Product Quality Law of the People’s Republic of China
August 25, 2009
Contents
Chapter I General Provisions
Chapter II Product Quality Supervision
Chapter III Producer’s and Seller’s Liability and Commitment for Product Quality
Section 1 Producer’s Liability and Commitment for Product Quality
Section 2 Seller’s Liability and Commitment for Product Quality
Chapter IV Liability for Damage
Chapter V Penalty Provisions
Chapter VI Final Provisions
Chapter I General Provisions
Article 1
For the purposes of strengthening product quality supervision and control, raising the product quality level, clarifying the liability for product quality, protecting the legitimate rights and interests of consumers and safeguarding the socio-economic order, this Law is formulated.
Article 2
The engagement in production or sale activities of products in the territory of the People’s Republic of China must comply with this Law.
For the purposes of this Law, product means the product which is processed or manufactured for sale.
The provisions of this Law are not applicable to construction projects; however, the provisions of this Law are applicable to materials, component parts and equipment for construction projects if they lie to the range of product within the meaning of the preceding paragraph.
Article 3
Every producer or seller shall establish and amplify his internal product quality management system and implement the job quality specifications, quality liability and connected assessment measures strictly.
Article 4
Producers and sellers assumes the liability for product quality pursuant to the provisions of this Law.
Article 5
It is forbidden to forge or to use illegally quality marks such as the certification mark; it is forbidden to forge the place of production of a product or to forge or to use illegally the factory name or address of another person; and it is forbidden to mix impurities or fakes into products produced or sold or to pass the fake product off as the genuine one or the shoddy product off as the high-quality one.
Article 6
The State encourages the practice of scientific quality management methods and the employment of advanced science and technology, and encourages the enterprises’ product quality coming up to or exceeding the sector, national and international standards.
Units and individuals having advanced product quality management, internationally advanced product quality and outstanding achievements are rewarded and praised.
Article 7
People’s governments at all levels shall incorporate the product quality improvement into the national economic and social development plan, strengthen the overall planning, organizing and leadership of the product quality work, guide and urge producers and sellers to strengthen their product quality management and to improve their product quality, organize all relevant departments to take measures according to law and to prevent the acts of violating this Law in the production and sale of products, and ensure the operation of this Law.
Article 8
The State Council’s supervisory department for product quality is in charge of the product quality supervision work throughout the country. Relevant departments of the State Council are responsible for the product quality supervision work within their respective spheres of responsibility and authority.
Local supervisory departments for product quality at or above the county level are in charge of the product quality supervision work within their respective administrative areas. Relevant departments of local people’s governments at or above the county level are responsible for the product quality supervision work within their respective spheres of responsibility and authority.
If any other law provides otherwise on the supervisory department for product quality, the provisions of the said law govern.
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Article 9
No servant of people’s governments and other State organs at all levels may abuse their powers of office, neglect their duties or practice favoritism or irregularities for shielding or tolerating the acts of violating the provisions of this Law in the production or sale of products within their respective areas or sectors or obstructing or intervening in the investigation and punishment into the acts of violating the provisions of this Law in the production and sale of products.
If the local people’s government at any level or any other State organ has an act of shielding or tolerating the violation of the provisions of this Law in the production or sale of a product, its principal responsible person is demanded for legal liability according to law.
Article 10
Any unit or individual is entitled to report an act of violating the provisions of this Law to the supervisory department for product quality or any other relevant department.
Supervisory departments for product quality and relevant departments shall keep confidential for reporters and give rewards and praises thereto according to the provisions of provinces, autonomous regions and municipalities directly under the Central Government.
Article 11
No unit or individual may refuse a quality-acceptable product produced by an enterprise of non-local area or sector to enter its own area or sector.
Chapter II Product Quality Supervision
Article 12
The product quality shall be inspected and acceptable, and the nonconforming product may not be passed off as the acceptable product.
Article 13
Industrial products which might endanger the health and personal or property safety must comply with the national or sector standards for safeguarding the health and personal or property safety; and in case of absence of such national or sector standards, they must comply with the requirements for safeguarding the health and personal or property safety.
It is forbidden to produce or to sell industrial products which fail to comply with the standards and requirements for safeguarding the health and personal or property safety. The concrete measures therefor are provided by the State Council.
Article 14
The State practices the enterprise quality system certification according to the internationally used quality management standards. Pursuant to the principle of its own accord, an enterprise may apply for the enterprise quality system certification to a certifying body approved by the State Council’s supervisory department for product quality or by its authorized department. If an enterprise passes the certification, the certifying body issues a document of enterprise quality system certification thereto.
The State practices the product quality certification system by reference to the internationally advanced product standards and technical requirements. Pursuant to the principle of its own accord, an enterprise may apply for the product quality certification to a certifying body approved by the State Council’s supervisory department for product quality or by its authorized department. If the enterprise passes the certification, the certifying body issues a document of product quality certification thereto and the enterprise is allowed to put the product quality certification mark on its products or packages.
