International Product Liability Laws

Overview

Much has been written about the various European Union Directives enacted over the years, first establishing strict liability, and then providing more specific safety directives. Interestingly, this proliferation of product safety and product liability laws and standards has not really resulted in significant amounts of new litigation in Europe.

In fact, for U.S. manufacturers selling in Europe, the greatest risk appears to be that they either may not be allowed to sell into one or more countries, or customers will not buy their products if they fail to comply with these directives and additional technical standards. Similarly, with the passage of the Consumer Protection Law in Taiwan, the Toys and Children's Product Safety Ordinance in Hong Kong, and product liability and quality legislation in Japan and China respectively, Asian countries have taken major steps toward ensuring that only safe products are sold within their borders.

Like Europe, the rise of product liability standards in Asia means that manufacturers and retailers must pay even more attention to quality, product safety and product liability than in the past. In addition, all manufacturers who sell in the U.S. must consider the effect of compliance with foreign safety laws and standards on U.S. litigation. To the extent foreign sold products are or may be considered safer, the manufacturer runs the risk of providing the plaintiff with proof of an alternative design that can be used in a U.S. court.

This chapter highlights significant product safety legislation, directives and standards in Europe, Australia, Taiwan, Japan, China and Hong Kong. This chapter merely provides a starting point for those affected by these laws. They must still spend considerable time to ensure compliance. The current interpretation and enforcement policies of these laws in each individual country will evolve quickly. Any manufacturer must obtain current information as they try to comply.

Europe

The Product Liability Directive

The Product Liability Directive, the oldest and most significant European Union directive, established the modern concept of product liability. This directive was signed in 1985 and imposed an August 1, 1988, implementation deadline. Fourteen of the sixteen European countries who are part of the European Union have passed the Product Liability Directive. Only France and Spain have not. The directive only applies, in each respective country, to products put into circulation after the directive's effective date.

Producer Liability. The Product Liability Directive provides, in Article 1, that "The producer shall be liable for damage caused by a defect in his product." Producers include manufacturers, component part suppliers, importers and anyone using a trade name or trade mark. A product is defective when it "does not provide the safety which a person is entitled to expect," considering all circumstances, including:

• the presentation of the product;
• the product's reasonably expected uses; and,
• the time the product was put into circulation.

The directive also requires the consumer to prove defect, causation and damages, but leaves the specific burden of proof to individual member states.

Warnings and Instructions. While the Product Liability Directive does not explicitly address warnings and instructions, its language implicitly requires them. The directive's defect definition considers the "presentation of the product" and finds a product defective if the reasonably expected uses involve hazards that do "not provide the safety which a person is entitled to expect." These two considerations seem clearly to cover warnings and instructions. Therefore, a product could be found defective under the Product Liability Directive if it lacks adequate warnings and instructions.

Defenses. Several defenses are available under the Product Liability Directive. Article 7 provides that a producer is not liable if:

• the producer did not put the product in circulation;
• the defect did not exist when the product went into circulation;
• the producer did not sell or distribute the product in the course of business;
• the defect is due to compliance with mandatory public regulations;
• existing knowledge and science could not have discovered the defect (optional with individual member states); and
• the producer is a component supplier and the defect is attributable to the final product.

Further, while the directive leaves to individual nations adoption of provisions concerning contribution among joint tortfeasors and a plaintiff's contributory fault, it does provide statutes of limitation and repose. The statute of limitation bars a claim brought three years after a plaintiff discovers the damage, the defect and the producer's identity, while the statute of repose bars a claim brought ten years after the product was first circulated.

Limited Impact of the Product Liability Directive. A recent study for the Commission of the European Communities concluded the Directive has so far not lead to an overall increase in the number of product liability claims. Since the Directive only applies to products put into circulation after its effective date in the particular country, more claims can be expected as more products fall within the Directive's purview. The study did, however, uncover three reported cases based on the Product Liability Directive. First, in a case from Lubeck, Germany, plaintiff claimed his apartment and furniture were damaged by oily particles emitted by Advent candles. Plaintiff sued the retailer, which may be liable unless the retailer identifies the manufacturer. The defendant-retailer, however, replied only with an unclear and incorrect identification of the manufacturer. Thus, after finding the candles defective, the court awarded plaintiff damages against the retailer, including a sum for loss of use of the apartment.

