Invisible Trade Hurdle
China’s new Consumer Rights Protection Act, which hasn’t been revised in 20 years, becomes effective on March 15. The purpose of the new law is to protect consumers from exaggerated advertisements and counterfeit products. However, Korean companies doing business with China are pretty anxious, because it could be abused as a non-tariff barrier against foreign businesses.
The new act imposes excessive duties on the companies in China but the principle of the application of the law has not been clarified yet. This is why not a few experts are concerned over the possibility of abuse.
According to the revised act, a company has to pay compensation if it fails to prove that there is no flaw in a durable consumer product such as air conditioners and TV sets. This is to allow for the difficulty of defect verification on the part of consumers.
In addition, the minimum damages for the irrational provision of a product or service have been increased from 100 percent to 300 percent of the product price under the new law. The business license of a company will also be canceled if it is engaged in the falsification of a date or place of production, factory designation, quality-related documentation, etc. In the event of false advertising or fraudulent sales, not just the product supplier but also the advertiser and the celebrity in the ad can be held responsible.