At the beginning of 2020, the COVID-19 broke out in Germany, and then the epidemic spread, with a sharp increase in local cases. In order to curb the further spread of the epidemic, the German government has taken multiple measures, including but not limited to recommending that the public wear masks. As a response to the action, the German Ministry of Health took a series of measures in 2020 to purchase and distribute medical supplies, including masks, protective clothing, ventilators, and so on.
I represented a mask trade lawsuit between a Chinese supplier and a German company, during which I consulted a large amount of information, including judgments from local courts in Germany, judgments from Chinese courts, reports from the website of the Chinese Ministry of Commerce, and reports from German websites.
I have found that many mask trade disputes between China and Germany appear to be caused by substandard mask quality or lack of CE certification, but in fact, they are caused by the breach of contract by the German Ministry of Health. However, many Chinese manufacturers or suppliers are unaware and either simply and rudely accept the testing report from the German Ministry of Health, returning the goods for compensation; Either simply defending against CE certification and quality standards, ignoring the true reasons behind the disputes and the fact that product quality non-compliance does not equate to fundamental breach of contract, thus failing to form an effective defense.
1. Causes of the Sino-German mask dispute
Since April 2020, the domestic supply of masks has gradually stabilized, and the export volume of masks has surged. Many mask manufacturers and domestic mask traders have no experience in exporting medical supplies to the European Union. To avoid future disputes, on April 25, 2020, the Ministry of Commerce, the General Administration of Customs, and the State Administration for Market Regulation issued the "Announcement on Further Strengthening the Quality Supervision of Epidemic Prevention Materials Exports", strengthening the quality supervision of non-medical mask exports. From April 26, 2020, exported non-medical masks must comply with Chinese quality standards or foreign quality standards. When declaring for export, non-medical mask export enterprises must submit an electronic or written joint declaration from the exporter and importer, confirming that the products comply with Chinese quality standards or foreign quality standards. For purchase contracts signed before April 26, an electronic or written joint declaration from the exporter and importer must be submitted when declaring for export
However, even against such a backdrop, a significant number of disputes over masks have arisen. Upon conducting a search on the China Judgment Online, the author found that from January 1, 2020, to May 1, 2023, there were as many as 281 trade disputes between China and Germany regarding masks, including cases that had been mediated or agreed upon for arbitration. The following are the reasons for the disputes summarized by the author:
1. Nominal reason: No CE certification, and the quality of the masks is unqualified
(1) The mask does not have CE certification
So, what certifications are required for personal protective masks exported to Germany and the EU to circulate in the local market? Theoretically, they need to undergo CE certification. CE certification is a product safety certification of the EU, and all medical devices entering the EU market must undergo medical device CE certification. The EU categorizes masks into two types based on their usage: medical masks and personal protective masks. Among them, personal protective masks do not belong to medical devices, but they must comply with the requirements of the EU Personal Protective Equipment Regulation EU2016/425 (PPE). They are CE certified and issued a certificate by an authorized notified body, with the corresponding standard being EN 149.
Therefore, a common misconception has emerged: masks without CE certification cannot be sold in EU countries.
(2) The quality of the mask is unqualified
The masks produced by Chinese manufacturers are generally KN95 masks, which only need to comply with the GB2626 standard, not the EN 149 standard. However, many traders have sued Chinese manufacturers on the grounds of product quality non-conformity, simply because the masks produced by Chinese manufacturers do not comply with the FFP2 or EN149 standard.
Is it necessarily true that products without CE certification or those that do not comply with EN149 are of substandard quality? The answer is no! Is it necessarily true that products without CE certification cannot be sold in the EU or Germany? The answer is also no!
2. Substantive reason: Excessive procurement quantity and breach of contract by the German Ministry of Health
In order to expedite the procurement and delivery of materials, the German Ministry of Health has implemented an emergency procurement procedure (OpEN-House)
-VerfahrEN). This procedure allows the government to directly sign contracts with suppliers without going through the traditional open bidding process. This measure can expedite the procurement process, thereby providing the necessary medical supplies to hospitals and other health institutions more quickly. In this procedure, suppliers can provide an unlimited quantity of masks that meet the quality standards required by the bidding. It is this unlimited supply that sets the stage for future conflicts.
In fact, prior to April 30, 2020, Germany's procurement conditions neither required masks to be CE certified nor necessarily comply with the EN149 (FPP2) standard. Instead, it was sufficient to meet any one of the three standards: N95, EN149, or KN95. The only requirement was that the delivery be made before April 30, 2020.