In a second reported case from Hamm, Germany, a homeowner sued a paint manufacturer for damage to his garage after the paint turned out to be darker than the color indicated on the label. Plaintiff sought damages representing the cost of dismantling and rebuilding a new garage. The court held that while plaintiff could recover for the value of the wood, plaintiff was 50 percent contributorily negligent for not testing the paint first. Since one-half value of the wood was lower than the damages threshold necessary to succeed on a property damage claim, plaintiff recovered nothing.

The final reported case is a decision from a court in Monza, Italy. Plaintiff sued a mountain bike manufacturer for injuries sustained when the bike's frame suddenly broke. To prove defect, plaintiff prepared an expensive technical report with the aide of an Italian consumer organization. The report concluded the defendant defectively manufactured the frame by using a low-grade steel of insufficient thickness. The court held the frame was defective and awarded plaintiff damages. The defendant-manufacturer did not enter an appearance and was not represented.

While there are a lack of many cases referencing the Product Liability Directive, there are cases in Europe basing liability on country law existing side-by-side with this new directive. For example, in 1992, a German Federal Court held a manufacturer of instant tea powder liable for failure to warn that it could cause tooth decay if infants were permitted to sleep through the night with the bottle of tea. The decision was made under the general negligence doctrine of German tort law. The German Court did not mention the European Product Liability Directive or the German Product Liability Act of 1990. In fact, commentators feel that the German act is more favorable to consumers than the European Product Liability Directive in the area of warnings.

Machinery Safety Directive

Overview. There are also product-specific directives that manufacturers who export to Europe must consider. One of the most significant, enacted on January 1, 1993, is the Machinery Safety Directive. This directive applies to industrial machinery with moving parts used for processing, treatment, moving or packaging of any material and contains essential health and safety requirements relating to design and construction of machinery and safety components.

Manufacturers must meet this directive's requirements before they may legally affix the EC approval mark ("CE") to a product. The purpose of the CE mark -- a necessary pre-condition to selling machinery into Europe -- is to provide users and public authorities with a distinctive mark indicating that the product meets all mandatory EU technical requirements. As of January 1, 1995, industrial machines, to be sold legally, must have a Declaration of Conformity with the Machinery Directive and the CE mark.

The essential safety requirements in the Machinery Safety Directive tell a manufacturer what must be done, such as providing appropriate lighting, handholds, surfaces, edges or angles, control devices, emergency stopping devices or components to prevent mechanical hazards. However, the manufacturer must also consider the European harmonized standards, which explain how to comply with the directive's requirements, i.e. what specific safety devices might be required.

The European Committee for Standardization (CEN) and the European Committee for Electrotechnical Standardization (CENELEC) promulgate these harmonized standards. Since the European Union will not prepare individual standards for each type of machine, CEN has developed a hierarchy among three types of standards.

Type A standards establish basic machinery design and safety principles. Type B standards, designated as group safety standards, deal with specific safety aspects or devices that can be used by a wide range of machinery. Type C standards give detailed design safety requirements for particular machine types or groups of machines. If a machinery manufacturer complies with the European harmonized standards, there is a presumption that they also conform to the relevant Machinery Safety Directive requirements.

Each machinery manufacturer or its authorized European representative is responsible for assessing a machine's conformity to the Machinery Directive's essential safety requirements. Once the manufacturer assesses the machine's conformity to the safety requirements, it can obtain the CE mark.

Duty to Warn Under the Machinery Directive. The Machinery Directive expressly creates a duty to warn and instruct. This directive adopts U.S. product liability concepts requiring that manufacturers eliminate risk through a combination of design, guarding and warnings.

The directive requires a manufacturer to "inform users of the residual risks due to any shortcomings of the protection measures adopted, indicate whether any particular training is required and specify any need to provide personal protection equipment." (Annex 1, Section 1.1.2(b)). The directive also requires warnings "where risks remain despite all the measures adopted or in the case of potential risks which are not evident (for example, electrical cabinets, radioactive sources, bleeding of a hydraulic circuit, hazard in an unseen area, etc.)." (Annex 1, Section 1.7.2.). It is not clear whether these warnings should be placed directly on the machine or in the instruction book. Given the directive's strong consumer safety purpose, if there is sufficient space, manufacturers should put the warnings in both places.

