In view of the rapid development of commerce and technology in recent years, the Ministry of Economic Affairs (the "MOEA") proposed a draft amendment (the "Draft Amendment") to the Commodity Labeling Act (the "Act") on April 10, 2020, to meet current business needs and to provide consumers with greater protection. A summary of the Draft Amendment and our comments are as follows:
I. Summary of the Draft Amendment
1. Commodities Being Sold Online Are Also Subject to the Act
While the MOEA had issued an interpretation (Ref. No.: Chin-Shan-Zi No. 09702502860) in 2008 clarifying that the Act also applies to commodities being sold online, there are still frequent cases where the labeling of said commodities do not conform to the standards under the Act. For the purpose of informing traders and consumers of such labelling obligations, the MOEA incorporated said interpretation into Article 2 of the Draft Amendment.
2. Identifying Entities Obligated to Label Mandatory Information on Commodities
According to Article 4 of the Act, the entities obligated to label mandatory information on commodities (the "Obligated Entities") are "business operators" of which the definition is not clear. For the purpose of making the aforesaid definition clearer, Article 5 of the Draft Amendment stipulates that the Obligated Entities are the manufacturers (for locally manufactured commodities), importers (for imported commodities), contracting manufacturers (for commodities locally manufactured by a contract manufacturer, i.e., ODM or OEM), and re-packers (for commodities re-packed before being sold).
3. Updating Mandatory Information Required to Be Labelled on Commodities
In line with the amended definition of Obligated Entities under Article 5 of the Draft Amendment, the MOEA updated the mandatory information required to be labelled by the Obligated Entities under Paragraph 1, Article 6 of the Draft Amendment. The name, address and telephone number (collectively, the "Contact Information") of the manufacturer shall be labelled on a locally manufactured commodity; the Contact Information of the contracting manufacturer shall be labelled on a commodity locally manufactured by a contract manufacturer; the Contact Information of the importer, the agent or the local responsible vendor shall be labelled on an imported commodity; and for a commodity re-packed before being sold, the Contact Information of the re-packer shall be labelled thereon. The "place of origin" shall be labelled as well. In addition, the "net weight, volume or measurements" may be labelled in measurements commonly used internationally instead of statutory measuring units. Furthermore, the manufacturing date is only required to be labelled on the "manufacturing year and month in ROC calendar or Gregorian calendar".
It is also stipulated under Paragraph 2, Article 6 of the Draft Amendment that in the event of any changes to the Contact Information of the Obligated Entities labelled on the commodities already being sold or displayed on the market, the labelling may remain the same; provided that such changes shall be made publicly known to the consumers (e.g. by press release or announcement on the official website of the Obligated Entities).
4. Electronic Labelling Is Allowed for Certain Types of Commodities Designated by the Central Competent Authority
Considering that some types of commodities may require electronic labelling due to technological, industrial or economic developments, the MOEA adds Paragraph 3, Article 10 to the Draft Amendment, under which the central competent authority may, via public notices, designate certain types of commodities for which electronic labelling may be used.
5. Certain Pieces of Mandatory Information Are Not Required to Be Labelled in Chinese
To align with the international norm, Article 11 of the Draft Amendment stipulates that certain pieces of mandatory information, for example, the "place of origin", "major components/ingredients or materials", "net weight, volume, quantity or measurement" and "manufacturing year and month in ROC calendar or Gregorian calendar", may be labelled in English and/or using internationally accepted words or symbols.
6. Local Competent Authorities May Conduct Inspections at the Facilities Where the Commodities Are Manufactured, Stored or Re-packed
Under Paragraph 2, Article 14 of the Draft Amendment, the competent authorities of a municipality government or a county (city) government (the "Local Competent Authorities") may conduct an on-site inspection at the facilities of the manufacturer, the importer or the re-packer of the commodity or other facilities where the commodity is manufactured, stored or re-packed, if the labelling requirements under this Act is suspected to have been violated. The manufacturer, importer, re-packer of the commodity or the responsible person of such facilities shall not evade, impede or otherwise repudiate such inspection; instead they shall provide relevant information. For each violation of the aforementioned obligations, fines ranging from NT$20,000 to NT$200,000 may be imposed in accordance with Article 19 of the Draft Amendment. Fines can be imposed repeatedly until a violation is rectified.
7. Online Platform Operators' Obligations to Cooperate with the Local Competent Authorities
As stipulated under Article 15 of the Draft Amendment, the Local Competent Authorities may, where necessary, request the online platform operators to provide the data of those who put up the listing for the sale of commodities or the sellers or purchasers of commodities. For any violation of the aforementioned obligations, fines ranging from NT$20,000 to NT$200,000 may be imposed in accordance with Article 20 of the Draft Amendment. Fines can be imposed repeatedly until a violation is rectified.
8. A Penalty May Be Imposed Without First Giving the Violator An Opportunity to Rectify Its Violation
Under the current Article 14 and 15 of the Act, Obligated Entities in violation of the Act will be afforded with a rectification period, and will be imposed with a fine only if the violation is not rectified by the expiry of the rectification period. Under Articles 16 and 17 of the Draft Amendment, for any violation of the Act, except for a violation which is not deemed material (for which the rectification period will still be granted), the Obligated Entities would be imposed with fines directly and be ordered to rectify such violation within a given time limit.
II. Comments and Observation
Aside from clarifying the ambiguities under the Act, the Draft Amendment also proposed to relax or lift a few restrictions on commodity labelling, making the labelling method in a more feasible and flexible manner, which is beneficial to the Obligated Entities.
However, the on-site inspection stated under Article 14 of the Draft Amendment can be easily triggered in the case where the labelling of a commodity is "suspected" to be in violation of this Act; the content and scope of such inspection as well as the relevant information to be provided need to be further clarified. In addition, the content and scope of the information that an online platform operator is required to provide to the Local Competent Authorities under Article 15 of the Draft Amendment are not crystal clear, and the need of submitting purchasers’ data (especially if the purchasers are ordinary consumers instead of business operators) should also be carefully considered. Moreover, while the legislative intent is to promote and ensure business operators’ compliance since no period for rectification will be granted, there might be an increase in the number of administrative lawsuits in challenging Local Competent Authorities' decision on whether a violation is deemed of a minor or material nature. The dialogue between the Local Competent Authorities and the alleged violators regarding the remedial measures would no longer exist as administrative penalties can be imposed directly.
The MOEA will submit the updated Draft Amendment to the Executive Yuan and the Legislative Yuan for further review after taking into account the relevant opinions collected within 60 days after the announcement of the Draft Amendment. The development of the Draft Amendment remains to be watched.