As of January 1, 2020, the People's Republic of China implemented its new Interim Provisions on the Recall of Consumer Products. China’s State Administration for Market Regulation (SAMR) released the new rules on November 26, 2019, which define recall obligations for companies throughout the supply chain.
While the Interim Provisions provide helpful guidance for companies planning for and managing recall events, they also foreshadow significant risk.
Dezan Shira & Associates summarized the Interim Provisions on China Briefing, noting that “the new compliance regime will facilitate industry best practices in product quality management and includes a time-bound process with penalty clause.”
One objective of the Interim Provisions is to reinforce existing regulations. For example, companies are required to alert regulators to any discoveries of a product leading to serious injury, death or property damage. They must also inform China’s State Administration for Market Regulation (SAMR) of any recalls initiated outside China, a nod to the importance of global recall coordination.
But the new rules also outline new operational procedures for recalls and enforcement provisions SAMR can levy against companies that fail to comply.
For example, the Interim Provisions provide more detail about what the State Administration is expecting when receiving a recall plan. The topics covered should include the scope of impacted products, the reason for the recall, emergency measures to avoid further damage, a detailed plan for executing the recall, a timeline for execution and the appointed person and company responsible for managing the recall in country.
These components should be no surprise to companies with global operations. In fact, they should be second nature. But these requirements represent only part of the risk. It’s the enforcement actions that may follow if a company fails to meet deadlines or is found to violate any product safety regulations. In these cases, China’s National Enterprise Credit Information Publicity System will notify the public. The most serious violations may result in the company being blacklisted.
Nanda Lau, partner at global law firm Herbert Smith Freehills, shared her observations on the new recall rules, warning that they “will bring new compliance challenges for companies operating in, or selling products to, the China market.” One specific area of concern is the tightened timeframes in which companies are expected to respond. Nanda noted that “companies will need to act quickly and carefully in responding once a product defect is identified and will need to communicate effectively with the regulatory authority and the general public,” adding that “it is crucial for companies, with the help of professional advisors, to formulate an overall strategy and a detailed action roadmap for each step of the recall process.” Close coordination across global markets will also be critical.
Recalls are no longer events that happen in a vacuum or in a single market. They often become global events. Wise companies find partners and experts capable of helping them plan for and execute recalls across international borders and in compliance with all applicable regulations.