Non-compliance with country of origin rule: Amazon executives to meet government officials on January 11

E-commerce as a category has spent Rs 813 crore in first half of 2020. One company from this category Amazon Online India took the fourth spot in the top 10 advertisers' list with ad spend in the range of Rs 250 to Rs 350 crore. (Image: Amazon)

Executives from Amazon will meet with officials from the Consumer Affairs Ministry on January 11 to explain why the US-based e-commerce firm should not be fined for violating Country of Origin norms, a senior government official told Moneycontrol.

Amazon has received two notices from the Central government as its vendors are still selling products without displaying the country of origin.

Moneycontrol reported in November that e-commerce companies such as Amazon and Flipkart may have to pay steep fines for failure by their sellers to publish the country of origin.

Amazon and Flipkart have received notices for non-compliance with the rule. While Flipkart is learnt to have already met the officials concerned, Amazon will meet with them in the coming week.

Over 70 percent of the listings on the marketplace comply with the government rule but  27-30 percent of legacy listings on e-commerce websites such as Amazon and Flipkart still do not display the country of origin.

“If the compliance has not been made even for a single packet then the rule is violated,” said the government official quoted above.

The provision under the Legal Metrology (Packaged Commodity) Rules states that if the government passes an order, the second party can make an appeal requesting for a personal hearing. The government will hear Amazon on January 11.

What Amazon has said

"Amazon is a marketplace that operates in compliance with all applicable laws. In respect of COO information display to consumers, Amazon provides functionality for third party sellers registered on its marketplace to make the statutory product declarations for display and has done so for 100% of the products sold on the marketplace. We are constantly engaged with all relevant authorities with respect to this matter and have made multiple cogent representations on the issue," a company spokesperson said.

Adding, "We have undertaken a host of steps in this regard, such as making COO information mandatory for the creation of product listings, providing a dedicated field (in addition to existing options on the display page) for sellers to fill in this information for their product listings. We undertook a sustained and rigorous communications campaign with sellers through a regular series of webinars, emails, and calls about the importance of displaying COO to customers and educating them about the existing functionalities available for them on the marketplace to provide this information easily. This campaign has been effective and received well by sellers such that a significantly large percentage of product listings have been updated with COO information by sellers," the spokesperson added.

Earlier, an industry source had said that Amazon was likely to share details of the initiatives it has been taking to educate its sellers on the importance of displaying the country of origin. The company will present details of communications made to the sellers such as the number of calls, mails, notifications on the seller apps etc.

“It is very difficult for e-commerce companies to educate sellers and get them to comply,” said a senior executive at an e-commerce company, requesting anonymity. “Most are reluctant to give importance to these activities. They wonder why they should take so much effort for a few listings,” he added.

According to the source, the last resort in the hands of the marketplaces is to delist the sellers. However, that isn’t something either the government or the marketplaces would want to do, especially when most of these sellers are yet to emerge from the disruption caused by the pandemic.

Etailers can scan through the products listed on their websites through data search algorithms to figure out which fields are populated and which ones are not in the product listing form.

If the compliance has not been made even for a single packet then the rule is violated

- Government official

While the new listings have started displaying the country of origin, the issue is mostly with older listings that were made before the government highlighted this issue in July, following the standoff on the India-China border.

Penalty for non-compliance

While the companies claim that the listings are in the millions and will take some time to get updated, the government feels this argument has no base given that the rule has been in place since 2018.

“The rules were notified in 2018 and the etailers had two years to comply. They will have to make enough efforts,” said the government official.

The rule states that companies are liable to be fined, starting with Rs 25,000 for the first offence. The penalty can get extended for multiple offences. There was no immediate clarity on whether the fine would be capped.

The idea behind displaying the country of origin on the product is to ensure that consumers make an informed choice at a time when nationalism is ruling the roost in the wake of anti-China sentiments following the Galwan Valley clash. It is also happening at a time when the government is trying to give its Make-In-India initiative a big push.