India’s government has fined ecommerce giant Amazon 25,000 INR for not displaying mandatory information, including the country of origin for its products (1). Last month, the consumer ministry affairs ministry had issued notices to ecommerce companies Flipkart (2) and Amazon (3) for not displaying the information.
The ministry also asked to ensure that all ecommerce entities comply with the Legal Metrology and Packaged Commodities Rules.
According to the ministry’s order dated November 19, it has imposed the penalty on Amazon because its reply to the notice was unsatisfactory. As per the Indian legislature, Amazon is fined 25,000 INR per director for the first offense, said a senior ministry official. However, he added that Flipkart had not been fined.
“It has been brought into notice that some of the ecommerce entities are not displaying the mandatory declaration on digital platforms required under the Legal Metrology (Packaged Commodities) Rules, 2011.”
– The Consumer Affairs Ministry (4).
In similar notices, the ministry had stated that Flipkart India Pvt Ltd and Amazon Development Centre India Pvt Ltd have to endure that all mandatory declarations are displayed on the electronic and digital network for the ecommerce transactions.
MCA, Ministry of Corporate Affairs addressed Flipkart and Amazon had specific links to the inventory, which lacked the required details under the legal metrology.
Over the past several months, ecommerce and food delivery companies have had numerous meetings with the consumer affairs department and the officials of the ÐPIIT, Department for Promotion of Industry and Internal Trade, about the addition of the ‘country of origin’ tag to its product listings.
The Country of Origin Rule
Notably, the Indian government had set September 30 as a deadline for ecommerce firms to complete the assigning country of origin tags to both new and existing products on their platforms (5).
The deadline came even as ecommerce industry associations had sought an extension of six to seven months from the government to comply with the new consumer protection rules. The mandatory listing of ‘country of origin’ is one of the principal regulations ecommerce websites need to follow. Other vital provisions include grievance offers appointments and resolution of consumer complaints within months, among others.
The Consumer Protection Rules, 2020 for ecommerce came on July 20 and was effective immediately (6). The rules apply to all products and services bought and sold over electronic and digital networks, including digital goods. Notably, firms offering internet services like online ticketing and hotel booking are also defined as ecommerce companies and subject to the new rules.
According to reports (7), the FICC, Federation of Indian Chambers of Commerce and Industry wrote to the Ministry of Affairs in August and asked for six to seven months to comply with the new rules.
The new rule is also applicable to overseas-based ecommerce companies supplying goods and services to Indian customers. According to the latest consumer protection laws for etailers, failure to abide by the rules would attract penalties as per the recently established CPA, Consumer Protection Act, 2019.
The CPA mandates every ecommerce company to give information related to return, exchange, refund, warranty and guarantee, shipment and delivery, payment modes, grievance redressal mechanism, among others, to enable the consumer to make an informed decision.
Nevertheless, the ‘country of origin’ clause has attracted a lot of attention due to the nation’s anti-China sentiment and the consequent call to reduce dependency on imports.
Promoting Atmanirbhar Bharat
On June 23, the commerce and industry ministry had made it mandatory for all sellers registered on the GeM, Government e-Marketplace (8), to display each item’s product origin. The sellers would have to update the source for products already listed, and if sellers fail to do so, it would be delisted.
Country of Origin refers to the nation where the good is produced. It is irrespective of the shipping point. For instance, if a Chinese mobile handset is shipped via Vietnam to India, its origin would remain China and not Vietnam.
Some ecommerce firms had started displaying names of multiple countries as the country of origin since components are sourced from different countries. However, the DPIIT has clarified that sellers have to show the final product’s manufacturing country only.
The commerce and industry ministry launched GeM in 2016 to procure goods and services sold or procured by the government department and public sector units. In February 2020, the ecommerce portal had chalked up 40,000 Crore INR in public procurement transactions, which has resulted in an average saving of about 15% to 25%.
Last year, the Union Ministry had also launched a startup runway called SWAYATT, Startups, Women, and Youth Advantage Thro e Transactions (9). The initiative aimed to promote more Indian startups to come on board. Notably, it has a network of more than 2.73 lakh sellers and service providers selling 12 lakh products and 15,000 services.
Additionally, the commerce ministry is also looking to infuse a new feature to indicate the local products’ visibility percentage for all items. The government would also add a ‘Make in India’ option on the portal to filter out products that meet the minimum 50% local content standards.
Meanwhile, the CAIT, Confederation of All India Traders (10), had also launched a nationwide movement to boycott the sale of Chinese products in India. It also made a list of 3K Chinese items, from toys to cosmetics, which Indian manufactured goods can easily replace to make the transition smoother.