In addition to warnings, instructions must accompany all machinery. The instructions must include:

1. information establishing that the machinery complies with the safety certification standards;
2. a description of the machine's foreseeable uses; and,
3. instructions for safely servicing, using, assembling, and maintaining the machinery. (See Annex 1, Section 1.7.4.).

The majority of this information should already be included in instructions prepared by manufacturers who sell in the U.S.

Language Requirements Under the Machinery Directive. As noted earlier, the Machinery Directive requires warnings where risks remain despite all adopted safety measures. Those warnings "should preferably use readily understandable pictograms and/or be drawn up in one of the languages of the country in which the machinery is to be used, accompanied, on request, by the languages understood by the operators." (Annex 1, Section 1.7.2.). Thus, the directive may require manufacturers to draft warnings in two or more languages.

Moreover, the instructions "should preferably be accompanied by the same instructions drawn up in another community language, such as that of the country in which the manufacturer or his authorized representative is established." (Annex 1, Section 1.7.4, subpart (b)). However, the maintenance instructions for use by the specialized personnel frequently employed by the manufacturer need only be drawn up in one of the official community languages, either French or English. (Id.)

Post-Sale Updating. The Machinery Directive also creates a post-sale duty to update instructions by requiring manufacturers to draw the user's attention "to ways--which experience has shown might occur--in which the machinery should not be used." While the scope of the post-sale duty remains largely undefined, manufacturers should monitor their product's status and consider incorporating their findings into revised warnings and instructions.

General Product Safety Directive

The third significant European Directive is the General Product Safety Directive which went into effect in the European Union on June 29, 1994. This directive obligates EU member states to impose upon producers a general requirement to place only safe products on the market. The directive applies to all products unless another more specific directive governs that particular product.

Producer and Distributor Liability. The directive defines producers in Article 2 as the manufacturer, the manufacturer's representatives or any party in the supply chain whose activities affect the product's "safety properties." The directive defines distributors, by contrast, as "any professional in the supply chain whose activity does not affect the safety properties of a product."

The directive defines safe products as those which, when used under normal conditions, present either no risks or minimal but "acceptable" risks compatible with their use. Producers are obligated to place only safe products on the market while distributors are subject to the lesser requirement of acting with due care to monitor product safety.

In assessing product safety, four main elements must be considered:

• the characteristics of a product;
• its presentation;
• its effect on other products; and
• the categories of consumers at serious risk when using it.

A product is safe under this directive if it complies with European or national legislation, European or national safety standards or technical specifications, codes of practice or the technological state of art. Unfortunately, despite compliance with the directive, member states may still consider a product dangerous and require the manufacturer to withdraw the product from the marketplace.

Warnings and Instructions. The General Product Safety Directive, like the Machinery Directive, expressly requires warnings and instructions. Article 2(b) defines "safe product," in part, as a product that does not present an unacceptable safety or health risk in its instructions for handling and use, "or any other of its properties." Inadequate instructions and, presumably, inadequate warnings as encompassed by the phrase "any other of its properties," render a product unsafe.

Article 4 expressly requires manufacturers to warn of "significant" risks. The warning must identify the risk in a manner that will make the potential user or consumer aware of it. Individual EU countries may also require that manufacturers include certain on-product warnings. Moreover, in a continuing effort to ensure that only safe products are placed on the market, the directive requires the individual countries to analyze the treatment, processing, packaging, storage, transport, installation, and where necessary, product disposal. (Article 3).

Countries who determine that a product presents a significant risk that is nonetheless acceptable because of the nature or technical composition of the product must make the potential user or consumer aware of the risk. This may be done in two different ways. The national authorities who are charged with the duty of monitoring product safety have the authority to give public warnings "through appropriate media." (Annex 2, subpart d.).

Alternatively, or perhaps in conjunction with the media, the national authorities may request that manufacturers add appropriate warning notices to the product in question. (Annex 2, 1.1.2(c)). If the machine runs the risk of "break-up" during operation, the manufacturer must indicate in the instructions the type and frequency of inspection and maintenance required for safe operation. (Annex 1, Section 1.3.2.). The manufacturer must also indicate the parts subject to wear and tear and the criteria for replacement.

