Product safety and liability

Safety and environmental

What are the most relevant automotive-related product compliance safety and environmental regulations, and how are they enforced? Are there specific rules for product recalls?

Automobiles and automotive-related products are among the most highly regulated in China’s product quality/liability regime. As briefly mentioned above, CCC must be secured before whole vehicles and applicable automobile parts (either domestically manufactured or imported) can be sold in the Chinese market. Under the current version of the CCC Catalogue, promulgated by China’s Certification and Accreditation Administration (CNCA), whole vehicles including passenger cars, trucks, trailers and motorcycles, and components including tyres, vehicle windows, rear-view mirrors, safety belts, seats and door locks, all require CCC prior to sale in China. CCC-related regulations are actively enforced by the CNCA. Manufacturers securing CCC must apply CCC marks to their products (including applicable modifications) and are subject to routine CNCA inspections once a year.

For whole vehicles, however, CCC is only the first regulatory step before entering into the market. For consumers to be able to actually drive the cars on the road, the products must also receive emissions type approvals per standards set by the Ministry of Environmental Protection as well as its local and regional counterparts. As vehicle emissions are regarded as a major contributor to China’s air pollution situation, China has recently taken action to strengthen its vehicle emissions standards. From July 1 2020, all motor vehicles imported into, distributed and registered in China shall comply with the Stage VI motor vehicle emissions standards, replacing the previous Stage V motor vehicle emissions standards implemented in 2018. Moreover, for diesel fuelled heavy-duty vehicles Stage VI will be applicable on 1 July 2019, one year ahead of other types of vehicles. It is worth noting that the timeline above is of national standard, while local governments have discretion to move up the date. Guangzhou and Shenzhen, for example, will enforce the Stage VI standard in 2019.

Apart from the above, manufacturers, sellers, and other parties in the distribution chain - such as the parties that provide transportation, warehouse services, and repair and maintenance to automotive products, among others - are also subject to various post-sale product quality and safety monitoring and reporting obligations pursuant to the Product Quality Law, the Consumers’ Interests and Rights Protection Law, and the Tort Law of China. If a product is determined to contain a defect, the laws require primarily that manufacturers, or their domestic importers if the car is foreign-made, conduct a public recall, pursuant to guidelines and procedures set up in the Regulations for the Administration of Recalls of Defective Automotive Products (the Recall Regulations) and the implementing rules of the Recall Regulations. The Recall Regulations cover both motor vehicles and trailers and apply to automobiles produced or sold in China only. The requirement to recall is triggered when automotive products contain a defect, defined as a situation where the products are determined to contain unreasonable risks endangering personal and property safety, or when the products fail to comply with mandatory national or industrial standards that safeguard personal and property safety. Under the Recall Regulations, manufacturers are also required to promptly evaluate and investigate potential defects when they become known, and SAMR will also notify the manufacturers about potential defects when it becomes aware of them through reports or its own investigation. Manufacturers or operators in the distribution chain refusing to cooperate with SAMR during the defects investigation and recall process will be subject to penalties, and automotive manufacturing permits may be revoked in serious circumstances. Moreover, Circular issued by SAMR on 15 March 2019 emphasises the safety issue for NEVs, which requires the manufacturers to report any accident of its manufactured, sold or imported NEV in connection of collision or fire.

Product liability and recall

Describe the significance of product liability law, and any key issues specifically relevant to the automotive industry. How relevant are class actions or other consumer litigation in product liability, product recall cases, or other contexts relating to the automotive industry?

The Contract Law, the Product Quality Law, the Consumers’ Interests and Rights Protection Law, and the Tort Law of China are the primary pieces of legislation setting out the bases for product liability in civil law cases, which generally are divided into contract actions and tort actions. A potential breach of contract claim exists between a consumer and the party that directly sells the automotive product to him or her. By comparison, a tort cause of action can be asserted by anyone who has allegedly been injured by a defective product against any party in the distribution chain that allegedly caused the damage. In particularly serious product liability cases, the state may also pursue criminal charges pursuant to the Criminal Law of China.

Chinese civil procedure recognises a ‘joint action’ or ‘representative action’, but this is substantially different from a US-style class action. A Chinese joint action allows for more than one claimant who shares the same legal relationship against the defendant or defendants. The court’s judgment in such a case applies only to those expressly serving as parties in the case, not all similarly situated litigants. Moreover, we are not aware of a joint or representative action ever being used in China for a large-scale litigation; nor are they typically used for consumer or product liability litigation.

Apart from this, the 2013 amendments to the Civil Procedure Law also allow qualified parties, such as national or provincial-level consumer interests and rights protection organisations, to represent groups of consumers in ‘public interest litigation’ against defendants of product defect claims. In practice, neither joint actions nor public interest actions for automotive product defects are seen commonly. Mass consumer claims are primarily resolved through public recall actions under the supervision of the Chinese government, or are filed against manufacturers and sellers on a case-by-case basis.