As a part of Atmanirbhar Bharat Abhiyan to achieve self-reliance, India is also seeking to reduce more than 50 billion USD trade with China. Even though mandating the ‘Country of Origin’ tag is not directly targeted against China, the government is riding on the country’s growing sentiment against Chinese goods due to the ongoing face-off between the two nations along the LAC, Line of Actual Control (11).
In April 2020, the DPIIT notified changes in its FDI, foreign direct investment policy by mandating government clearance for all FDI inflows from countries with whom India shares land borders.
Moreover, India had previously banned 59 Chinese apps, including TikTok, on security grounds. In July, the government also restricted Chinese bidders from participating in a tender for government procurement without the competent authorities’ approval on defense and security grounds.
Online sellers and marketplaces on these platforms were surprised when the government directed them to specify the country of origin on all listed products. The move seems to identify and highlight the largescale import and scale of China-made products via these portals against the dispute’s backdrop with China at LAC.
Reportedly, ecommerce companies had sought more time to add the country of origin tag in all products. They reasoned complexities and a massive volume of products. For instance, Walmart-owned Flipkart has 150 million products, while Amazon India has 180 million products.
Since the listings are in millions, it would take a reasonable time to get updated. It could be more comfortable for the giants to make it compulsory for the sellers to add country of origin for the new products but taking care of already existing inventory requires a lot of scanning.
Flipkart had been showing country of origin for select categories has now increased its efforts on the matter after the government directives. Amazon India had started showing a state of origin for select brands, such as in the food category.
But can government penalize Amazon for non-compliance? Experts have a different opinion on the affair.
“Technically, the Legal Metrology Act does not apply to marketplaces but only to manufacturers, sellers, importers, etc. While the government can ask etailers to assist in enforcing the law by delisting sellers who are not sharing the country of origin of their products, they cannot be penalized under the Act.”
– Karan Kalra, Founder of Bombay Law Chambers (12).
There is no denying that the issue became one of the most debated subjects since the border conflict between India and China. The idea is to help consumers make informed decisions when anti-China sentiment is growing in India by showing the country of origin.
The Government Cracking Down
The Indian government has whipped on Amazon and Flipkart for not displaying the country of origin during sale season (13). The Ministry of Consumer Affairs had sent notices to ecommerce giants on October 16 and had asked them to explain within 15 days. If the etailers fail to follow the regulations, the authorities will initiate an action against them according to the Legal Metrology Rules 2011′ provisions.
During the same period, Flipkart had started its six-day BBD, Big Billion Days, on October 16 (14). Amazon had also announced a month-long Great Indian Festival for the first time from October 17.
The companies have started asking their sellers to update the country of origin in August at the time of product listing. Many have not managed to do that for the existing websites.
Flipkart mentions the details in the section called ‘Manufacturing, Packaging, and Import Info,’ under the listing specifications section. Certain products like select mobile phones also have the details of the importers and backers and the manufacturer.
On the other hand, Amazon has gone a step ahead and is wearing nationalism. In the case of products from Indian origin, Amazon mentions ‘Made in India’ right in the product’s title to promote locally sourced goods. In imported products, Amazon says the country of origin further below in the product descriptions.
The idea behind displaying the country of origin on the product is to make sure consumers make informed decisions, especially while nationalism is at the fore.
Penalty on Amazon
On Wednesday, the consumer affairs department penalized Amazon India for non-compliance with packaging norms. It needs to display country of origin details on packaged products sold on its platform.
“Amazon.in is a marketplace enabling third-party sellers to list and offer goods for sale to customers in India. Third-party sellers list, own, and sell products on the marketplace, and they are also responsible for updating the country of origin, as legally mandated. We display country of origin information for all products as provided to us by the sellers.”
– Amazon Spokesperson (15)
Since it’s a first offense, officials have asked Amazon India to pay a fine of 25,000 INR within a week of receiving the notice.
As per the sources (16), Amazon was not able to show evidence of country of origin display on several products and hence attracted the penalty. On the other hand, Walmart-owned Flipkart responded with evidence and therefore has not been fined.
As per the Legal Metrology, Packaged Commodity rules, 2011 (17), which became useful for e-commerce platforms from January 2018. It mandates displaying country of origin on packaged products. As per the rules, the fine for a second offense is 50,000 INR, while the following violation could lead to a jail term.
Both Amazon and Flipkart had informed the Indian government that they had removed several sellers from their platforms because of the non-compliance with ‘country of origin’ standards. However, there is no clearness on how many sellers these two platforms have delisted.