The instructions must also contain the drawings and diagrams necessary for putting the machinery into service, maintaining and inspecting it, and all instructions relating to safety. (Annex 1, Section 1.7.4.). Moreover, installation and assembly instructions must give the requirements necessary to reduce noise or vibration. (Annex 1, Section 1.7.4, subpart (e)). Lastly, the directive requires that the manufacturer's sales literature not contradict its safety instructions. (Annex 1, Section 1.7.4, subpart d.).

Adequacy of Warnings Under the General Product Safety Directive. Warnings under the General Product Safety Directive must allow a user or consumer to make his own risk assessment. (Article 4, Section 2). The warnings must take into account "the perception and knowledge that can reasonably be expected from the intended or potential user or consumer." (Article 4, Section 1, subpart (a)). Moreover, for many products, the warnings must be readable "at all stages of use, consumption and disposal, and, if necessary, throughout the foreseeable use of time of the product including disposal." (Article 4, Section 1, subpart (b)).

Post-sale Updating. The General Product Safety Directive contains a permanent monitoring requirement which imposes on manufacturers a post-sale duty to monitor its product. (Article 5). This presumably means manufacturers must update warnings and instructions in accordance with the information gathered from the monitoring program. National authorities, who also are required to monitor product performance, can request that manufacturers issue new warnings based on their post-sale monitoring.

Interaction with the Product Liability Directive. The General Product Safety Directive and the Product Liability Directive interact in a complementary fashion. The General Product Safety Directive states that if a product does not conform and an action is taken against the manufacturer for violation of the directive, it shall not automatically mean the product is defective under the Product Liability Directive. But a manufacturer could reasonably assume a court would hold it liable under the Product Liability Directive.

Unlike the Product Liability Directive, which applies to virtually all products, the General Product Safety Directive applies only to a product intended for consumers or likely to be used by consumers whether new, used or reconditioned. Despite this language, experts disagree about whether the directive only applies to consumer products or whether it might also apply to machines subject to the Machinery Safety Directive.

The problem arises because the General Product Safety Directive makes clear that its provisions continue to apply to products not covered by other applicable rules of EU law. Therefore, to be especially careful, a manufacturer must compare the individual provisions of any directive that applies to its product. If that is done, there may be certain General Product Safety Directive provisions that apply to machinery.

Experts feel the General Product Safety Directive's effect on consumer product manufacturers could be significant. Non-complying products could be barred from some European markets or pulled off the shelves. Of course, non-compliance could also be used, despite the language in the General Product Safety Directive, as a basis for imposing strict liability under the Product Liability Directive, at the discretion of a nation's courts.

ISO Standards

The International Organization for Standardization (ISO) also publishes technical standards for companies that seek certification. Many of these overlap or at least interrelate with other technical standards applicable in product safety and product liability.

One group of standards published by ISO is referred to as ISO 9000. This series of standards relate to the establishment of quality assurance programs. One part of the ISO 9000 series, ISO 9004, establishes guidelines for quality management and quality system elements. Within ISO 9004 are various goals and requirements concerning safety and prevention of safety problems.

Section 19 of ISO 9004 requests that manufacturers consider "...identifying safety aspects of products or processes with the aim of enhancing safety." Specifically, section 19 lists steps that manufacturers can use to meet this goal. They include identifying relevant safety standards in order to effectively formulate product specifications, as well as carrying out design evaluation and prototype safety tests. More steps include analyzing instructions and warnings, maintenance manuals, labeling and promotional material in order to minimize misinterpretation, developing a means of traceability to facilitate product recall, and consider developing an emergency plan if a recall becomes necessary.

ISO 9004 is a voluntary part of the ISO 9000 series. Therefore, a manufacturer could be registered under ISO 9000 and not necessarily comply with ISO 9004. It is recommended, however, that any manufacturer interested in compliance and prevention consider these requirements and try to incorporate them into their normal product safety management procedures.

ISO also issues product-specific standards. For example, ISO 11684 relates to safety signs and pictorials for tractors, agricultural machinery and powered lawn and garden equipment. Any manufacturer of equipment falling under this standard needs to compare this standard's requirements with labeling requirements of the Machinery Safety Directive, the General Product Safety Directive, and any other general or product-specific directive or standard. After comparing requirements, the manufacturer will have to select which elements to comply with.