Article 15
The State adopts the supervisory inspection system for product quality with the spot check as its main form and imposes the spot check on the products which might endanger the health and personal or property safety, the key industrial products which have a bearing on the national economy and the people’s livelihood and the products of which quality problems are reported by consumers or interested organizations. Samples therefor shall be taken randomly from the products ready for sale in the market or in the enterprise’s finished products warehouse. The supervisory spot check work is planned and organized by the State Council’s supervisory department for product quality. Local supervisory departments for product quality at or above the county level may also organize the supervisory spot check within their respective administrative areas. If any other law provides otherwise on the supervisory inspection over product quality, the provisions of the said law govern.
If the State imposes the supervisory spot check on a product, the locality may not make a repeated spot check separately thereon; and if the superior department imposes the supervisory spot check on a product, the lower department may not make a repeated spot check separately thereon.
Products may be inspected as required by the supervisory spot check. The number of samples taken for such inspection may not exceed the reasonable demand therefor, and no inspection expense may be collected from the party being inspected. Inspection expenses needed by the supervisory spot check are recorded and paid according to the State Council’s provisions.
A producer or seller disagreeing with the inspection result in the sport check may, within 15 days from the day of receiving the inspection result, apply for a re-inspection to the supervisory department for product quality which makes the supervisory spot check or to its superior supervisory department for product quality, and the supervisory department for product quality which accepts the re-inspection application gives a re-inspection conclusion.
Article 16
No producer or seller may refuse the supervisory inspection imposed on the product quality according to law.
Article 17
If the quality of a product fails to pass the supervisory spot check imposed according to the provisions of this Law, the supervisory department for product quality which imposes the supervisory spot check orders the producer or seller to make corrections within a given time limit. If he fails to do so as scheduled, the supervisory department for product quality of the people’s government at or above the provincial level issues a public announcement; if the quality fails to pass the re-inspection after announcement, he is ordered to suspend for rectification within a given time limit; and if the quality still fails to pass the re-inspection at the expiry of the given time limit, his business license is revoked.
If a product has a serious quality problem through the supervisory spot check, punishment is given according to the relevant provisions of Chapter V of this Law.
Article 18
When a supervisory department for product quality at or above the county level investigates and punishes an act suspected of violating the provisions of this Law depending on the evidences of the suspected violation already obtained or reports received, it may perform the following duties and powers:
1. to carry out on-the-spot inspection over the site where the party concerned suspected of engaging in production and sale activities of violating this Law;
2. to investigate into and inquire about the production and sale situation suspected of violating this Law from the legal representatives and principal responsible persons of the party concerned and other related persons;
3. to consult and duplicate relevant contracts, invoices, books and other related materials of the party concerned; and
4. to seal up or detain those products which are considered, based on the evidences, nonconforming to the national or sector standards for safeguarding the heath and personal or property safety, products which have other serious quality problems as well as raw materials, auxiliary materials, packaging materials and means of production directly used for the production and sale of the said product.
When investigating and punishing an act suspected of violating the provisions of this Law according to the spheres of responsibility and authority defined by the State Council, the administrative department for industry and commerce at or above the county level may perform the duties and powers set forth in the preceding paragraph.
Article 19
A product quality inspection body must have required inspection facilities and capability and can engage in the product quality inspection work only after it passes the examination from the supervisory department for product quality of the people’s government at or above the provincial level or its authorized department. If any other law or administrative regulations provide otherwise on the product quality inspection body, the provisions of the said law or administrative regulations govern.
Article 20
All social intermediary agencies engaging in product quality inspection or certification must be established according to law and may not have a subordination relationship or any other interest relationship with any administrative organ or any other State organ.
Article 21
Product quality inspection or certifying bodies must, in accordance with relevant standards, objectively and fairly produce inspection results or certification documents according to law.
Product quality certifying bodies shall, in accordance with the State’s provisions, carry out after-certification tracking inspection on the products allowed to use the certification marks; Any use of certification marks failing to comply with the certification standards shall be demanded for corrections; and if the circumstance is serious, the qualifications for using certification marks are revoked.
Article 22
Consumers have the right to make inquiries to producers and sellers about the product quality; and to make complaints to the supervisory departments for product quality, the administrative departments for industry and commerce and relevant departments. The departments which accept the complaints shall be responsible for handling.
Article 23
Social organizations for protecting the rights and interests of consumers may suggest to the relevant departments to handle the matters concerning the product quality reported by consumers, and support consumers in bringing suits before people’s courts on the damage caused by the product quality.
Article 24
The supervisory departments for product quality of the State Council and the people’s governments of provinces, autonomous regions and municipalities directly under the Central Government shall periodically issue public announcements on the quality conditions of products supervised and inspected.
Article 25
The supervisory departments for product quality or other State organs and product quality inspection bodies may not recommend the products of producers to the social public; and may not take part in the product marketing activities under the name of supervisory production or supervisory sale.
Chapter III Producer’s and Seller’s Liability and Commitment for Product Quality
Section 1 Producer’s Liability and Commitment for Product Quality
Article 26
Producers shall be liable for the quality of products they produce.