While several ecommerce firms had not fully abided by the Legal Metrology Act’s rules since 2018, the issue became significant amid India-China border tensions over recent months.
The ministry had demanded an explanation and provided details on the nature of ownership of sellers, their GST registration certificate, among others. The authorities have also written to all controllers of states and union territories to ensure that ecommerce firms are following the norms.
A Matter of Consideration
According to a survey (18), three in ten urban Indian respondents, 31%, consider the country of origin of a product when buying it. However, it ranks lower than other factors. People focus more on the product quality (77%), its price (53%), the brand name (34%) when deciding on which product to buy.
Even though it is a less motivating factor when making a purchase decision, 44% responded always seek details related to their origin. 40%, on the other hand, look for such data only for certain products and services. And 16% responded rarely or never bother about the product origin, says a YouGov survey (19).
While mentioning the different countries manufacturing products, most respondents, 88%, stated that products of Indian origin had the most significant influence on their purchase decision. Apart from local products, products from certain countries also impact their purchase intention. It includes America; 71%, Japan; 64%, and Germany, 55%. The data suggests that products from these countries can offer aid to brands to some extent.
Meanwhile, Products from Bangladesh are unlikely to influence, along with those made in Hong Kong; 66%, Taiwan; 65%, Sweden; 64%, and China 58%, all of these are likely to have less or no impact on their purchase decision.
The recent border tensions between India and China have angered Indian consumers, and many Chinese brands face a backlash on social media. In response to the call of boycotting Chinese goods, 43% of respondents claimed that they have stopped using at least one of more Chinese products or services.
The negative sentiment would also affect their future choices to boycott Chinese products in the future. However, these movements are likely to be influenced by the current geopolitical situations than the country of origin alone.
Ecommerce firms are resisting the efforts of the DPIIT to include point-of-origin information in all the products they sell on their platforms. These companies argued that they couldn’t do the logistical exercise in such a short time (20) since they have millions of products and vendors. They asked for three months to implement the new regulations. However, it is also essential to highlight the real reasons for delaying the operational ones’ implementation.
First, there is no doubt that most of the products sold on these platforms come from China. Putting a system that flags Chinese products in searches and product information would mean losing potential revenues, especially when anti-China sentiment is high among consumers.
These companies want to delay things to go back to business after three months if the sentiment cools down. In this case, it becomes essential for the DPIIT to clear that regardless of the final deadlines, there would be no dilution of the country of origin requirement.
The Indian customers also know that if their purchases are feeding an enemy or a friend or even better if it helps a domestic firm that uses local labor and raw materials to manufacture a product.
Secondly, the logistical issues seem exaggerated. For instance, say, a platform has one million vendors. What the government is directed by August 1 is not the complete information on all products but only the new ones. It is not that complicated.
Since all we need is an info panel or a pop-up which offers information whenever a customer is searching or studying a product for a possible purchase. Adding details of the country of origin is hardly a considerable tech challenge since info pop-ups, offers, deals, and other information are already part of the software.
The giants may make it a big deal, but such information is available with every vendor. All that needs to be done is to ask them to upload these details in an excel sheet. Then, companies can feed the information on their websites.
The real problem would come in a later stage where the country of origin and the details about import content may need to be given. It could be a logistical challenge, and one can understand.
The simple point ecommerce firms need to know is giving information won’t discourage anyone’s ability to sell his China-made products. Consumers come in different varieties, and there is always a demand for cheaper Chinese products even if labeled. The important part is that consumers need to know who made the product besides its volume, price, and other details.
Make in India Post COVID-19
The coronavirus pandemic is a wake-up call to all nations, businesses, and people to make conscious choices in their country’s interest.
To support Make in India nation need to make information available to the consumer to make an informed choice at the store or online.
China is looking to heighten its manufacturing by offering massive subsidies to exporters. It would inflict a considerable problem for micro, small and medium enterprises that are already impacted due to the lockdown.
The call for such rule gained momentum amid the India-China border standoff. The CAIT, Confederation of All India Traders (21), has been on the front of the campaign to mandate the Country of Origin disclosure applauded the Indian government’s move.
Praveen Khandelwal (22), CAIT Secretary-General, called the development a bod move and asked the center to take action immediately. During the festive sales, both Amazon and Flipkart did not comply with the obligation to mention the Country of Origin.
And by making the country of origin tag mandatory, the government is helping the Indian industry. The growth of businesses would help revive employment and spending to revive our economy.