In March 2020, China had effectively controlled the spread of the epidemic due to its previous effective response measures and gradually resumed production. However, at this time, the epidemic was spreading rapidly globally, and mask production in other regions, except for China, basically stagnated. According to statistics, from March to May 2020, China supplied more than 90% of the world's masks. This means that the vast majority of the world's epidemic prevention masks were produced in China. For a time, China's mask supply fell short of demand.
Regarding the mask trade between China and Germany, there are generally four roles involved. These are Chinese factories, Chinese traders, German traders, and the German Ministry of Health. The German Ministry of Health purchases from German traders, who then find Chinese traders. The Chinese traders then contact the Chinese factories that produce masks for production.
So what is the fundamental reason behind the dispute? It stems from the open procurement model employed by the German Ministry of Health. Driven by profit motives, German traders supplied a massive quantity of masks to the German Ministry of Commerce at a high price of 4.5 euros each. According to statistics, the total value of the supplied masks exceeded 1 billion euros, significantly exceeding the demand at that time. After May, the global supply of masks gradually increased, and their prices plummeted. The German Ministry of Health's previous high-priced procurement of masks became a target of public criticism, and both the Ministry and its Minister faced severe criticism from the media. The media even initiated an impeachment against them, alleging bribery. Under such circumstances, the German Ministry of Health began delaying payments from May 2020 and ultimately refused to pay altogether, citing the unqualified quality of the products provided.
This led to a series of disputes. Firstly, the German Ministry of Health provided a product quality report, stating that the product was unqualified, and demanded a return of the goods from the German supplier while refusing to pay for them. The German supplier, relying on the quality inspection report from the German Ministry of Health, demanded a return of the goods from the Chinese supplier and a refund of the payment. However, the Chinese supplier, citing the same reason, demanded a return of the goods from the Chinese mask manufacturer and a refund of the payment, as well as bearing the liability for breach of contract.
II. Outcome of the German court case: The German Ministry of Health lost the case
Since May 2020, the German Ministry of Health has begun to delay payments. Initially, the Ministry of Health only made changes to the requirements, but later directly refused to pay on the grounds that the masks failed the TÜV Nord test. After the Ministry of Health refused to pay, German suppliers successively brought the Ministry of Health to court. After studying German judgments, the author found that in most judgments, the court ultimately ruled against the Ministry of Health, with the following reasons:
1. The inspection report cannot directly prove that the quality is unqualified
The court held that the TÜV test report provided by the German Ministry of Health was merely a unilateral test result from the Ministry, equivalent to the personal opinion of the party concerned. Only conclusions recognized by both parties or obtained through court-commissioned appraisal can serve as the basis for determining whether the masks meet the quality standards.
2. It cannot be proven that the tested mask is indeed provided by the supplier
In addition to the above reasons, the German court also held that the testing process for the masks stated in the test report as not meeting quality standards was not comprehensive, and thus could not prove that the tested masks were indeed provided by the supplier.
3. The testing method does not meet the standards agreed upon in the contract
Furthermore, many TÜV testing reports submitted by the German Ministry of Health refer to a "modified CPA test principle," which does not correspond to the testing procedures stipulated in the bidding documents or the contract signed by both parties. N95, EN149, and KN9 all have clearly defined testing procedures, yet the TÜV testing reports were not conducted according to these standard testing procedures. Therefore, the testing reports cannot be recognized.
4. Have no right to directly request the termination of the contract and return of the goods
If the test report was not recognized solely for this reason, the German Ministry of Health could have applied to a German court for quality appraisal. However, this request was rejected by the German court. The reason is that the German court believed that although the masks purchased by the German Ministry of Health had a contract provision allowing for returns if the quality was not up to standard, these masks were not seasonal or date-specific products. According to the German Civil Code, if the Ministry of Health believes the quality is not up to standard, it should first notify the supplier to replace the goods. Only if the supplier fails to replace the goods within a reasonable time, or if the replacement goods are still of substandard quality, can the Ministry of Health request the termination of the contract for returns. However, the German Ministry of Health never notified the supplier to replace the goods from start to finish. Therefore, regardless of whether the quality inspection is passed or not, the German Ministry of Health has no right to directly request the termination of the contract.
