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Recently, a case involving a sky-high claim of up to US$8 million (approximately RMB 60 million) has once again attracted widespread attention in the cross-border e-commerce industry.
According to reports, the cause of this incident was that a product accessory of the company involved, Yang Company, a button battery, caused personal injury to a minor. The company was then sued by an American consumer and was ordered to pay compensation. US$8.325 million (approximately RMB 60 million). This number is exactly equal to Cheyang Company’s registered capital, which is like “the sky falling” for this cross-border e-commerce company!
A button battery caused a murder The cause of the incident can be traced back to July 2023, when an American consumer purchased a product from XY's Amazon store. But a few months later, a young child at the consumer's home accidentally swallowed a button battery in the product's accessory remote control, causing tracheal burns. Although the button battery was not directly provided by XY but purchased by the consumer from other channels, the incident still caused serious legal consequences. In April 2024, Amazon's lawyers informed XYZ of the incident via email. However, since the email did not come from Amazon's official email address, XYZ's operations staff mistakenly thought it was spam and ignored it. This oversight caused XYZ to miss the best opportunity to deal with the issue. In July 2024, the consumer named X Yang Company as a co-defendant, and caused X Yang Company's Amazon store account to be frozen the following month. Initially, the consumer claimed $80,000 in compensation, but after lawyers negotiated, the amount was reduced to $15,000. The two parties reached a settlement at the end of September 2024, and Xyang Company immediately submitted a complaint to the platform for repayment. Unexpectedly, more than a month later, the other party suddenly regretted and filed a claim for a whopping $8.325 million in compensation. At this time, the balance of Xyang Company's store account had been frozen to $1.5 million, far from covering the claim amount. Faced with such a huge amount of compensation, XY Company was in a dilemma. The maximum coverage of the product liability insurance they purchased was only $1 million, and with the $1.5 million frozen in the account, it was still far from enough to pay the claim amount. Some people suggested abandoning the store, but considering that Amazon has the right to claim the remaining part, this plan is obviously not feasible. Industry insiders analyzed that when cross-border e-commerce companies encounter overseas claims, the usual response methods include settlement, abandoning the store, and filing a lawsuit. But for Xyang, it was too late to abandon the store, and there was almost no room for negotiation on the settlement amount. The cross-border community couldn't help but feel sad and regretful when they heard about this. The store involved was the biggest source of income for X Yang on the Amazon platform. Now that the store has been frozen, it can be seen how difficult the seller's situation is. I can't imagine how much hard work 60 million will destroy. A lesson learned from blood and tears, cross-border sellers must be on guard
It is understood that the case is closely related to the US Reese Act. A few days ago, a screenshot of a response from a person in charge of the company was circulated in the social network. The person in charge said helplessly: The person in charge also reminded that the button battery bill involved in the relevant reports is called the Reese Act . The bill was passed in August 2022 and aims to strengthen the safety supervision of button batteries and coin batteries to prevent the risk of injury or death caused by children swallowing them by mistake. The bill imposes strict requirements on battery compartment design, warning labels, testing standards, etc.: Battery compartment design: The battery compartment must be designed to be difficult for children to open, usually requiring tools (such as a screwdriver) to open; Warning label: The dangers of button batteries must be clearly marked on product packaging and instructions, and consumers must be reminded to keep them out of reach of children; Testing standards: Products must pass rigorous testing to ensure that the battery compartment will not accidentally open under normal use and abuse; Legal liability: If a product does not comply with the above regulations and results in injury or death of a child, the manufacturer and seller may face high claims and legal liability.
In this case, although Xyang Technology's products were not equipped with button batteries, the products themselves and accessories containing button batteries may not have fully complied with the design and warning label requirements of the Rees Act, resulting in them being identified as having safety hazards, which ultimately led to high claims. No matter what, such a high amount of compensation is difficult for any seller to bear. This case undoubtedly once again sounded the alarm for the majority of cross-border sellers: First of all, starting from the product itself, we must strictly control the product quality and prevent similar situations from occurring at the root; secondly, once the store funds are frozen, operations should be stopped immediately and the warehouse should be moved to avoid causing greater losses; finally, if unfortunately you really encounter a similar situation, you must deal with it in a timely manner and protect your own rights and interests by hiring a lawyer to minimize the damage. According to the experience of many cross-border practitioners, after the Amazon platform freezes funds, most of the appeals will fail and they can only apply for arbitration in the United States. Not only is arbitration difficult and cumbersome, but there are also very few successful arbitrations. Therefore, it can be said that if you find that your account is frozen, you must immediately stop operations, transfer inventory, and find out the reasons to avoid further losses and fall into a more passive situation. !
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