The quality of a product shall satisfy the following requirements:
1. being free from unreasonable dangers to the personal or property safety, and conforming to the national or sector standards for safeguarding the health and personal or property safety if such standards are available;
2. possessing the properties and functions for use that they ought to possess, except for those with directions stating the defects in the functions of the product; and
3. conforming to the product standards marked on the product or on the package thereof, and to the quality conditions indicated by way of product directions and physical sample.
Article 27
Every identification on a product or on the package thereof must be authentic and satisfies the following requirements:
1. having the certificate showing that the product has passed quality inspection;
2. having the name of the product and the name and address of the manufacturer factory in Chinese language;
3. having Chinese identification accordingly if it is, in accordance with the characteristics of a product and use requirements, necessary to indicate the specifications and grade of the product, and the name and content of principal components; and when it is necessary for consumers to know in advance, it shall be indicated on the outer package of the product, or relevant materials shall be offered to consumers in advance;
4. having the date of production and the period of safe use or date of invalidity indicated clearly at an obvious place if the use of a product is limited to a certain period; and
5. having a warning mark or warning explanatory words in Chinese language if a product, due to improper use, might cause damage to the product itself or might endanger the personal or property safety.
Food products without package and other primarily packed products that are difficult to be marked because of their characteristics could not be attached with such product identifications.
Article 28
The package quality of dangerous products such as fragile, inflammable, explosive, toxic, corrosive and radioactive products, products that should be kept upright during storage and transportation and other products with special requirements shall satisfy the corresponding requirements, and warning marks or warning explanatory words in Chinese language and matters of attention for storage and transportation are given according to the State’s relevant provisions.
Article 29
No producer may produce a product that has been officially eliminated by the State.
Article 30
No producer may forge the place of production, and may forge or use illegally any other producer’s name or address.
Article 31
No producer may forge or use illegally quality marks such as the certification mark.
Article 32
No producer may, in the production of a product, mix impurities or fakes into the product, substitute the fake product for the genuine one, the shoddy product for the high-quality one, and pass the nonconforming product off as the acceptable one.
Section 2 Seller ??s Liability and Commitment for Product Quality
Article 33
Sellers shall set up and implement the acceptance inspection system when they receive products and examine the quality certificate and other identifications of products.
Article 34
Sellers shall take measures to maintain the quality of products for sale.
Article 35
No seller may sell a product that has already been officially eliminated by the State or an invalid or deteriorated product.
Article 36
The identifications of products being sold by sellers shall comply with the provisions of Article 27 of this Law.
Article 37
No seller may forge the place of production and may forge or use illegally any other producer’s name or address.
Article 38
No seller may forge or use illegally quality marks such as certification mark.
Article 39
No seller may, in the sale of a product, mix impurities or fakes into the product, substitute the fake product for the genuine one, the shoddy product for the high-quality one, or pass the nonconforming product off as the acceptable one.
Chapter IV Liability for Damage
Article 40
A seller shall be liable for repair, replacement or refund if he sells a product under any of the following circumstances; and if the product causes a damage to the consumer, the seller shall be liable therefor:
1. failing to have the usable property the product ought to have and the prior explanations;
2. failing to comply with the product standards indicated on the product or its package; or
3. failing to satisfy the quality conditions indicated by way of product directions or sample.
After the seller fulfilled its liability for repair, replacement, refund or damage in accordance with the provisions of the preceding paragraph and if it lies to the liability of the producer or any other seller who supplies the product (hereinafter cited as the supplier), the seller has the right to seek compensation from the producer or the supplier.
If the seller fails to make the repair, replacement, refund or compensation according to the provisions of the first paragraph, the supervisory department for product quality or the administrative department for industry and commerce orders the said seller to make corrections.
If a sale contract or processing contract concluded between the producers, the sellers or the producer and the seller contains different stipulations, the parties to the contract shall perform according to the stipulations of the contract.
Article 41
If a personal injury or damage to a property other than the defective product itself (hereinafter cited as the other’s property) is caused by the defect of a product, the producer shall be liable for the injury or damage.
The producer is not liable for damage if he can prove any of the following circumstances:
1. The product is not put into circulation;
2. The defect causing the damage did not exist at the time when the product was put into circulation; or
3. The science and technology at the time when the product was put into circulation was at a level incapable of detecting the defect.
Article 42
A seller shall be liable for a personal injury or damage to the other’s property caused by a product’s defect resulted from the fault of the seller.
A seller shall be liable for damage if he can not give the producer or the supplier of the defective product.
Article 43
If the defect of a product causes personal injury or damage to other’s property, the injured or damaged person may claim compensation from the producer of the product or may also claim compensation from the seller of the product. If the compensation lies to the liability of the producer of the product but the seller of the product has made the compensation, the seller of the product has the right to seek the compensation from the producer of the product. If it lies to the liability of the seller of the product but the producer of the product has made the compensation, the producer of the product has the right to seek the compensation from the seller of the product.