III. Outcome of the Chinese court: The Chinese supplier lost the case
Since the second half of 2020, there have been multiple trade disputes between European purchasing parties and Chinese suppliers over the quality of masks, resulting in a large number of lawsuits. The handling lawyer has reviewed multiple relevant judgments, and the representative cases and trial results are as follows:
1. Sales contract dispute between Hi-Mir (Qingdao) Electronic Technology Co., Ltd. and Shandong Saice Garment Products Co., Ltd
Trial result: Due to the explicit stipulation in the contract by Hi-Mile that the product standard is FFP2, and the FFP2 markings printed on the product packaging, although the joint statement indicates that the standard used is GB2626-2006 KN95, this is only for customs clearance purposes and does not reflect the true intention of both parties. Therefore, the court determined that the applicable standard is EN149. According to the EN149 standard, the product quality of the supplier, Hi-Mile, is unqualified, and Hi-Mile's failure to complete CCCQS certification has resulted in the produced products being unable to be sold in the European Union. Therefore, the court ruled against the supplier, Hi-Mile.
2. Case of sales contract dispute between Stiehler Civil Law Firm and Li Lulu et al
Trial result: As Stiehler Company did not provide a testing report for the masks involved in the case (tested according to the Chinese quality standards agreed upon in the contract), it cannot be proven that all the masks involved have serious quality issues and should be returned. Therefore, Stiehler Company should bear the legal consequences of failing to provide evidence. The court ultimately rejected Stiehler Company's appeal request.
3. Dispute over the sales contract between Tam Fashion Co., Ltd. and Songchao Network Technology (Shanghai) Co., Ltd
Trial result: Both parties established the content of the sales contract through WeChat. Obtaining a legitimate CE certification from the European Union is a condition for the plaintiff to purchase the goods. However, Songchao Network Technology (Shanghai) Co., Ltd. did not provide a legitimate and valid certification certificate. Therefore, the supplier, Songchao Network Technology (Shanghai) Co., Ltd., was ruled to lose the case.
4. Sales contract dispute between Tongxiang Baohuo Medical Equipment Co., Ltd. and Zhejiang Yunkai Yamei Pharmacy Chain Co., Ltd., etc
Trial result: The court of second instance determined that both parties were aware that the masks involved in the case should comply with both the European standard EN149 and the GB2626 standard. Yunkai Yamei Company should deliver masks that meet the product name standard and the contractually agreed standard. Furthermore, after Yunkai Yamei Company submitted an application for identification and the court repeatedly clarified the matter, it still failed to pay the identification fee. It is presumed that the masks involved in the case do not meet the FFP2 level quality standard in the European standard EN149:2001+A1:2009. The supplier, Yunkai Yamei Company, was ruled to lose the case.
In summary, the court's focus in the trial lies in two issues: 1. What is the quality standard agreed upon by both parties? 2. Has the supplier obtained CE certification? The court mainly makes a comprehensive judgment based on three aspects: the contract, communication records between both parties, and the product's outer packaging.
IV. Coping strategies of Chinese suppliers and manufacturers
For Chinese suppliers, it is crucial not to merely accept the high-sounding reasons given by German buyers, such as non-conforming quality and lack of CE certification. Instead, they should delve into the underlying reasons and make use of them. At the same time, they should draw on the reasoning of German courts to defend themselves. The specific approach is as follows:
1. Identify the true cause of the dispute: breach of contract by the German Ministry of Health.
Regardless of the dispute, we must first understand the root cause of the conflict. Only by knowing the true reasons behind the dispute can we unravel the complexities, distinguish truth from falsehood, and identify the problem. Before April 30, 2020, most of the disputes arising from Sino-German mask trade were caused by the breach of contract by the German Ministry of Health, and the responsibility lay entirely with the German side, not the product supplier.
2. Non-conformity of product quality does not equate to termination of the contract and refund of payment.
Even if the product does not meet the standards stipulated in the contract, does it constitute a fundamental breach of contract? Can the buyer directly request to terminate the contract and refund the payment due to the unqualified product? The answer is no.
Many lawyers, and even judges, believe that masks that have not been CE certified or do not meet the EN149 standard cannot be sold within Germany when adjudicating the China-EU mask trade dispute. Based on the unfulfillment of the contract purpose of sale, the absence of CE certification or non-compliance with the EN149 standard for masks constitutes a fundamental breach of contract.
The actual situation is that in early 2020, Europe relaxed its requirements for imported masks. Under the special circumstances at that time, CE certification was not an absolutely mandatory requirement, and EN149 was not the only quality standard. Therefore, the lack of CE certification and non-compliance with EN149 standards are not the fundamental reasons why masks cannot be used in the EU.
Even if the provided mask products do not meet the quality requirements, can we directly request to terminate the contract and return the goods? The answer is also in the negative. The provisions of the Chinese Civil Code regarding the termination of contracts are similar to those of the German Civil Code: for ordinary goods, generally speaking, a notice of return or exchange must be given first. If it is impossible to provide a replacement immediately or to provide a product that meets the quality requirements within a reasonable period of time, one can then request to terminate the contract.