On January 01, 2013, the Chinese government will be implementing new automotive recall laws to increase consumer protections against lemon automobiles. The laws are likely to created disputes within the market as new regulations increase the accountability of manufacturers when it comes to quality control and documentation.

Presently, there is a patchwork of recall regulations implemented in response to a crisis of some kind. The first auto recall regulations were issued in in 2004 when foreign manufacturers did not give Chinese consumers the same rights as other jurisdictions. Other recall regulations were passed in relation to problems found with food and toys in 2007.

Under the new automotive recall laws:

• Manufacturers will be defined as only Chinese automotive manufacturers and importers of foreign cars into China. Foreign manufacturers will be excluded from recall liability in China to ensure that importers of foreign vehicles will not be able to shift the recall responsibility back onto foreign manufacturers in the future.
• The definition of a defect will include those cases in which standards are met but where the product may still present unreasonable hazards.
• Complainants’ will include any organization or individual , not just the owner or driver of an automobile. There is no requirement for the complainant to prove that he or she is the vehicle owner, as under the current provisions.
• Sellers shall establish stock account and sales account, record details of sales including product type, specification, production batch and quantity etc. These details must be stored for at least 3 years.
• When the seller or service provider become aware that a defect may be harmful to human health and safety, they must stop the sale, use or lease of products, inform the customers, producers and suppliers and report the problem to the quality department. The seller or service providers are also under a duty to coordinate with the producers to carry out the recall.

Risks of abuse are expected to be high, especially since China’s government tend to interfere in private business at all levels. Manufacturers could expect to see a range of complaints from bodies without a genuine liability problem, who are motivated to disrupt competition in the market and protect local brands. Recalls of defective cars are expected to rise significantly after the regulation is introduced.