Impact Of Foreign Standards On U.S. Product Liability Litigation

Product liability litigation in the U.S. has not yet felt the impact of the European Directives and ISO standards. While product standards are often admissible to show whether a product is reasonably safe or whether a manufacturer was negligent, some U.S. courts have held foreign standards inadmissible. E.g., Garmon v. Cincinnati, Inc., 1993 W.L. 190923 (Tenn. Ct. App. 1993) (excluding British regulations and accident statistics because of danger of confusion when removed from the context of British custom and practice); Hurt v. Coyne Cylinder Co., 956 F.2d 1319 (6th Cir. 1992) (excluding expert testimony on British cylinder design standards); Deviner v. Electrolux Motor, AB, et. al., 844 F.2d 769 (11th Cir. 1988) (excluding Swedish law on chain saw design).

As more U.S. companies gain access to European markets, however, the European Directives and ISO standards could become increasingly significant in products litigation. For example, as U.S. companies more widely adopt European standards, U.S. judges may be less likely to regard such standards as confusing. Moreover, plaintiff's lawyers could attack companies who market a safer product in Europe than in the United States.

Furthermore, U.S. judges could begin allowing consideration of foreign standards under current evidence and discovery rules. For example, under Federal Rule of Evidence 703 and many similar state rules, expert witnesses may base opinions on data "reasonably relied on by experts in the particular field" even if the data is otherwise inadmissible. Judges could allow, under these rules, experts to base opinions on European Directives and Standards. Moreover, the technical files that the European Directives and Standards require companies to keep may be subject to the automatic disclosure provisions of the Federal Rules of Civil Procedure. Rule 26(a)(1) requires defendants to produce all "relevant" documents when litigation commences. Incomplete documentation could show that a company failed to thoroughly analyze a product's hazards. Thus, companies should assume a plaintiff's attorney will discover the contents of technical files.

Australia In July, 1992, Australia enacted a product liability law that tracks the European Union's Product Liability Directive in all important respects. Previously, common law tort and contract principles governed compensation for loss or damage caused by defective products.

The Australian law departs from the EU Directive on a couple of points. First, the Australian law provides a 20 year statute of repose, while the EU's Product Liability Directive provides a 10 year statute. Furthermore, the Australian law empowers the Trade Practices Commission to take representative actions on behalf of one or more consumers.

Taiwan Taiwan's New Liability Standard

The most prominent feature of Taiwan's recent legislation is its adoption of the theory of strict liability -- liability for damage or injury caused by a product, regardless of fault by the manufacturer or distributor. In the past, product liability claims in Taiwan were based on negligence and required the victim to prove that the manufacturer failed to exercise reasonable care in designing or manufacturing the product. Establishing manufacturer fault can be difficult for consumers, who lack the technical knowledge necessary to provide such proof.

Liability of Manufacturers and Service Providers

The law requires those engaged in the design, production or manufacture of products, or in the provision of services, to ensure that their products and services are "free from any danger to safety or sanitation." Further, if a product or service may pose a danger of personal injury or property damage to a consumer or third party a conspicuous warning of that danger and instructions for emergency treatment must be provided.

The language of the law is expansive. By its terms, the law applies to any danger that may be present in a product. By contrast, the standard of strict liability in the United States requires products to be free only of reasonable dangers. It is unclear just how broadly the Taiwanese standard will be interpreted and applied. Under the broadest reading, a manufacturer will be subject to liability for failure to remove all health and safety dangers from its products.

Liability of Product Distributors

Businesses that either repackage products for distribution and sale, or take products sold in bulk and break them into smaller units for distribution and sale, are considered manufacturers or providers of these products, and are subject to the same liability.

Under the principle of joint and several liability, those involved solely in the distribution and sale of finished products share liability for injury with the manufacturers. However, distributors and sellers are protected from liability if they exercised reasonable care to avoid the injury or, if despite their failure to exercise reasonable care, the injury still would have occurred.

Liability of Importers

Importers of products or services into Taiwan are also considered manufacturers of products, or providers of services. Therefore, they have the same liability as manufacturers or providers. In addition, the law requires all imported products or services to be accompanied by complete Chinese labels and instructions.

Damages, Remedies and Penalties

If a product or service injures a consumer in violation of the law, the responsible party must compensate the consumer for his or her actual loss, whether or not the manufacturer or provider was at fault. The law does not specify the types of damages that would constitute a victim's actual loss. While it is reasonable to assume that actual loss includes medical expenses and loss of income, it is unclear whether damages for pain and suffering are also included.

