Recently Guangdong Provincial Administration of Industry and Commerce (“Guangdong AIC”), a local administrative authority supervising business operations in its territory in China, revealed a list of jewelry manufacturers and distributors selling defective jewelry products in 2012. Some of internationally reputable jewel brands appeared on the list for non-compliance with Chinese labeling laws, regulations or standards, or for incorrect or improper engraving and/or labeling practices. As a result, Guangdong AIC slapped a large amount of fines on those companies and ordered them to recall all the defective products from the market. This exhibits how improper labeling has affected sale of products in China.
Product labeling is an element of product quality governed by the PRC Product Quality Law. If any manufacturer or distributor operating in China fails to comply with labeling rules of law, they may face in some cases serious sanctions such as discontinuance of sale, a fine up to 30 percent of the value of the products illegally produced or sold, and even confiscation of all illegal gains.
However, it is by no means an easy task to comply with PRC labeling rules of law. For a given imported jewelry product, the overseas manufacturer or the importing distributor will be very likely at a loss when confronted with a set of inconsistent national laws and regulations, local regulations, mandatory and recommendatory standards of both national and local levels that may be relevant to labeling of the same product. The company will be puzzled at a compliance solution to solve the problems of different provisions of different local regulations and different standards, and stunned to find itself in a failure to comply with a mandatory labeling provision hidden in a recommendatory local standard. This is a difficult situation, but it is the reality in daily labeling compliance work in China.
Ambiguity often exits in product standards as to how to effect the labeling requirements. The drafters of those standards are mostly technicians who barely know the business practice, and in some industries, the rapid development and great diversity of the products just leave the correspondent standard obsolete and out of date, which inevitably leads to the practical difficulties in compliance.
Jewelry watch may be a pertinent instance of the compliance difficulty. The jewelry watch is normally not treated as jewelry in practice, as watch is governed by a recommendatory industrial standard specifically for such jewelry watches. However, a mandatory national standard directing at jewelry mentions watch as well, only for the purpose of safety though, whereby the applicability of such two standards becomes a difficult issue.
The drafters of the mandatory national standard and the recommendatory industrial standard from two different standardization commissions fail to draw a distinct boundary between jewelry and watch but afford different labeling requirements for them. In absence of appropriate interaction and coordination, they both failed to give any solution but announced that their respective standard shall apply. Even the enforcing authorities are not clear about the answer. If the importer follows some labeling requirements which are against the customary business practice, certain products would look more like average goods rather than luxuries. Considering all the problems as a whole and given particulars of the jewelry watch in question, HaoLiWen advised the client in such way so that the conflicting requirements are solved with minimum risks.
Facing the dilemma of jewelry watch, the importer certainly needs legal advice. Given the legal difficult outline above, it may be dangerous to seek advice from a lawyer who only literally reads the laws and standards. A good lawyer advising on labeling matter must have the following qualities:
- He must know the history of how the labeling laws and standards are developed in China;
- He must know how the Chinese authorities implement such laws and standards;
- He must how the Chinese courts would interpret such laws and standards;
- He must know what is the labeling practice of a given industry;
- He must be able to identify and assess the risks in this respect;
- He must be able to give a practical compliance solution to make it easier to the business.
In summary, given the complexity of labeling regime and the serious liabilities for incompliance, only seasoned lawyers with extensive experience in both advisory and litigation practices in China can afford trust from client in advising labeling issues for imported and domestically made products.