Article 44
If the defect of a product causes personal injury to the injured person, the injurer shall compensate for the medical expenses, the nursing fees during the period of treatment and income lost due to the miss of work; if it causes the disability of the injured person, the injurer shall pay the fees for self-aid tools, living allowance, compensation for the disability and the living expenses for the persons the injured person supports; and if it causes the death of the injured person, the injurer shall pay the funeral expenses, the pension for the family of the deceased and the living expenses necessary for the persons supported by the deceased before his death.
If the defect of a product causes damage to the property of the injured person, the injurer shall restore the damaged property to its original state or pay compensation according to the market price. If the injured person suffers other substantial damages therefrom, the injurer shall be liable therefor.
Article 45
The limitation period of action for claiming compensation for damage caused by the defect of a product is two years, counting from the date on which the party concerned knows or should know the infringement of his rights and interests.
The right to claim damages resulting from the defect of a product ceases to exist upon the expiry of a period of ten years from the date on which the defective product causing the damage is delivered to the first consumer, except where the period for safe use clearly indicated has not expired.
Article 46
For the purpose of this Law, defect means the unreasonable danger existing in a product that endangers the personal or other’s property safety; and if national or sector standards for safeguarding the health and personal or property safety are available, it means any unconformity to such standards.
Article 47
If a civil dispute arises from the product quality, the parties concerned may settle it through negotiation or mediation. Should the parties be unwilling to resort to negotiation or mediation or the negotiation or mediation be unsuccessful, they may apply to an arbitration organization for arbitration according to their agreement; and if the parties concerned fail to reach such an arbitration agreement or such agreement is invalid, they may directly initiate an action before a people’s court.
Article 48
The arbitration organization or the people’s court may ask the product quality inspection body set forth in Article 19 of this Law to conduct the related product quality inspection.
Chapter V Penalty Provisions
Article 49
Anyone who produces or sells a product failing to comply with the relevant national or sector standards for safeguarding the health and personal or property safety is ordered to stop the production or sale, is confiscated of the product illegally produced or sold and concurrently is imposed a fine equivalent to but less than three times of the value amount of the product illegally produced or sold (including the product already sold and not yet sold, the same hereinafter); is confiscated of his illegal gains concurrently if any; is revoked his business license if the circumstance is serious; and is demanded for criminal responsibility according to law if a crime is constituted.
Article 50
Anyone who mixes impurities or fakes into a product or passes a fake product off as genuine one, a shoddy product as a high-quality one or a nonconforming product as an acceptable one, is ordered to stop the production or sale, is confiscated of the product illegally produced or sold and concurrently is imposed a fine exceeding 50% but not exceeding three times of the value amount of the product illegally produced or sold; is confiscated of his illegal gains concurrently if any; is revoked his business license if the circumstance is serious; and is demanded for criminal responsibility according to law if a crime is constituted.
Article 51
Anyone who produces a product which is officially eliminated by the State or sells a product which is officially eliminated by the State and stopped sale is ordered to stop the production or sale, is confiscated of the product illegally produced or sold and concurrently is imposed a fine not exceeding the value amount of the product illegally produced or sold; is concurrently confiscated of his illegal gains therefrom if any; and is revoked his business license if the circumstance is serious.
Article 52
Anyone who sells an invalid or a deteriorated product is ordered to stop the sale, is confiscated of the product illegally sold and concurrently is imposed a fine not exceeding two times of the value amount of the product illegally sold; is concurrently confiscated of his illegal gains therefrom if any; is revoked of his business license if the circumstance is serious; and is demanded for criminal responsibility according to law if a crime is constituted.
Article 53
Anyone who forges the place of production of a product, forges or uses illegally the name or address of any other factory, forges or uses illegally quality marks such as certification mark, is ordered to make corrections, is confiscated of the product illegally produced or sold and concurrently is imposed a fine equivalent to the value amount of the product illegally produced or sold; is confiscated concurrently of his illegal gains therefrom if any; and is revoked his business license if the circumstance is serious.
Article 54
Anyone whose product identifications fail to comply with the provisions of Article 27 of this Law is ordered to make corrections; and anyone whose packaged product identifications fail to comply with the provisions of Article 27.4 or 5 of this Law is ordered to stop the production or sale and concurrently is imposed a fine not exceeding 30% of the value amount of the product illegally produced or sold if the circumstance is serious; and is concurrently confiscated of his illegal gains therefrom if any.
Article 55
The seller of a product forbidden by the provisions of Articles 49 to 53 of this Law may be given lenient punishment or reduced punishment if he has sufficient evidences proving that he has no knowledge of the product forbidden for sale and could give the source of the product.
Article 56
Anyone who refuses to accept product quality supervisory inspection imposed according to law is given a warning and ordered to make corrections; is ordered to suspend operation for rectification if he refuses to make corrections; and is revoked his business license if the circumstance is extremely serious.
Article 57
If a product quality inspection or certifying body forges an inspection result or issues a false document, it is ordered to make corrections, the unit is imposed a fine exceeding 50,000 yuan but not exceeding 100,000 yuan and the principal person directly responsible and other persons directly responsible are imposed a fine exceeding 10,000 yuan but not exceeding 50,000 yuan; is concurrently confiscated of its illegal gains therefrom if any; is revoked its qualifications for inspection or certification if the circumstance is serious; and is demanded for criminal responsibility according to law if a crime is constituted.
