Selling Illegal Product From China

China employment law

My law firm is right now defending a large Chinese company in a big United States litigation matter. Our client is being sued, for among other things, having allegedly provided a product that failed to meet U.S. environmental standards. Our defense to this claim is that the American plaintiff had the responsibility to make sure its imported product met those U.S. standards, not a company in China that ships its product around the world.

Earlier this year, my law firm was consulted by an insurance company that provided coverage for a U.S. company that sold a product in an East Coast state that had caused a death. Though legal in most states, this product was not legal in the state in which the death occurred.  Our international dispute resolution attorneys were brought in to help figure out whether it made sense to go after the Chinese manufacturer, but one of the key questions was whether anyone other than the American company that sold the product was obligated to make sure the product was legal in that particular state or not.

A few years ago, a U.S. company called me regarding a product it had been required to recall because it had not met U.S. consumer product safety standards. This U.S. company was interested in suing its Chinese manufacturer over this shortcoming. The U.S. company told me it had assumed the product it was buying from the Chinese manufacturer had met all safety standards because they knew this Chinese manufacturer was selling a similar product to one of its leading competitors and it “just knew” that competitor would never sell a non-complying product. So when the US company learned that its competitor’s product was in compliance, they were sure that meant they would have a great lawsuit against the Chinese manufacturer. I have since heard of a number of other cases where the U.S. buyer/importer “just assumed” that the Chinese manufacturer was aware of U.S. safety (or other standards) because the manufacturer was so big/so competent/so experienced in selling to U.S. companies.

I make the above examples to try to drive home a fairly basic point. When buying product from anywhere in the world outside of your home country, you should see it as your job to make sure the product you are buying complies with the laws of the city, state, province, or country in which you will be selling it. Even if your foreign manufacturer insists the product complies with your jurisdiction’s standards, you need to verify. Merely assuming your product is in compliance could prove costly.

6 responses to “Selling Illegal Product From China”

  1. Dan Harris has the on-going China law trend award – representing Chinese companies wanting to sue companies in the United States. It’s a timely article and well advised to warn the US about it’s behavior when buying other peoples sub standard products. If you buy crap you pay twice. Dan will make sure you buy properly or sue you. Its time someone stood up for the American consumer! Awesome post Dan.

    • Go back and read the post again. We are representing a Chinese company that has been sued, NOT as you say, a Chinese company suing an American company.  Big difference. 

  2. A  Chinese associate wanted to market a product made overseas in the U.S., and asked me to help with some research.  
    I investigated some of the product ingredients, and discovered that one ingredient would be subject to U.S. F.D.A. regulations.  
    In other areas, I provided feedback regarding U.S. restrictions that must be placed on directions for “use”, including some “warnings” that were not included with the product, even though I was told it is very popular in China, and throughout South East Asia.
    I tried the product myself, and thought it was very useful and had potential, but when I made suggestions regarding the research I had done, I was accused of being “prejudice against Chinese products”.  I was a bit shocked by that reaction, and made my best attempts to clarify that issue was only about due diligence, and further communicated that being sued in the United States for failing to maintain U.S. safety standards and “instructions for use” requirements” would not be a pleasant experience.  
    The experience did make me more acutely aware of how a Chinese national, (or other foreign national) may be very unaware of the kinds of restrictions and standards that must be met in the U.S. when importing product from overseas.  It’s a very important area to consider.   

  3. Interesting case Dan.  In April I served as an expert witness in one of the “Chinese Drywall” suits that are still being litigated in the wake of Katrina creating a huge demand for drywall in the South.
    It turned out that this drywall was made using gypsum from a mine in China where the sulfur content was slightly higher.  When installed in a damp climate in a house with a lot of copper wiring, the copper interacted with the sulfur creating fumes that made the house unlivable.
    The case was settled before trial.  It was determined that the company that imported it, the distributors who bought it from them and the contractors who bought and installed it were partially liable.  But, in this case at least, the Chinese manufacturer was not liable as the drywall passed the standard tests but the standard tests did not account for the extra sulfur content.
    Mike Z

  4. Assumptions are dangerous to make in all walks of life – on both micro and macro scales.  For a U.S. Company to assume this surely makes them liable. I personally feel its their obligation to re-check the products veracity since its on their grounds. Again, for two businesses to work well, both ends must verify. This will most likely decrease such occasions like this because it’ll be checked at least once by one of the parties involved.

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