60 million yuan in compensation! The Shenzhen seller's bankruptcy alarm bell sounded

A case of claiming a high price of 8 million US dollars has emerged in the cross-border circle ! The seller involved cried out in grief: "This case is completely different from any case circulated in the industry before. I sincerely hope that Chinese sellers will not suffer the same loss in the future."

Shenzhen sellers stunned by $8 million in claims

In November 2024, Shenzhen Cheyang Technology Co., Ltd. encountered an unexpected crisis - they were suddenly involved in a personal injury claim and had to bear compensation liability of up to US$8.325 million ( calculated according to the exchange rate at the end of September, exactly equal to RMB 60 million, and Cheyang's registered capital was also exactly RMB 60 million).

The story began three months ago. In August 2024, one of Che Yang's stores suddenly received a performance notice: because the product caused personal injury, the account withdrawal was frozen.

The incident started with an order placed a year ago. In July 2023, a US consumer purchased a product from Che Yang's store. In October of the same year, the consumer's one-and-a-half-year-old son accidentally swallowed a button battery installed in the remote control of the product accessory (the product was not equipped with a button battery and was purchased by the consumer from other channels).

According to consumer feedback, the battery got stuck in his son's trachea and needed to be removed by surgery in the hospital. Then the trachea was burned by the corrosive substances in the battery. For this reason, he took Amazon to court. In April 2024, Amazon's lawyer informed Che Yang of the matter by email.

" Because the sender box was not Amazon, the operator thought it was spam and didn't check it. " Li Li, the person in charge of the store, said that due to this negligence, they missed the best time to deal with it.

Perhaps because of the delay in receiving a response, more than three months later, in July 2024, the consumer named Che Yang as a co-defendant. The following month, Amazon froze Che Yang's store account, and Che Yang learned about it after discovering that the store could not withdraw money. Initially, the consumer claimed a claim of $80,000, which was reduced to $15,000 after negotiations with the lawyer. At the end of September, the two parties reached a settlement, and Che Yang immediately submitted a complaint to the platform to recover the money.

But who could have expected that more than a month later, what was waiting for us was not the good news that the platform’s appeal was approved, but the other party’s regret and the sky-high compensation demand of up to 8.325 million US dollars. At that time, since the operation was not interrupted in the middle, the frozen balance had accumulated to 1.5 million US dollars ( about 220,000 US dollars when it was first frozen ).

It was at this time that they suddenly realized that the other party did not want to settle the dispute, and the settlement was just a smokescreen to delay time and accumulate more funds in the account. Liu Jigen, the person in charge of Cheyang, said: "Normally, when there is a dispute, both parties hope to resolve it as soon as possible, but they almost always take about a month to reply to emails."

Amidst numerous difficulties, bankruptcy has entered the countdown

The maximum coverage of the product liability insurance purchased by Che Yang was $1 million, plus the $1.5 million frozen in the account, which was far from enough to pay the claim. Some people might suggest abandoning the store, but it is too late to do so now.

Because Amazon has the right to pursue the remaining amount. In other words, once the platform finds their store, parent company, or other accounts of the same brand on Amazon, it has the right to claim the remaining amount.

When cross-border sellers encounter overseas claims, there are only three ways to deal with it: settlement, abandoning the store, and suing. Nowadays, abandoning the store is not feasible, so is there room for negotiation on the settlement money? Is suing feasible?

" The lawyer hired by Ping An Insurance has evaluated this case before. We have also consulted some lawyers and service providers ourselves, and they all said that it is difficult to negotiate the amount of compensation. " Li Li said helplessly.

The settlement amount is not negotiable, so if the seller is determined to sue, can he win?

According to the claim list sent by the other party, the total medical bills they paid were more than $500,000, and the rest was all mental damages. Compared with the $8.325 million claim, the medical bills for the actual damages were much less. However, in the actual case, Che Yang is very likely to still have to pay compensation according to the amount proposed by the other party.