The consumer may also seek punitive damages. Depending on whether the victim's injuries were caused by negligence or by willful misconduct of the manufacturer or service provider, punitive damages may total one to three times the amount of actual damages.

In some circumstances, a manufacturer may be required to immediately recall all of its products in the field. Of course, this type of remedial action by the manufacturer could be more costly than losing a product liability lawsuit.

Defenses

Noticeably absent from the law are any defenses available to manufacturers or distributors. In the United States, for example, a manufacturer may successfully defend against a strict liability claim if the consumer misused the product in an unforeseeable manner, or if the manufacturer did not discover the product defect because of limited scientific or technical knowledge within the particular industry. These defenses are not included in Taiwan's product liability law. Nor does Taiwan's law have a statute of limitations period during which an aggrieved consumer must present his or her claim.

Procedure for Disputes

The Consumer Protection Law provides for a comprehensive network of private and government consumer protection groups. A consumer who is injured by a dangerous product may directly contact the responsible party. The consumer can expect his or her complaint to be handled within 15 days. If a timely response is not given, the consumer may file a complaint with a government consumer protection official. If the consumer fails to get a satisfactory response from the official, he or she can petition for mediation before a consumer dispute mediation commission. If mediation is unsuccessful, the consumer may initiate a lawsuit in a district court.

Private consumer protection organizations may also take action on behalf of injured consumers. For example, in cases involving more than 20 victims, a consumer protection group may bring a class action type lawsuit in its own name on behalf of the victims. To qualify as a consumer protection group and to be permitted to file such lawsuits, an organization must meet certain conditions and have the endorsement of government officials.

Other Consumer Protection Provisions

The Consumer Protection Law also regulates some of the ways that companies may promote and conduct business. First, a "truth in advertising" provision of the new law requires businesses to guarantee the accuracy of their advertisements. This provision entitles consumers to receive nothing less than what is stated in a particular advertisement. The Consumer Protection Law provides for a comprehensive network of private and government consumer protection groups. A consumer who is injured by a dangerous product may directly contact the responsible party. The consumer can expect his or her complaint to be handled within 15 days. If a timely response is not given, the consumer may file a complaint with a government consumer protection official. If the consumer fails to get a satisfactory response from the official, he or she can petition for mediation before a consumer dispute mediation commission. If mediation is unsuccessful, the consumer may initiate a lawsuit in a district court.

Private consumer protection organizations may also take action on behalf of injured consumers. For example, in cases involving more than 20 victims, a consumer protection group may bring a class action type lawsuit in its own name on behalf of the victims. To qualify as a consumer protection group and to be permitted to file such lawsuits, an organization must meet certain conditions and have the endorsement of government officials.

Consumers who buy products by mail also have significant new protection under the law. Now they have a seven-day "trial period" to return a product without stating any reason for the return, paying any part of the purchase price, or bearing any part of the cost of return. Finally, the law sets forth guidelines for contracts whose terms are presented to the consumer in a "take it or leave it" manner. The law states businesses must "follow the principle of equality and reciprocity in adopting terms for standard contracts." Contracts drafted in violation of this principle of good faith, or that contain obviously unfair terms, will be deemed unconscionable and may not be enforced.

China Manufacturers' Duties

China's Product Quality Control Law, which became effective in September 1993, holds manufacturers -- or producers -- responsible for product quality. Article 14 requires producers to manufacture products that:

• comply with national and industry standards;
• do not pose an "unreasonable danger" to people or property;
• have the "properties that should be possessed by such products," except where explanations about defects have been provided; and
• conform with standards carried on the product or its packaging, or with the quality indicated by a sample.

Producers are liable for physical injury or damage to another's property caused by a defective product. While the law defines "defect" as an "unreasonable danger" that "threatens personal safety or another's property," the phrase "unreasonable danger" is not further defined. Additionally, while the requirement that products have the properties they should possess is not clearly explained, the law expressly prohibits adding improper ingredients or elements, or selling imitation or low-grade products as genuine or high quality.

Producers are also subject to several labeling and packaging requirements. All product packages must contain:

• product quality inspection certificates;
• product name, producer name and address, in Chinese;
• the primary ingredients;
• expiration date; and
• warnings in Chinese if the product is potentially dangerous.

