Disputes over masks and other epidemic prevention materials

1. Frequent disputes over masks

In April 2020, the epidemic was flourishing in foreign countries. Supplier received an order for masks from German home decoration importer B, which had cooperated for many years, and purchased a batch of kn95 masks of a certain domestic brand from it. The order amount was about 110000 US dollars, and the goods were delivered upon payment. In July 2020, the German buyer B purchased a batch of decorations from supplier in the form of credit sales, with an amount of about 30000 US dollars. However, after the expiration of the collection period, the buyer B delayed to pay.

However, the buyer claimed that the masks shipped in April had quality problems and counterclaimed US $110000. The buyer claimed that after deducting the payment of USD 30000 for ornaments, supplier still had to pay more than USD 70000 to it. The reason was that in the notice of unqualified products issued by the EU fast warning system for non edible consumer goods in the 17th week of 2020, the brand kn95 mask was considered to be in violation of the EU Personal Protective Equipment Directive en149 due to its insufficient filter retention capacity. Belgium, the reporting country, decided to mark appropriate risk warning on the product package to remind consumers, As a result, this brand of mask is not marketable in the EU.

In addition, the buyer said that the mask inspection certificate presented by supplier was issued by the Italian ECM international certification center, while ECM was not the designated organization to issue the certificate of personal protective equipment (PPE) in the EU directive, and the certificate issued by ECM had no authoritative effect in the EU. In conclusion, buyer B is unwilling to pay.

3. Investigate the financial situation of the buyer in advance

In the first half of 2020, affected by the COVID-19 epidemic, the mask industry developed explosively. However, with the resumption of work and production of domestic enterprises, the original medical supplies enterprises expanded production, and enterprises in other industries switched production, the mask production capacity increased dramatically. In addition, the domestic epidemic has been controlled, and the domestic demand for masks tends to be saturated. Many export enterprises have turned their eyes to overseas countries where the epidemic broke out. However, before China officially issued the relevant guidelines for the export of masks in April, the export enterprises did not pay too much attention to the quality of the exported masks or the relevant certification certificates required. With the relaxation of restrictions and the resumption of production in many countries, the production capacity of masks has been surplus. This also triggered warnings from the United States, Canada and other countries to many mask manufacturers in China since April.

However, the export enterprises neglect to investigate the financial situation of the buyer in advance, and it is very easy to ignore the potential trade risks; In addition, the strong trade impulse also led to the buyer and the seller’s over contempt for the original industry standards and testing requirements, which led to the subsequent payment of the goods everywhere, causing huge losses.

In view of this, it is suggested that enterprises should pay attention to the following matters when exporting epidemic prevention materials:

1. Pay close attention to the relevant import regulations and standards of the epidemic country. At present, the regulatory policies related to epidemic prevention materials at home and abroad are changing rapidly, and the requirements of importing countries are also different. The export enterprises should follow up and pay attention to the latest qualification certification and regulatory requirements of epidemic prevention materials at home and abroad issued by the State Administration of market supervision and Administration, the customs and other relevant regulatory departments, take the initiative to do a good job in compliance management, avoid the risk of goods being detained or returned. Both parties shall clearly agree on the quality terms in the contract terms. Specifically, it can include: specifying the applicable quality standards of the products to avoid disputes arising from the unclear contract agreement and the different understanding of the quality standards between the parties; Clearly agree on the acceptance terms, determine the acceptance standard and acceptance place; The third-party quality inspection organization recognized by both parties shall be agreed in advance.

2. The exported products must first meet the quality standards of China. Foreign trade enterprises must first distinguish whether the exported epidemic prevention materials belong to ordinary goods or medical devices. Ordinary goods shall be implemented according to national standards or industrial standards or enterprise filing standards. Besides meeting the quality standards, medical devices shall also obtain the registration certificate of Chinese medical device products. Take masks as an example, masks can be roughly divided into ordinary masks and medical masks, Personal protective or industrial masks are ordinary masks, but medical masks belong to medical devices. If the produced masks belong to surgical masks and medical protective masks of class II medical devices in the classification catalogue of medical devices, the manufacturer shall obtain the production license and submit the certification materials that meet the conditions specified in the regulations on the supervision and administration of medical devices and the registration certificate of the medical devices produced, The business scope of foreign trade enterprises shall include medical device sales items; The exported products shall also meet the quality standard requirements of the importing country (region). For example, the United States requires such products to be registered with the US FDA (except for exemption items), and some commodities also need 510k and NIOSH certification; The European Union directive on personal protective equipment (PPE) requires that the CE certification on product conformity be completed and the CE mark be affixed before sales. That is to say, the export enterprises need to know in advance the quality standard requirements and access conditions of epidemic prevention materials and medical materials in the importing countries. If the export customs clearance process only meets the regulatory requirements of the Chinese customs (since April 1, the enterprises exporting novel coronavirus detection reagents, medical masks, medical protective clothing, respirators and infrared thermometers must provide written or electronic statements when declaring to the customs, and promise that the exported products have obtained the registration certificate of Chinese medical devices and meet the quality standards of the importing countries (regions)). The customs shall check and release the medical device product registration certificate approved by the drug regulatory department.), If it does not meet the customs clearance requirements of the importing country for the import of corresponding materials, it is very likely that it will not be able to pass the customs when the destination country clears the customs, which will lead to the failure to deliver the goods to the trade counterpart and constitute a breach of contract, and there is a risk of claims. Even if the customs clearance is smooth, if the quality of some products does not meet the quality standards of the importing country, there is a hidden danger of being claimed in the future.

2. During the signing of the contract, both parties shall describe the name, specification, quantity, unit price, acceptance standard, inspection period and other information of the purchased goods in detail as much as possible, and specify the registration and certification information of the products in the buyer’s country and other relevant information in the contract. It is also agreed that if the buyer considers that the goods do not meet the quality requirements, it shall notify the seller within a certain period; otherwise, the quality shall be deemed to meet the agreement, and the seller’s liability for breach of contract shall be exempted. It may also be specially agreed that in the event of any conflict between the standards of the importing country and the standards of the exporting country, the standards of the exporting country shall prevail if the standards do not substantially affect the functions and effects that the products normally should have; The upper limit of the compensation amount can also be specified in the contract (for example, whether the buyer claims or the third party claims, it is limited to one or two times of the transaction price).

3. In case of disputes between the buyer and the seller that cannot be settled through negotiation, international commercial arbitration is required. It is suggested that the laws of the people’s Republic of China should be applied to the disputes in the international trade contract as far as possible. In consideration of the cost of arbitration fees and familiarity with arbitration rules of overseas institutions, and in order to protect their own interests to the greatest extent, it is suggested to agree in the contract that the disputes between both parties should be submitted to well-known domestic arbitration institutions for arbitration, such as China International Economic and Trade Arbitration Commission (CIETAC), Shenzhen International Arbitration Institute (SCIA), etc.