A new law covering automotive recalls in China comes into force on 1 January 2013, as part of the Chinese government’s moves to increase consumer protection. Whilst the regulations increase the obligations for manufacturers in terms of quality control and documentation, the new rules are also likely to create unanticipated disputes within the Chinese market.
In addition to re-defining ‘manufacturers’ and ‘defects’, the new automotive recall law broadens the definition of ‘complainants’ to include any organisation or individual, not just the owner or driver of an automobile. Under the new law, any organisation or individual will be able to complain about possible defects in automotive products to AQSIQ (State Administration of Quality Supervision, Inspection and Quarantine). There is no requirement for the complainant to prove that he or she is the vehicle owner, as under the current provisions.
Risks of abuse are evident, especially in China where the government at all levels tends to interfere in private business. Manufacturers could expect to see a range of complaints from bodies without a genuine liability problem, who are motivated to disrupt competition in the market and protect local brands.
Automotive manufacturers and suppliers need to understand their obligations under the regulations and adjust their operations in China accordingly, especially the focus on quality control. Considering the possibility that the new complainant rights may be abused, foreign vehicle manufacturers should consider co-operating to promote a revision of the regulations in this matter.
From 2013, manufacturers will be defined as being only Chinese automotive manufacturers and importers of foreign cars into China. Foreign manufacturers will now be excluded from recall liability in China. The intention here is to ensure that importers of foreign vehicles will not be able to shift the recall responsibility back onto foreign manufacturers in the future.
Although foreign manufacturers will welcome the fact that they are now legally excluded from the recall obligations, this does not mean that they can forget about recalls in China. In practice, the foreign mother company will still need to provide full support to their own importers and their localised manufacturing companies.
The new definition of ‘defect’ includes the design, manufacture, marks or other reasons where automotive products of the same batch, model or category have universally unreasonable hazards which endanger personal or property safety. Previously, cars meeting relevant national and industrial standards have not been considered as ‘defective’, even if they may pose a hazard to personal safety and property. The new recall law has expanded the scope of the definition of a defect to include those cases in which standards are met but where the product may still present unreasonable hazards. This will have implications for quality control procedures.
The new obligations extend the amount of information that shall be preserved for no less than ten years. The Chinese manufacturer or the importer must also submit essential information, technical statistics of auto products and any recall history outside China to AQSIQ. Foreign vehicles with a recall history in or out of China are very likely to be recalled upon the order of AQSIQ.
Demonstrating the seriousness of the Chinese government’s intentions, new and more severe punishments will be introduced for violations of the recall law. Among others, severe penalties of up to US$1.6m are foreseen for any ‘manufacturer’ which fails to conduct a recall according to the regulations or refuses to conduct a recall.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Dr. Paolo Beconcini is a Partner at CBM International Lawyers. He specialises in intellectual property and product liability law and has worked for many leading automotive brands. Now based in Beijing with CBM Lawyers International, Beconcini has been working in China for over 11 years.
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