If a product quality inspection or certifying body issues a untrue inspection result or certification, thus causing a damage, it shall be liable therefor accordingly; if serious damage is caused, its inspection or certification qualifications are revoked.
If a product quality certifying body, in violation of Paragraph 2 of Article 21 of this Law, fails to demand a product which is not in compliance with the certification standards but uses the certification mark to make corrections or to revoke its qualifications for using certification mark according to law, it is liable jointly and severally for with the producer or seller of the product for damage caused to the consumer by the unconformity of the product to the certification standards; and its qualifications for certification are revoked if the circumstance is serious.
Article 58
A social group or social intermediary agency which makes a promise or guarantee over the quality of a product that fails to meet the promised or guaranteed quality requirements, thus causing a damage to the consumer, is liable therefor jointly and severally with the producer or seller of the said product.
Article 59
If an advertisement makes false publicity over the quality of a product, thus deceiving or misleading the consumer, legal liability is demanded for according to the provisions of the Advertising Law of the People’s Republic of China.
Article 60
Raw and supplementary materials, packaging materials and means of production used by producers to exclusively make the products listed in Articles 49 and 51 of this Law or the fake products passing off as the genuine one shall be confiscated.
Article 61
Anyone who knows or should know a product of which production or sale is forbidden by the provisions of this Law but provides convenience for its transportation, keeping or warehousing or provides production technologies to pass off the fake product as the genuine one, is confiscated of all his proceeds from transportation, keeping or warehousing or providing such production technologies and is concurrently imposed a fine exceeding 50% but not exceeding three times of the illegal proceeds; and if a crime is constituted, is demanded for criminal responsibility according to law.
Article 62
An operator in the service sector who uses a product forbidden for sale by the provisions of Articles 49 to 52 of this Law for his business services is ordered to stop the use; and if the operator knows or should know that the product is forbidden for use by the provisions of this Law, he is punished according to the value amount of the product illegally used (including those already used and not yet used) and the provisions of this Law on the punishment for the seller.
Article 63
Anyone who conceals, transfers, sells or destroys a product sealed up or detained by the supervisory department for product quality or by the administrative department for industry and commerce is imposed a fine exceeding the value amount but not exceeding three times of the value amount of the said product; and concurrently is confiscated of his illegal gains therefrom if any.
Article 64
Anyone who, due to violation of the provisions of this Law, shall be liable for civil compensation and pay penalty fines is liable for the civil compensation first if his property is insufficient to pay them all simultaneously.
Article 65
A servant of the people’s government at any level or of any other State organ is given administrative sanctions according to law if he is under any of the following circumstances; and if a crime is constituted, he is demanded for criminal responsibility according to law:
1. to shield or tolerate an act of violating the provisions of this Law in the production or sale of a product;
2. to give information to a party involved in a production or sale activity in violation of the provisions of this Law to help him escape inspection and punishment; or
3. to obstruct or interfere into the investigation or punishment by the supervisory department for product quality or the administrative department for industry and commerce on the act of violating the provisions of this Law in the production or sale of the product, thus causing a serious result.
Article 66
If a supervisory department for product quality asks for samples in excess of the prescribed amount or an inspection fee from a party being inspected in the course of supervisory spot check over the quality of a product, the supervisory department for product quality at the higher level or the supervisory organ orders it to return the samples; and if the circumstance is serious, the principal person directly responsible and other persons directly responsible are given administrative sanctions according to law.
Article 67
If a supervisory department for product quality or any other State organ, in violation of the provisions of Article 25 of this Law, recommends a product of a producer to the social public or takes part in a business operation in the form of supervised production or supervised sale, the organ at the higher level or the supervisory organ orders it to make corrections and to eliminate the influence, and confiscate its illegal gains therefrom if any; and if the circumstance is serious, the principal person directly responsible and other persons directly responsible are given administrative sanctions according to law.
If a product quality inspection body commits any of the illegal acts listed in the preceding paragraph, the supervisory department for product quality orders it to make corrections and to eliminate the influence, confiscate its illegal gains therefrom if any; and concurrently may impose a fine not exceeding one times of its illegal gains thereon; and if the circumstance is serious, its quality inspection qualifications are revoked.
Article 68
A servant of a supervisory department for product quality or of an administrative department for industry and commerce who abuses his power of office, neglects his duty or practices favoritism or irregularities, thus constituting a crime, is demanded for criminal responsibility according law; and is given administrative sanctions according to law if no crime is constituted.
Article 69
Anyone who obstructs, by means of violence or intimidation, the servant of the supervisory department for product quality or the administrative department for industry and commerce to perform the official duty according to law is demanded for criminal responsibility according to law; and if no means of violence or intimidation is resorted to in refusing or obstructing, he is punished by the public security organ in accordance with the provisions of the Regulations on Penalties for Public Security.
