Direct answer
CPL Art. 35 and Civil Code Arts 1202–1203 put the consumer-facing seller/producer on the hook. A WFOE cannot tell the buyer to sue the offshore factory. Build a China Compliance & Indemnification clause with full recourse (civil, punitive, admin fines, fees, testing) and a 3–5% compliance escrow. Run three phases (pre-entry / operate / crisis) and three crisis tiers (quality → SAMR → extortion / 刑法 Art. 274).
Recourse matrix
| Loss type | Consumer-facing payor | Upstream claim (if drafted) |
|---|---|---|
| Refund / 3× / 10× | WFOE / seller | OEM / brand owner indemnity |
| SAMR fine | Licensed operator | Indemnity + escrow draw |
| Testing / counsel | Operator | Fee-shift clause |
Scope / legal framework
CPL Art. 35. Consumers may claim against sellers or producers; internal supply contracts do not bind the consumer.
刑法 Art. 274. Extortion — the correct criminal report theory when claimants tamper, forge reports, or threaten smears for cash.
Practical workflow
Pre-entry: GB audit, channel choice, indemnity + escrow.
Operate: claims DB, UI/PIPL audit, CS escalation scripts (never “fraud”).
Crisis: Tier 1 isolate lot + statutory 3Rs; Tier 2 counsel-controlled SAMR; Tier 3 evidence pack + public-security filing.
Annotated indemnity structure
1. Scope: ingredients, manufacturing, labelling, advertising copy supplied by Seller 2. Losses: civil (incl. statutory punitive), admin fines, testing, reasonable PRC counsel fees 3. Escrow: 3–5% of invoice, 12–24 months after delivery 4. Defence control: Buyer may settle consumer claims in good faith; notice to Seller in 10 business days 5. Audit: Buyer may test lots; Seller cooperates with SAMR sampling
Common mistakes
- Indemnity limited to “direct damages” that silently excludes punitive and fines.
- No retainage, so recovery is a foreign judgment problem.
Action checklist
- Pre-entry: GB + channel + indemnity + escrow
- Operate: claims DB + guest mode + CS scripts
- Crisis: lot hold + 笔录 protocol + tier-3 crime report criteria
