CHINA Law and Practice Contributed by: Yue Dai, Zhenghao Li and Xiaokun Yuan, King & Wood Mallesons
In addition, if the manufacturer or seller know - ingly continues to manufacture or sell a defec - tive product, or fails to take effective remedial measures, and the defect results in death or seri - ous damage to the health of another person, the manufacturer or seller will be liable for punitive compensation. Such punitive compensation will be determined by the court on a case-by-case basis. Administrative Liability The regulatory government authorities may impose administrative sanctions on manufac - turers and sellers when their product fails to conform to product safety standards, including by requesting rectification of defect, imposing fines, ceasing the operation, and revoking the business licence. In addition, the manufacturer and seller might also be subject to administrative penalties if they do not perform their product recall obligations. For example, where an automobile manufacturer breaches the Administrative Regulations on the Recall of Defective Automotive Products by fail - ing to stop manufacturing the products, selling or importing defective auto products, withhold - ing information about the defects or refusing to implement a recall as ordered, the regula - tory authorities may order it to make correction, impose a fine of 1–10% of the monetary value of the defective products, and confiscate any illegal gains. Criminal Liability If the products are found to have caused death, serious personal injury, or serious property dam - age, the responsible manufacturers and sellers may be criminally liable. For example, in one criminal case, the defendant was sentenced to a fixed term of imprisonment of 12 years and ordered to compensate for medical fees, nurs -
ing fees, funeral expenses and other costs of the victim’s family for knowingly selling counterfeit medicines, which caused the death of the vic - tim (see Case (2018) Liao 02 Xing Chu No 59, decided by Dalian Intermediate People’s Court, Liaoning Province). 2. Product Liability 2.1 Product Liability Causes of Action and Sources of Law Causes of Action Flaws in the product itself Firstly, a buyer can bring a claim in respect of flaws in a product where the flaw poses no safe - ty risk and has not caused any losses beyond the product itself. Under Chinese laws, a product must conform to the quality standards or speci - fications as presented by the manufacturer and seller. The buyer (or consumer) can claim against the seller for repair, replacement or return, and for any further damages caused, if a product falls within one of the following categories: • the product does not have the properties required for use and the buyer (or con - sumer) has not been informed of the flaws in advance; • the product quality does not conform to the standards specified on the product or its packaging; or • the product does not meet the quality stated in the instructions for use or demonstrated via samples provided. It should be noted that a claim based on such flaws is, by nature, a contractual claim since it arises from the seller breaching the contract by selling products that fail to meet the quality standards agreed upon by the parties.
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