Distributors' Duties

Sellers or distributors under the Chinese law have the same responsibilities as producers plus additional obligations relating to marketing. For example, distributors must inspect products to make sure they are properly labeled, and make sure that their expiration dates have not passed. Moreover, while distributors are not responsible for compliance with industry standards, a distributor who knows that a product does not comply with the necessary standards may be subject to liability for personal injury or property damage caused by that product.

Defenses

Compared with its counterpart in Taiwan, the Chinese law is more favorable to manufacturers and distributors because it provides defenses. A manufacturer will not be held liable if it can establish that:

1. it did not put the product on the commercial market;
2. the defect did not exist at the time the product was put on the market; or
3. the defect could not have been detected at the time it was put on the market, because of limited scientific or technical knowledge.

The one defense available to a distributor is to demonstrate that another party, such as the manufacturer, was responsible for the defect. If the seller or distributor cannot locate the manufacturer, the seller must bear full responsibility for compensating an injured consumer. If the manufacturer can be identified, the product distributor has a recovery right against that manufacturer.

The Chinese law also has a statute of limitations and statute of repose for both manufacturers and distributors. Under the law, a claim must be brought within two years of the date that the defect was or should have been discovered. Moreover, a consumer may not bring a claim more than ten years after the product was delivered to the first consumer, unless, as Article 33 provides, "the clearly indicated period of safe use has not yet expired."

Damages

Injured consumers under the Chinese law can recover medical expenses, lost income and cost of living if unable to resume working. In case of death, the liable party must pay funeral expenses as well as pensions and living expenses of the deceased's dependents. The law also contains a potentially broad provision that requires that the liable party compensate the injured consumer for all other "major losses." (Article 32).

In addition to damage payments, failure to comply with national or industry standards can produce stiff penalties. Authorities will order manufacturers not in compliance to cease production and will seize illegal products and income derived from their sale. Moreover, a non-complying manufacturer will be fined at least two times and as much as five times the illegal income amount. Manufacturers are strictly liable for non-compliance with national or industry standards, while sellers are liable only if they actually knew they were selling non-complying products.

Japan Manufacturers' Liability

Japan's Product Liability Law, the first Japanese legislation of its kind, went into effect on July 1, 1995. Under the new law, a manufacturer is strictly liable for personal injury or property damage caused by a defect in a manufactured, processed or imported product. The law defines "manufacturer" as "any person who manufactured, processed, or imported the product" and any person who puts a name, trademark, or other feature on the product in a manner that would mislead a consumer into thinking that person is the manufacturer.

The law defines "defect" as "a lack of safety which ordinarily the product should provide, in consideration of the characteristics of the product, the use of the product which could ordinarily be expected, the time that the manufacturer . . . delivered the product, and other circumstances relating to the product." The definition's reference to a lack of normal safety suggests that defective products are those that are unreasonably dangerous to the consumer. Moreover, the reference to "circumstances relating to the product" suggests that instructions and warnings are relevant factors in determining whether a product is unreasonably dangerous.

Defenses

Like the Chinese law, the Japanese Product Liability Law provides a defense to manufacturers who could not have been aware of the defect at the time the product was marketed, because of limited scientific or technical knowledge. In addition, the law includes a section protecting small subcontractors, raw material providers or parts manufacturers. These types of defendants are not liable if they can show they are not negligent and that the defect was solely attributable to instructions concerning the design specifications provided by the manufacturer of the finished product.

The Japanese law, like its Chinese counterpart, also provides two limitations periods. Under the first, a claim is barred if not brought within three years of when the injured party discovers the damage and identifies the liable party. Under the second limitation period, a claim is barred if brought ten years after the manufacturer first delivered the product.

An exception to the ten year limitation exists, however, in the case of latent injuries. Where damage is caused by substances that cause damage over time, or where the symptoms appear after a latent period, the ten-year limitation period does not begin until such damages arise.

Impact of the Japanese Product Liability Law

Cultural, procedural and evidentiary restraints will likely combine in Japan to discourage a flood of litigation under the new law. In addition to a culture that de-emphasizes rights of the individual and elevates conciliation over litigation, the Japanese legal system is filled with devices that deter litigation. For example, a shortage of judges and lawyers deter the initiation of lawsuits. Once initiated, judges intentionally break-up proceedings with long delays to encourage settlement.

