Client Services / International / Chinese Products

Chinese Products

Any company that has imported defective or unsafe products from China faces a potentially broad array of legal problems, including the possibility of having to defend itself against class action lawsuits commenced by consumers who have been injured (physically or financially) by the imported product; the need to seek indemnification for all resulting financial losses from the culpable Chinese exporter/manufacturer; the obligation to address and comply with governmental safety regulations, including potential product recall orders and food and drug safety statutory requirements; the need to seek insurance coverage and respond to the typical defenses asserted by insurers against defective product claims; and the need to revise its import contract with the Chinese manufacturer to avoid, or at least minimize, any liability arising from future imports.

McDermott Will & Emery is uniquely qualified to assist companies that import goods from China on all of these legal issues.   Our Chinese Products Practice Group integrates lawyers from the various relevant practice areas (e.g., class action, international dispute resolution, product recall), and from MWE China Law Offices, who work together to address our clients’ challenges with comprehensive and customized legal solutions.  The goal of the Chinese Products Practice Group is to provide importers of defective products with a coordinated “one-stop shopping” legal experience—such that the numerous legal problems which can arise from the importation of defective products are analyzed, prioritized and resolved in the most efficient manner possible.

McDermott’s Chinese Products Practice Group includes lawyers in the following practice areas:

Class Actions

Given the wave of class action lawsuits that have been filed against importers of defective Chinese goods, importers with potential legal exposure are well advised to consult with knowledgeable class action defense lawyers as early as possible, even before any class action suit is filed.   By consulting with a class action lawyer early in the process, importers at risk may be able to devise and implement preemptive defensive strategies, including strategies designed to defeat class certification.

McDermott’s Class Action Practice Group has extensive experience in the defense of a wide variety of class action lawsuits in state and federal courts throughout the United States.  The group is known for its strategic and tactical skill in the management of large and complex class action litigation.  Members of the group practice before the Judicial Panel on Multidistrict Litigation and serve as lead defense counsel in class actions in federal multidistrict litigation.  Members of the group also represent clients in parallel government proceedings, including multi-state attorney general investigations and actions.

International Dispute Resolution

In the event that an importer of Chinese goods is sued in the United States or in the courts of any other country, the reasonable first step would be to seek indemnification from the culpable Chinese exporter/manufacturer of the goods.   Finding a suitable forum to assert claims against a Chinese entity, however, is not always easy.  Commencing a lawsuit against the Chinese exporter/manufacturer in a U.S. or other non-Chinese court is frequently impracticable, since Chinese entities can often successfully challenge the jurisdiction of the court or, if the Chinese exporter has no assets located abroad, avoid enforcement of a court judgment altogether.   In addition, many, if not most, contracts with Chinese exporters/manufacturers require that all disputes arising under the contract be subject to arbitration in a foreign forum.

Whether it is necessary to commence a litigation or an arbitration against a Chinese exporter/manufacturer, importers should seek advice from lawyers who focus on international dispute resolution (IDR).  McDermott has an IDR Practice Group that focuses exclusively on the resolution of cross-border disputes.  McDermott’s IDR lawyers have experience arbitrating a broad range of international commercial disputes, including disputes arising from trade and importation contracts.  We pride ourselves on providing creative advice in the resolution of international disputes.

Our IDR capabilities specifically include advising on Chinese arbitration matters.   Most arbitration clauses with Chinese entities call for arbitration under the rules of the China International Economic and Trade Arbitration Commission (CIETAC) and the Hong Kong International Arbitration Centre (HKIAC).  McDermott’s IDR Practice Group has substantial experience arbitrating both CIETAC and HKIAC disputes.

MWE China Law Offices

MWE China Law Offices is a Chinese law firm with a professional team of lawyers licensed to practice in the People’s Republic of China.   MWE China Law Offices has a strategic alliance with McDermott Will & Emery and thus can readily provide our clients with superior Chinese legal services.  With more than 30 lawyers, MWE China Law Offices possesses in-depth knowledge and understanding of the laws, customs and regulations of the People’s Republic of China, combined with a Western-style approach to client service.  The office advises clients on all areas of Chinese and international law, and works with both Chinese companies and multinational companies doing business in China.

In the event that an importer of defective Chinese goods must seek compensation from the exporter/manufacturer in the Chinese courts, MWE China Law Offices stands ready to assist.   Its lawyers regularly represent leading global corporate and financial institutions in a range of litigation and administrative proceedings across China.  The lawyers of MWE China Law Offices also work closely with McDermott’s IDR Practice Group in arbitrating Chinese disputes, inasmuch as Chinese arbitrations are often conducted in the Chinese language, and inasmuch as Chinese law often governs the substantive law of the contract or affects the procedural law of the arbitration situs.  MWE China Law Offices is also able to conduct investigations of the Chinese exporter—including an investigation into the financial ability of the exporter to pay any future arbitration award—and, if necessary, apply to the Chinese courts for attachments or other interim relief in aid of an ongoing arbitration.

