Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. China has addressed product liability issues through two primary related laws, namely the Product Quality Law, issued in 1993 and amended in 2000, and the Tort Liability Law, issued in 2009. The Product Quality Law states that products must be free from unreasonable dangers, conform to product quality standards and contain the necessary warnings to prevent damages. The Tort Liability Law unifies the product liability law framework, defining when producers or sellers are held responsible for damages arising from a failure to live up to an obligation, as well as extending such damages to include the punitive.
Product liability arises when a defective product is placed on the market, wherein a defect gives rise to damage to a person or property. The following three preconditions must be fulfilled for product liability to occur:
- Defective product; where the product does not comply with a national or industrial health and safety standard, or, if such standards do not exist, where an excessive or unreasonable risk to people or property derives from the product. Design error, production error and incorrect or insufficient information are the three types of legally defined deficiency.
- Damage; personal injury or property damage according to the Product Quality Law.
- Causality between defect and damage; where damage comes from the defective product. The burden of proof is firstly on the party claiming damages and then on the producer and seller to prove their defense.
Therefore, producer and retailer have to assume joint liability for a defective product, which means an injured party can pursue a claim against either, or both of them. Additionally, if the retailer ultimately pays the damages to an injured party but the producer is responsible for the defective product, the retailer may then pursue the producer to recover its losses.
The Tort Liability Law imposes an obligation to retailers to supervise products after they have been put into circulation. Once the deficiency is discovered, retailers are obligated to take remedy measures, such as product warnings or recall.
Understanding product liability framework is crucial for foreign businesses in China, not only for companies manufacturing and selling products, but also for companies in the distribution chain and companies permitted to use their name, trademark or other distinguishing mark on the defective product. Such companies should allocate sufficient resources towards monitoring product quality and establishing effective product distribution channels to mitigate the risk of such liability arising. They should in addition have plans to manage product recall, liability litigation and a potential public relations crisis.
This article is intended solely for informational purposes and does not constitute legal advice. Although the information in this article was obtained from reliable official sources, no guarantee is made with regard to its accuracy and completeness. For more information please visit dandreapartners.com or WeChat: dandreapartners.
