesting producers and/or sellers to stop the infringement, remove obstacles, and eliminate dangers. (Article 76)
The Revised Draft also increases the provisions on the joint and several liability of e-commerce third-party platform service providers, product quality inspection and testing agencies, and certification agencies. (Articles 77 and 78)
VII. Punitive Damages
It is particularly noteworthy that the Revised Draft adds provisions for punitive damages. According to Article 79, if a producer or seller knows that a product is defective but still produces or sells it, or if a defect is discovered after the product is put into circulation and fails to take effective remedial measures in accordance with the law, causing death or serious damage to the health of others, the victim has the right to request compensation for the loss and has the right to ask for punitive damages of less than twice the loss suffered.
For violations of quality safety obligations, in addition to being ordered to stop production and sales and confiscated illegal products/income, producers and sellers will be imposed a fine up to five times the value of the illegally produced or sold products – under the Current Law, it is a fine up to three times the value of the illegally products. If the circumstances are serious, a fine of not less than five times but not more than ten times the value of the illegally products may be imposed, or the licenses may be de-registered. The legal representative and actual controller may be fined not less than RMB 50,000 but not more than RMB 100,000 – the Current Law does not cover fines in serious cases. (Article 83)
For violation of general quality obligations or product quality labeling obligations, producers and sellers will be fined not less than 50% but not more than three times the value of the products they illegally produce or sell, and in serious cases, a fine of not less than three times but not more than five times the value of the goods shall be imposed. (Articles 84 and 86)
Further, the Revised Draft also lists respective penalties for violating prohibited production and sales behaviors, violating product quality and safety accident reporting obligations, violating product quality obligations of e-commerce third-party platform service providers, violating product quality obligations of offline third-party operators, violating defective product recall obligations, and so on. (Articles 85, 87, 88, 89, 90)
The Revised Draft demonstrates the authority’s emphasis on product quality. By refining, improving and expanding the existing legal provisions, the Revised Draft has increased the number of subjects responsible for product quality, greatly strengthened supervision and punishment, and better kept pace with the times. The revision of the Product Quality Law has been included in the legislative plan of the 14th National People’s Congress Standing Committee, and we could expect the new law to take effect within next year.