Article 70
The administrative penalty of revocation of the business license under this Law is decided by the administrative department for industry and commerce, and the administrative penalties under Articles 49 to 57 and Articles 60 to 63 of this Law are decided by the supervisory department for product quality or the administrative department for industry and commerce according to the spheres of powers provided by the State Council. If laws and administrative regulations contain otherwise provisions on the exercise of the right to give administrative penalties, such provisions of the relevant laws and administrative regulations govern.
Article 71
Products confiscated according to the provisions of this Law are destroyed or disposed of in other methods according to the relevant provisions of the State.
Article 72
The value amount of the product mentioned in Articles 49 to 54, Article 62 and Article 63 of this Law is calculated according to the posted price of the product illegally produced or sold; and in absence of such posted price, is calculated according to the market price of the product of the same type.
Chapter VI Final Provisions
Article 73
Measures for supervision and control over the quality of military industrial products are formulated separately by the State Council and the Central Military Commission.
With respect to the liability for damages caused by nuclear facilities or nuclear products, the provisions of other laws and administrative regulations prevail if they contain such provisions.
Article 74
This Law enters into operation on September 1, 1993.
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Settlement of Employment Termination
July 8, 2009
It is common practice for an employee and employer to attempt to negotiate the monetary amount that the employer is required to pay the employee upon termination of employment. Any agreement in such circumstances will generally involve an employer paying an amount equivalent to its potential legal liability or lower. However, a question arises as to whether, under China’s Labour Contract Law, such an agreement is enforceable if an employee ultimately reneges on its agreement and takes the dispute to labour arbitration. The notion of free will and fair bargaining underpin Chinese contract law and the Chinese legal system in general. Accordingly, there may be such occasions where such an agreement could be struck down by the P. R. of China court.
It is advised that employers that it is in their interest to avoid labour arbitration as, in most cases, it favors the interests of employees. Further, in labour arbitration and litigation in China there is little possibility of recovering your legal costs and, accordingly, even if you are ultimately successful, there is a strong likelihood that you will incur legal expenses greater than the potential liability. For these reasons, many employers make every effort to settle matters with employees. The assumption is that in coming to an agreement with an employee, arbitration will be avoided.
Article 5 of the Law of the People’s Republic of China on Labor Dispute Mediation and Arbitration states that labour arbitration is available “where a labor dispute arises, if a party does not desire a consultation, the parties fail to settle the dispute through consultation, or a party does not execute a reached settlement agreement”. It seems, on the face of the matter, that where there is an agreement between the parties, there is no jurisdiction for the dispute to go to labour arbitration.
If an employee reaches an agreement with an employer regarding the termination of the labor contract and the economic compensation is far from the statutory standards, generally the agreement shall be deemed as invalid because it exempts the employer from statutory liability
and extinguishes the rights of the employee. The concepts of free-will and fair bargaining are critical principles underpinning Chinese Contract Law, particularly in the employment context. Article 4 of the Contract Law provides that ‘[t]he parties have the right to lawfully enter into a contract of their own free will in accordance with the law, and no unit or individual may illegally interfere therewith.’ Further, Article 3 of the Labour Contract Law provides that ‘[t]he principle of lawfulness, fairness, equality, free will, negotiation for agreement and good faith shall be observed in the formation of a labor contract.’ Whilst a settlement agreement in relation to economic compensation payable to an employee is not technically a “labour contract”, the matters outlined in Article 3 reflect common principles. Accordingly, where the agreed amount is well below the legal entitlement it will be difficult for the employer to show that the principles of fair-bargaining existed. In such circumstances, after an employee obtains economic compensation according to the agreement, if the employee applies for arbitration or files a suit to ask the employer pay the balance of the legal entitlement, the application shall be supported.
It is clear that the critical issue is whether there is fair-bargaining between the parties. As such, if the agreement stipulates the calculation methods and standards of economic compensation and the employee acknowledges that the agreed economic compensation is far from statutory standards, it shall be deemed that the employee has disposed of his or her rights, and any application to alter the terms of the agreement would be rejected. Further, if after an employee obtains economic compensation in accordance with an agreement with an employer, he or she applies for arbitration or files a suit beyond the statutory limitation period (it should be noted that the statutory limitation period is 1 year from the date of termination) for the balance of the employer’s legal liability, the employees rights shall be extinguished.
NancySun, Attorney & MatthewMcKee, Foreign Legal Counsel
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Mainland further facilitates recognition of Taiwan court decisions
June 16, 2009
The Supreme People’s Court (SPC) of China issued a judicial interpretation Thursday to further regulate mainland courts’ recognition of verdicts on civil cases made by Taiwan courts.
The judicial interpretation, effective Thursday, further specifies the range of civil cases entitled to recognition and clearly states that verdicts made by Taiwan courts, once recognized by mainland courts, have the same effect in the mainland as verdicts made by mainland courts.
Recognition is for Taiwan people who live in the mainland and are involved in civil cases for which a Taiwan court already issued a verdict.
