China's Proposed Regulation Would Mandate Recall Procedures
The Legislative Office of the State Council of the People’s Republic of China (“China”) recently announced a rulemaking entitled “Management Regulation on Defective Product Recall (Draft for Review)” (“draft law” or “Regulation”). The Legislative Office is currently seeking comments on the draft law which will be accepted through May 26, 2009. Comments can be provided to the Legislative Office via post, direct to the government website, or by email using the following contact information:
- by the Legislative Office website
- by mail: P.O. Box 1750, Beijing 100017
- by email: email@example.com
This draft law emanates from China’s State Council, which is China’s highest-level executive body. It comes during a time of increased product quality scrutiny and crises management in China. Indeed, Chinese government sensitivity has increased since the 2007 decision to establish in the State Council an ad hoc Leading Group for Inter-agency Coordination focusing on product quality and safety issues. China’s Administration for Quality Supervision, Inspection and Quarantine (AQSIQ), which prepared this draft law, serves as the Secretariat for the Leading Group. The Leading Group convened a number of sub-groups focusing on particular product quality issues, such as food quality.
The establishment of the Leading Group helped coordinate government efforts addressing product quality, and likely highlighted the need for comprehensive legal measures on product recalls. Until issuance of this Regulation, Chinese laws governing product recalls focused on specific product areas, such as:
- AQSIQ Management Regulations on Recall of Child Toys (August 27, 2007)
- AQSIQ Management Regulations on Recall of Food (August 27, 2007)
- State Food and Drug Administration (SFDA) (draft) Management Regulations on Recall of Medicine (in draft; no promulgation timeline offered by the Chinese government)
- SFDA (draft) Management Regulations on Recall of Medical Devices (in draft; no promulgation timeline offered by the Chinese government)
To those who have worked with product recall procedures under the U.S. Consumer Products Safety Act, many of the concepts in the Regulation may seem familiar. However, China’s Regulation, while clearly geared to consumer protection, is not expressly limited to “consumer products.” The Regulation applies to recalls of all products, except pharmaceuticals and military products for Chinese government use.
Key provisions in the Regulation are described below.
The Regulation places the responsibility for addressing defective products on the “producer,” which for this purpose means the manufacturer of the product in China or the importer or import agent in the case of products imported into China.
Defective products within the meaning of the Regulation means products that due to design, production, directions, or other factors, pose or may pose consistent and unreasonable harm to the safety of human physical health and life. Specifically, Article 8 states that when any of the following occurs, the producer must organize and undertake product defect studies:
- Having received consumer complaints regarding products [causing] personal physical harm
- Having been made aware of incidents wherein the products have caused human physical harm
- Having been notified by the local quality inspection agency at the provincial level or above regarding the forthcoming study of defects
- Where the producer is of the opinion that defects may be present in the product that are relevant to the safety of human physical health and life
- Where the producer has been made aware of the potential presence of defects through other means
Depending on the results of the defect study, the producers must warn, amend or correct consumer directions, or retrieve, return, exchange, repair, or destroy products to prevent, control and eliminate the damage or harm that may be caused by the defective product.
The recall procedures outlined in the Regulation address both voluntary and mandatory recalls.
Report and Disclosure
Producers must disclose to quality inspection authorities the hazards of the defective product, the details of the risk to people’s health and safety, damage or accidents that have been caused by the product, and defects that have been identified outside of China. The producer of the defective product must develop a recall plan designed to eliminate the damage or harm that may be posed by the defective product. The producer’s plan, for either a voluntary or mandatory recall, must be submitted to the quality department within five (5) days of the plan’s implementation. Producers must also report to the relevant quality inspection authorities regarding the progress of recall plan implementation during the recall period.
The Regulation sets forth the following elements that should be included in the recall plan:
- the type of defect present in the product that may pertain to the safety of human physical health and life, the causes, population that may be potentially affected, the degree of severity and the degree of urgency
- the specific method, scope and term, etc. of the recall measures to be taken pursuant to Article 16 of this Regulation
- the organizing agency that will implement the plan and its contact method
- the plan to notify consumers, distributors, and service industry operators
- the disposal measures after the defective products are recalled
- the anticipated results of the recall
Voluntary recall plans are to be filed with the relevant local quality inspection authorities within 5 business days of the recall plan’s implementation date. The producer is required to implement a mandatory recall plans within two business days of receiving notification from the national quality inspection authority of approval of such a plan.
Mandatory Recall Notice
If AQSIQ or the relevant local quality department determine that a producer should have instituted a voluntary recall and has not, where the authorities determine that the producer has deliberately concealed a product defect that threatens human safety and health, or where these authorities determine that the product defect in question has expanded or continues, these authorities may issue a notice of mandatory recall or take other appropriate measures to rectify the product defect in question. The producer must then notify consumers, and submit and implement a recall plan consistent with the plan outlined above.
Under the Regulation, violators of the Regulation will be issued a warning or asked to rectify the problem within a given period. Producers failing to comply with the warning may be fined (50,000 Yuan to 500,000 Yuan or approximately US $7,327 – $73,276) or punished under Chinese criminal law. Alternatively, if a producer refuses to eliminate the defect, the proposal calls for damages equal to three times the value of the defective products/goods. If the defect has caused damage to the consumer, the Regulation also calls for the producer to provide compensatory damages to make the consumer whole.
Producers have the opportunity to help shape the recall requirements in China and should submit comments and suggestions to the Legislative Office of China’s State Council on China’s AQSIQ by May 26, 2009. Holland & Knight looks forward to assisting our clients to submit comments and helping to shape the recall law in China.