Product Recalls

A critical concern of any importer of defective Chinese products is the prospect of having to remove, or “recall,” the product from the marketplace.   In the United States, the Consumer Product Safety Commission (CPSC) has the authority to monitor, implement and enforce the recall of potentially dangerous products that have been put into the stream of commerce.  A U.S. importer that fails to notify the CPSC of a defective imported product can be subject to severe fines and penalties. 

McDermott’s Chinese Products Practice Group includes lawyers who focus on CPSC investigations and product recalls, and who have the knowledge and experience necessary to navigate the sometimes intricate maze of statutory compliance.   Given the huge financial costs of recalling a product from the marketplace—or, alternatively, the significant penalties for failing to recall a hazardous product—our lawyers who focus on product recall can advise on the best and least risky course of action for importers of defective Chinese goods.

FDA Issues

As the lead federal agency responsible for protecting U.S. consumers from adulterated and misbranded foods, drugs and cosmetics, the U.S. Food & Drug Administration (FDA) has had to deal with a barrage of complaints associated with Chinese foodstuffs and medical products imported into the United States.   The FDA has, in turn, significantly increased its surveillance of Chinese food and drug imports, increasing the risk that such imports may be denied entry into the United States.

The Food & Drug Practice Group at McDermott Will & Emery combines nearly 60 years of experience with a diversity of perspectives and training.   Members of the group have served in the executive branch, on Capitol Hill, on presidential commissions, in trade associations and in private companies.  The group has experience in drug, device, biologics, food and animal drug regulation, as well as the approval, compliance and regulation of biotechnology matters.  With this experience, we are able to advise importers of such regulated products from China regarding the likelihood of government regulatory action against their imports and the possible legal measures that can be taken to limit the consequences and expense of such regulation.

Congressional Investigations

The U.S. Congress has started to respond to the Chinese defective goods scandal by conducting oversight hearings with various federal agencies, including the FDA, the CPSC, the U.S. Department of Agriculture and other organizations that regulate the importation of drugs, toys, foodstuffs and other products into the United States.   It is likely that U.S. importers that are involved in particular cases of interest will be “invited”—or, eventually, subpoenaed—to appear as congressional witnesses at adverse hearings on product importation and safety issues.

McDermott has a group of lawyers who practice exclusively in this arena, and who have a proven record of successfully assisting clients in response to congressional investigations.   If a company is forced to testify publicly in a U.S. congressional hearing, it has the potential to cause enormous damage to the company’s brand name.  Civil or criminal investigations can also be impelled or influenced by such hearings.  Our professionals can help devise the right mix of legal, media and lobbying strategies necessary to avoid the worst consequences of a congressional investigation.

Insurance

Importers of defective Chinese goods face a number of insurance issues.   Most notably, importers must assess whether their current product liability policies provide sufficient coverage against potential product class action suits and whether their Chinese suppliers maintain adequate liability insurance to protect their own interests.  Given the potentially huge expense of complying with a governmental product recall order, importers of Chinese goods must also consider whether to add product recall coverage to their insurance portfolios.

McDermott’s Insurance Industry Practice Group is well positioned to advise importers regarding the terms and provisions of their current policies, as well as to negotiate policy endorsements intended to best protect importers from the plethora of liabilities associated with defective Chinese goods.   McDermott’s insurance lawyers are also prepared, if necessary, to engage in coverage litigation arising out of any product liability or product recall matters.  McDermott’s insurance lawyers have represented clients in numerous import industries, including automotive, consumer products, food products, oil/gas and pharmaceuticals.

Review/Revision of Chinese Import Contracts

In addition to taking steps to resolve liability arising out of past Chinese imports, importers of Chinese goods should also constructively review their current import contracts with an eye to minimizing liability on future imports.   In this regard, the international corporate lawyers in McDermott’s Chinese Products Practice Group have already identified, and stand ready to negotiate, key provisions that importers should seek to add to their import contracts, including provisions requiring quality control and inspection of goods before they are exported out of China, specific indemnities in favor of the importer on product quality and safety issues, provisions requiring Chinese exporters to obtain and maintain sufficient product and general liability insurance protecting the importer, and provisions mandating the arbitration of any disputes arising out of the contract in a forum best designed to protect the importer’s interests.

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