Due to decades of political stand-off, judicial systems of the mainland and Taiwan used to have little exchanges or cooperation, which made jurisdiction very difficult — especially when economic exchanges between the two sides increased and more Taiwan businessmen came to live in the mainland.
As a follow-up effort to an agreement on mutual judicial assistance signed by top negotiators from the two sides on April 26 in the east mainland city of Nanjing, the new judicial interpretation says that civil cases on commercial affairs, intellectual property and maritime affairs are also entitled to recognition.
Previously, most of the Taiwan court verdicts recognized by mainland courts were on civil cases about relationships and identities, a judge from the No. 1 Civil Tribunal of SPC, who spoke on condition of anonymity, told Xinhua Thursday.
In addition to court verdicts, conciliation statements and orders of payment on civil cases made by Taiwan courts and arbitrations reached by Taiwan arbitration institutions are also entitled to recognition, according to the interpretation.
Those who apply for recognition could ask for property preservation at the time the case is submitted or after it is heard. Property preservation should be applied for with “effective guarantee” before the court decides to recognize the previous verdict or not, the interpretation said.
Property preservation refers to the imperative measures taken by courts to restrict involved parties’ disposal of controversial properties when the case is put under examination.
“Property preservation aims at best balancing the interests of the plaintiff and the defendant,” the same judge said.
The time limit to apply for recognition is extended to two years after the verdict or arbitration was made in Taiwan. The previous time limit was one year.
The interpretation also states that those who apply for recognition bear responsibilities to prove the evidence they provide, such as authenticity and effectiveness of the verdict, and existence of the properties.
Source: http://www.ipr.gov.cn
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Civil Procedure Law of the Peoples Republic of China – Arbitration
March 19, 2009
Chapter XXVIII Arbitration
Article 257 In the case of a dispute arising from the foreign economic, trade, transport or maritime activities of China, if the parties have had an arbitration clause in the contract concerned or have subsequently reached a written arbitration agreement stipulating the submission of the dispute for arbitration to an arbitral organ in the People’s Republic of China handling cases involving foreign element, or to any other arbitral body, they may not bring an action in a people’s court.
If the parties have not had an arbitration clause in the contract concerned or have not subsequently reached a written arbitration agreement, they may bring an action in a people’s court.
Article 258 If a party has applied for property preservation measures, the arbitral organ of the People’s Republic of China handling cases involving foreign element shall refer the party’s application for a decision to the intermediate people’s court of the place where the party against whom the application is made has his domicile or where his property is located.
Article 259 In a case in which an award has been made by an arbitral organ of the People’s Republic of China handling cases involving foreign element, the parties may not bring an action in a people’s court. If one party fails to comply with the arbitral award, the other party may apply for its enforcement to the intermediate people’s court of the place where the party against whom the application for enforcement is made has his domicile or where his property is located.
Article 260 A people’s court shall, after examination and verification by a collegial panel of the court, make a written order not to allow the enforcement of the award rendered by an arbitral organ of the People’s Republic of China handling cases involving foreign element, if the party against whom the application for enforcement is made furnishes proof that:
(1) the parties have not had an arbitration clause in the contract or have not subsequently reached a written arbitration agreement;
(2) the party against whom the application for enforcement is made was not given notice for the appointment of an arbitrator or for the inception of the arbitration proceedings or was unable to present his case due to causes for which he is not responsible;
(3) the composition of the arbitration tribunal or the procedure for arbitration was not in conformity with the rules of arbitration; or
(4) the matters dealt with by the award fall outside the scope of the arbitration agreement or which the arbitral organ was not empowered to arbitrate.
If the people’s court determines that the enforcement of the award goes against the social and public interest of the country, the people’s court shall make a written order not to allow the enforcement of the arbitral award.
Article 261 If the enforcement of an arbitral award is disallowed by a written order of a people’s court, the parties may, in accordance with a written arbitration agreement reached between them, apply for arbitration again; they may also bring an action in a people’s court.
Chapter XXIX Judicial Assistance
Article 262 In accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity, the people’s courts of China and foreign courts may make mutual requests for assistance in the service of legal documents, in investigation and collection of evidence or in other litigation actions.
The people’s court shall not render the assistance requested by a foreign court, if it impairs the sovereignty, security or social and public interest of the People’s Republic of China.
Article 263 The request for the providing of judicial assistance shall be effected through channels provided in the international treaties concluded or acceded to by the People’s Republic of China; in the absence of such treaties, they shall be effected through diplomatic channels.
A foreign embassy or consulate accredited to the People’s Republic of China may serve documents on its citizens and make investigations and collect evidence among them, provided that the laws of the People’s Republic of China are not violated and no compulsory measures are taken.
Except for the conditions provided in the preceding paragraph, no foreign organization or individual may, without the consent of the competent authorities of the People’s Republic of China, serve documents or make investigations and collect evidence within the territory of the People’s Republic of China.
Article 264 The letter of request for judicial assistance and its annexes sent by a foreign court to a people’s court shall be appended with a Chinese translation or a text in any other language or languages specified in the relevant international treaties.