Moreover, pre-trial discovery is severely limited. Interrogatories, depositions and requests for admissions are unavailable, and requests for production of documents are limited to narrowly defined categories. Finally, costs are often prohibitive. Claimants must pay their lawyers a retainer based on a percentage of the amount in controversy. Similarly, the claimant must pay court filing fees equal to a percentage of the amount in controversy. In short, despite the advent of strict liability, Japanese litigants face many often prohibitive hurdles to bringing claims under the new law.

Hong Kong The Toys and Children's Product Safety Ordinance

In July, 1993, Hong Kong enacted its only product safety law, The Toys and Children's Product Safety Ordinance. The ordinance requires that any toy or children's product manufactured, imported or supplied for consumption within Hong Kong must be safe.

General Safety Requirement. The ordinance provides that toys and children's products must meet the "general safety requirement." The general safety requirement imposes a duty on manufacturers, importers and suppliers to ensure that a toy or children's product is reasonably safe. Whether an item is reasonably safe depends on the manner in which the toy or children's product is marketed and any warnings or instructions dealing with storage, use or consumption. Moreover, to meet the "general safety requirement," each toy and its packaging must comply with each applicable requirement contained in one of the following sets of toy standards:

• the International Committee of Toy Industries Voluntary Toy Safety Standard;
• the European Committee for Standardization's European Standard EN71; or
• American Society for Testing and Materials ASTM F963.

In addition to the "general safety requirement," the ordinance requires that certain children's products listed in a special schedule must comply with the British Standards Institution's safety standard for that listed product.

Defenses. It is a defense under the ordinance if a person can show:

• a reasonable belief the product would not be used or consumed in Hong Kong;
• that the person supplied the products in the course of carrying on a retail business and at the time the products were supplied, the person neither knew nor reasonably should have known the product did not meet the "general safety requirement"; or,
• that the terms on which that person sold the products indicated that they were not being sold as new goods.

The ordinance also provides a "due diligence" defense that allows courts to consider any laboratory certificates that suggests the item in question complies with the ordinance's safety requirements.,

Enforcement and Penalties. The Commissioner of Customs and Excise enforces the Toys and Children's Products Ordinance by acting on consumer complaints and conducting inspections. The Commissioner can require the manufacturer, importer or supplier to have the product tested, and to modify labels, packaging and advertising. If the Commissioner determines a product may be unsafe, the Commissioner may require the manufacturer, importer or supplier to warn users that a product is unsafe unless certain step are taken. Moreover, the Commissioner may prohibit the sale and order a recall of unsafe products. The ordinance provides for fines and imprisonment for persons convicted under its provisions. For a first conviction, a person faces a fine of HK $100,000 and one year in prison. A subsequent conviction can bring a HK $500,000 fine and two years imprisonment. Moreover, where the Commissioner proves the offense was ongoing, the convicted person is subject to a HK $1000 fine for each day the offense continued.

Conclusion: Manufacturers who sell globally have a plethora of requirements and guidelines to consider and interrelate. Many of these are inconsistent or at least difficult to consider together. Making final design choices will not be easy.

In Europe, fortunately, the risk of increased product liability under the new Product Liability Directive is minimal. Each European country's laws have established fault-based compensation systems for consumers injured while using products. Adoption of these new directives and safety requirements should not immediately add to potential liability for manufacturers who sell in Europe. Nonetheless, manufacturers must diligently identify the various requirements and decide on a design and labeling that produces a safe product that can be sold in every European country.

In Taiwan, China, Japan and Hong Kong, it is difficult to predict how courts and governments will interpret or enforce new product safety laws which, in the case of Taiwan, are somewhat stricter than comparable U.S. laws. Moreover, in Japan, for example, industry analysts note that the law's success or failure will depend on a legal system where the number of lawyers is small, and the number of years it takes to resolve a typical product liability case is large. Critics of the Japanese legislation are quick to point out that the law may be undermined because so-called discovery rules, which allow consumer plaintiffs to uncover corporate records and information, remain very limited.

Despite the uncertainty, a general principle is clear: the global expansion of consumer protection rules will make it much easier for consumers to sue companies for injury or damage resulting from the sale of a defective product.