Li Li revealed to Yien that since this case involves children, according to US law, it will eventually enter the jury trial stage. And this jury is very likely to make a judgment unfavorable to Che Yang out of sympathy for the children and prejudice against Chinese companies. Especially since this case took place in Washington State. The state's laws on product liability insurance, especially those involving child compensation, are extremely strict and the penalties are severe.

Moreover, perhaps in an effort to end the case as soon as possible, Amazon communicated with Che Yang over the phone last week, hoping to reach a settlement with him for $5 million. Liu Jigen said: " Amazon is the first defendant in this case, and we are joint defendants. According to US law, Amazon has the right to end the case directly. "

According to the store opening agreement, if Amazon compensates the $5 million, then Che Yang will bear 100% of the money. In other words, if Amazon closes the case according to this plan, in addition to the insurance compensation and account freezing amount, Amazon will seek compensation from Che Yang for the remaining $2.5 million.

For Che Yang, this case has undoubtedly reached a dead end. It is reported that the store in question is Che Yang's largest store on the Amazon platform. It was opened as early as 2014 and has long been the mainstay of the company's revenue. Now, not only has this mainstay of revenue been lost, but they also have to bear huge compensation. There seems to be only one outcome waiting for them. "That means I can't continue!" Li Li said helplessly.

Lessons learned are on the table, sellers should take a look

For Che Yang, the matter is a foregone conclusion, but they still hope that their peers can learn some experience or get a warning from their own experience.

First, no matter how big or small the case is, if withdrawals are stopped, operations must be stopped immediately and then the positions must be moved to avoid causing greater losses.

Second, be sure to pay attention to the relevant laws of the sales destination. On March 19, 2024, the Button Battery Act of the United States was officially upgraded to a federal law. The Act has established a series of detailed regulations for battery sellers, battery manufacturers, and all sellers of devices that require the installation of button batteries, covering the design standards of battery compartments, warning labels that must be added, etc. In this case, Che Yang only paid attention to this act after the accident, and it was too late to remedy it at this time.

Third, when purchasing product liability insurance, sellers need to carefully confirm the coverage of the policy. According to the insurance company's regulations, a considerable number of products are not covered. If an accident occurs with these products, the insurance company will not compensate. Just like in this case, the insurer once determined that Che Yang's policy was invalid on the grounds that his products did not comply with local laws, and then refused to make a claim.

"When purchasing insurance, the insurance company usually only gives the seller an insurance certificate, which has the policy number and the seller's basic information, but no specific terms. If something happens, it will be difficult to explain the situation to the insurance company later," Li Li warned.

Fourth, other insurances should be provided in addition to product liability insurance. Because the maximum coverage of product liability insurance is only 1 million US dollars, it is not enough if there is a huge claim like Che Yang's. If there are other insurances to share the risk, it can build a more solid backing for the company at a critical moment.

Regarding this case, JULIE Guo, a seller lawyer at JS Law Firm in the United States, also gave professional thoughts and insights. She said that China's cross-border e-commerce industry has developed rapidly in recent years, but it has also faced huge challenges. The first challenge is that the platform blocks the account and freezes the funds. The second challenge is that the seller was sued by the plaintiff's law firm in the United States for TRO freezing the store funds.

The third challenge is this consumer product quality liability lawsuit. This type of lawsuit is likely to increase in number and become another way for Chinese sellers to be harvested in the United States. For this type of case, consumers generally sue both the platform and the seller at the same time. The platform will hire its own lawyers. But the platform lawyers will only protect the rights and interests of the platform. It is best for sellers to hire their own lawyers to actively protect their rights and interests. In this way, the case can be better handled to reduce or not pay the compensation. In order to avoid the freezing of store funds and the impact on sales, Chinese sellers need to guard against the risks faced in the United States due to product quality liability lawsuits initiated by consumers in advance.

Cheyang Technology

Amazon

Sky-high claims