The letter of request and its annexes sent to a foreign court by a people’s court for judicial assistance shall be appended with a translation in the language of that country or a text in any other language or languages specified in the relevant international treaties.
Article 265 The judicial assistance provided by the people’s courts shall be rendered in accordance with the procedure prescribed by the laws of the People’s Republic of China. If a special form of judicial assistance is requested by a foreign court, it may also be rendered, provided that the special form requested does not contradict the laws of the People’s Republic of China.
Article 266 If a party applies for enforcement of a legally effective judgment or written order made by a people’s court, and the opposite party or his property is not within the territory of the People’s Republic of China, the applicant may directly apply for recognition and enforcement to the foreign court which has jurisdiction. The people’s court may also, in accordance with the relevant provisions of the international treaties concluded or acceded to by China, or with the principle of reciprocity, request recognition and enforcement by the foreign court.
If a party applies for enforcement of a legally effective arbitral award made by an arbitral organ in the People’s Republic of China handling cases involving foreign element and the opposite party or his property is not within the territory of the People’s Republic of China, he may directly apply for recognition and enforcement of the award to the foreign court which has jurisdiction.
Article 267 If a legally effective judgment or written order made by a foreign court requires recognition and enforcement by a people’s court of the People’s Republic of China, the party concerned may directly apply for recognition and enforcement to the intermediate people’s court of the People’s Republic of China which has jurisdiction. The foreign court may also, in accordance with the provisions of the international treaties concluded or acceded to by that foreign country and the People’s Republic of China or with the principle of reciprocity, request recognition and enforcement by a people’s court.
Article 268 In the case of an application or request for recognition and enforcement of a legally effective judgment or written order of a foreign court, the people’s court shall, after examining it in accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity and arriving at the conclusion that it does not contradict the basic principles of the law of the People’s Republic of China nor violates State sovereignty, security and social and public interest of the country, recognize the validity of the judgment or written order, and, if required, issue a writ of execution to enforce it in accordance with the relevant provisions of this Law; if the application or request contradicts the basic principles of the law of the People’s Republic of China or violates State sovereignty, security and social and public interest of the country, the people’s court shall not recognize and enforce it.
Article 269 If an award made by a foreign arbitral organ requires the recognition and enforcement by a people’s court of the People’s Republic of China, the party concerned shall directly apply to the intermediate people’s court of the place where the party subjected to enforcement has his domicile or where his property is located. The people’s court shall deal with the matter in accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity.
Article 270 This Law shall come into force as of the date of promulgation, and the Civil Procedure Law of the People’s Republic of China (for Trial Implementation) shall be abrogated simultaneously.
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Procedures for Arbitration in China
March 18, 2009
After exchanging documents and appointing arbitrators, the CIETAC will fix a hearing date. In some cases, the parties may elect to conduct the proceedings on a documents-only basis and dispense with the oral hearing. It can be done subject to the agreement of both parties and the tribunal. Documents-only arbitration is suitable for cases where there is no substantial dispute on matters of facts.
The three arbitrators will make an award after the hearing. If the arbitrators cannot reach a unanimous decision, it will be decided by simple majority. The Arbitration Rules provide that the tribunal shall render an award within six months after the tribunal is formed, although this time limit can be extended by the CIETAC. Delays are not unusual in practice, bearing in mind the fact that the three arbitrators involved may reside in different jurisdictions, and the award must be reviewed and approved by the CIETAC before it is issued. The award comes into legal effect the date on which it is made. If no time limit is specified in the award, the parties must automatically take it into effect; otherwise, they must execute the award within the time limit specified.
The tribunal has the power to decide in the award the arbitration fees and expenses to be paid by the parties to the CIETAC as well as any compensation for expenses occurred to be paid to the winning party.
If any claims or counterclaims were omitted from the award, either party has 30 days from the receipt of the arbitral award to request in writing an additional award. If the tribunal finds that such an omittance exists, they have 30 days from the receipt of the request to make an additional award. Similarly, the tribunal can on its own initiative make an additional award within a “reasonable period of time” following the arbitral award.
At any time before the final award is made, a partial award may be made on any issue, provided that it is considered necessary by the tribunal or that the parties request an award and the tribunal accepts. Failure to perform the award will not affect the continuation of proceedings nor prevent the tribunal from making a final award.
The Arbitration Rules also provide for a summary procedure to be followed where either parties with a disputed amount below RMB 500,000 or parties with a disputed amount above RMB 500,000 but who agree, in writing, to a summary procedure. Upon accepting the application for the summary procedure, the CIETAC shall issue a Notice of Arbitration. Only one arbitrator, who should be appointed by the parties by agreement within 15 days after receipt of the Notice, will preside over the summary procedure, failing which the Chairman of the CIETAC will appoint an arbitrator for the parties. Either oral hearing or a document-only arbitration may be adopted, as the CIETAC deems fit.
The time limits for filing of documents and publication of award under the summary procedures are shorter than those under normal procedures. The Respondent should file the defence and counterclaim within 20 days after the receipt of the Notice of Arbitration. The award shall be given within three months from the date that the tribunal was formed.
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