Country of Origin Labels for E-Commerce Are Just Business as Usual

The new e-commerce rule has drawn flak as an anti-China gimmick, but labelling requirements already include this.

Published31 Jul 2020, 03:10 PM IST
Opinion
4 min read

The consumer protection regime in India has seen a recent overhaul with the Consumer Protection Act, 2019, (the “CPA”), replacing the Consumer Protection Act, 1986.

The restated Act builds on the experiences gained from the existing legal framework and addresses new consumer protection issues, such as e-commerce.

The CPA recognises that consumers have the right to be informed about the quality and standard of goods, products or services to protect them against unfair trade practices.

The Act also empowers the central government to make rules for the purpose of preventing unfair trade practice in e-commerce.

One of these new rules has generated significant interest: the requirement for e-commerce platforms to display the country of origin of the product.

But, is this just an attempt to strike an anti-China pose as some have argued? Is this even a new requirement under the law? And are there any concerns to be kept in mind about its implementation?

NEW E-COMMERCE RULES COME INTO FORCE

In exercise of these powers under the CPA, the Consumer Protection (E-commerce) Rules, 2020 (the “E-commerce Rules”) were notified on 23 July 2020.

The Rules set out a detailed regulatory framework for e-commerce entities and apply to all e-commerce operators, whether registered in India or abroad, that offer goods and services to Indian consumers.

As mentioned earlier, a significant new requirement imposed by the Rules is that every product listing on an e-commerce platform must display the country of origin for the product. These rules apply to all e-commerce, that is, all sale or purchase of goods over the internet.

As the e-commerce rules have already been notified, all product listings must now include this additional information. However, news reports suggest that major e-commerce operators have sought additional time to comply with this new obligation.

NOT JUST AN ANTI-CHINA GIMMICK

Labelling requirements are not new. Under the Legal Metrology Act, 2011, all products are already required to carry country of origin labels.

In addition to country of origin labelling requirements, there are various other mandatory labelling requirements that apply depending on the product involved.

For example, under the Food Safety and Standards Act, 2006, food products need to provide information with respect to ingredients and whether the products contain any meat products.

The principle underpinning these laws is to provide consumers a clear understanding of the product being offered for purchase. For example, a consumer buying olive oil should be able to see whether the olive oil comes from Italy, which connotes a certain level of quality, or from another country.

By the same token, it would also help consumers in choosing between products that are locally made and those that are imported. It is this principle that is operationalised by the CPA and the e-commerce rules.

Consumer awareness is not the only reason behind disclosure of origin requirements. Identification of originating country is essential for calculation of custom tariffs and implementation of multilateral and bilateral trade agreements.

For example, products originating in certain countries are eligible to avail benefits under free trade agreements existing between India and the country of manufacture. However, there are detailed rules prescribed to determine the country of origin for a given product.

Such requirements are also not unique to India. Most other countries impose similar labelling requirements. However, what is perhaps unique in the Indian context now is to have a special set of rules that apply to online sellers.

WELCOME STEP TOWARDS VOCAL FOR LOCAL – BUT SOME CAUTION NEEDED

The Rules seem to be another move to support the government’s Atmanirbhar Bharat policy. As such, clear labelling would help consumers who want to purchase local products make that choice more easily.

That said, determination of country of origin labelling in a globalised world where supply chains criss-cross multiple countries can be very complex. While the government's objective is laudable, there is always a risk that overregulation could stifle the nascent e-commerce sector.

For example, the e-commerce rules require online sellers to appoint a grievance redressal officer who acknowledges complaints within 48 hours. Sellers are also required to display guarantees regarding the authenticity of imported products.

While this would be easy enough to comply for a large business, smaller businesses may struggle to understand and comply with these requirements.

Specifically, with respect to the labelling requirements, sellers and e-commerce operators could be held liable for mislabelling if a country of origin labelling is incorrect.

As a seller, it is unclear if it would be enough for the seller to simply rely on the label on the product or if the seller is required to examine this further.

Mislabelling may be viewed by the authorities as an unfair trade practice. The penalties for unfair trade practices under the CPA include recall and replacement of the products, reimbursement of the purchase price or payment of compensation to the buyer.

The e-commerce rules as currently drafted require only sellers offering goods through marketplace e-commerce entities to disclose the country of origin. Thus, an inventory-based e-commerce entity selling goods on its website will be exempted from this requirement. The reason for such distinction is unclear.

While the move to make country of origin disclosures mandatory for e-commerce websites is a welcome step, care should, however, be taken in taking a practical approach to enforcement of this rule so that e-commerce operators and sellers do not face undue scrutiny.

(Moksha Bhat is a founding partner at AP & Partners, a law firm based out of Delhi and Tanisha Khaitan is an associate at the firm. This is an opinion piece, and the views expressed are the authorsown. The Quint neither endorses nor is responsible for them.)

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