Defective Product Must Be Recalled Urgently: Who Decides and Who Pays — A product batch is found to carry a defect that could harm users after it has already reached the market. Management debates: recalling now is costly and hurts reputation, while waiting for more test results raises accident and liability risk by the day. The problem is who has the right and duty to order the recall, and who ultimately bears the cost.
The issue and its legal grounds
The Law on Product and Goods Quality 05/2007/QH12 obliges producers and importers to recall non-conforming products that pose safety risks, and empowers regulators to order a compulsory recall. The Law on Protection of Consumers’ Rights 19/2023/QH15 (effective 1 July 2024) sets duties of public notification, recall of defective products and compensation to harmed consumers. Harm caused by defective products to third parties is also handled under the non-contractual damages regime of the Civil Code 91/2015/QH13, while food, pharmaceuticals and cosmetics face additional recall regimes under sector laws.
The boundary with similar cases
This article handles a harmful-defect recall crisis, unlike business-to-business quality disputes, because here consumers and state regulators are involved. The focus is the authority to order voluntary and compulsory recalls, the notification sequence, and how recall costs are allocated along the supply chain of producer, importer and distributor.
Answers to frequently asked questions
Who may decide to recall a defective product?
Two layers: the business itself decides a voluntary recall the moment a safety risk is identified — an active duty, not merely a right; and market and sector regulators may order a compulsory recall where the business delays or the product is clearly dangerous. Internally, the recall decision should be signed by the legal representative after a written risk assessment by the quality and legal teams, because it creates irreversible spending and public-notification obligations.
What notification duties arise on a recall?
The business must publicly announce, through media and at points of sale, the recalled product, how to identify the defective batch, the possible risks and how consumers obtain exchange, return or refund; and it must report to regulators as required by the Law on Protection of Consumers’ Rights 19/2023/QH15 and sector laws. Late notification or vague risk descriptions are the most common mistakes, drawing additional penalties and losing goodwill when compensation disputes reach court.
Who bears recall and compensation costs along the supply chain?
Toward consumers, the business that put the product on the market under its brand must recall and compensate first. Inside the chain, costs are pushed back to the stage that caused the defect under the supply contracts: design or manufacturing defects to the producer; storage and transport defects to the logistics provider; for imports, the importer pays first and claims from the foreign producer under the contract and product liability insurance. Successful push-back requires a pre-existing recall and cost-allocation clause in the supply contract, plus batch traceability records.
Does product liability insurance pay recall costs?
It depends on the policy wording: many product liability policies cover only third-party compensation and legal costs, and do not automatically include recall expenses such as reverse transport, destruction and media announcements, unless a separate recall-cost extension is bought. The business must check the policy the moment an incident occurs and notify the insurer within the contractual deadline, because late notification is the most common ground for denying cover even where the event is insured.
A concrete action plan
Practical steps: activate the internal recall procedure within 24 hours of test results confirming risk — stop selling the defective batch, quarantine stock, issue a written recall decision; publish the notice and report to regulators in the required form; set up an exchange and refund desk and log every consumer complaint; notify the insurer and supply-chain partners in writing immediately to preserve cost push-back rights; and after the crisis, audit the recall clauses across all supply contracts.
This article has been quality-reviewed by the FLAW AI Legal Council