Jiangxi Yikang Medical Equipment Group Co., Ltd. (Jiangxi Yikang for short) is an established medical device company. On April 29, 2020, it purchased 4 mask making machines produced by a subsidiary of CSG Smart Science & Technology Co., Ltd for 16.52 million yuan With 4 mask making machines, but all masks produced failed and thus it suffered heavy losses, and the company was also taken to court by the other party.
Zhejiang Xinyuhong Intelligent Equipment Co., Ltd. (Xinyuhong Company for short) is a subsidiary of the Chinese listed company Shanghai CSG Smart Science & Technology Co., Ltd. (Keda Intelligent Holdings), which began to produce mask making machines in 2020. At that time, media reports stated that “the Xinyuhong mask production line empowered by technology has greatly shortened the supply cycle and improved the speed of mask production line.”
The mask making machines purchased with huge sums of money had flaws in the finished product
“At that time, we went for the brand of CSG Smart. It is a listed company and has a good reputation in the field of technology and intelligence, so we did not hesitate to purchase.” Jiangxi Yikang Company’s person in charge said helplessly.
The person in charge said that after the outbreak of the COVID-19 pandemic, there was a severe shortage of masks across the country. The Jiangxi Medical Device Industry Association called on companies with production capacity to urgently launch a mask production line to solve problems such as shortage of masks and high prices. At the same time, the staff of the local health committee approached Yikang Group, hoping to take on the responsibility of the leading company in the medical industry, launch the mask production line as soon as possible, and speed up the solution to the urgent needs of Jiangxi Province.
So the company urgently looked for manufacturers of mask making machines across the country. After multiple rounds of inspections, they set their sights on Zhejiang Xinyuhong Company, a subsidiary of CSG Smart Robot Technology Co., Ltd.
According to Shanghai Songjiang Rong Media Center, Hangzhou Xinyuhong Intelligent Equipment Co., Ltd., a subsidiary of CSG Smart Science & Technology Co., Ltd., has received multiple orders for high-speed mask making machine production lines. It is expected that on March 10, 2020, Jiangxi Yikang’s intelligent production line that can produce 1,000 masks per minute will be launched. According to Lu Bing, general manager of Xinyuhong Company, in general, the ordinary mask production line can only produce 120 masks per minute, and the delivery cycle is more than 60 days. The Xinyuhong mask production line has greatly shortened the delivery cycle after technology empowerment. The speed far exceeds the traditional mask production line.
On April 29, 2020, Jiangxi Yikang signed a purchase contract with CSG Smart Science & Technology Company to purchase four CSG-PM1000 flat face mask making machines produced by Xinyuhong, Zhejiang at a total price of 16.52 million yuan. The contract stipulates that the buyer must first conduct a preliminary inspection of the product at the seller’s factory, and the product can be shipped after it is qualified. After the equipment is installed, debugged and can be produced normally at the buyer’s factory, the buyer shall conduct the final acceptance within 5 days. The contract also stipulates that if any problems are found during the acceptance process, the seller shall solve them immediately.
May 10, 2020 is the time when the first mask making machine will leave the factory. According to the contract, the business person in charge of Jiangxi Yikang enters the seller’s factory to check and accept the machine.
“But they refused me to enter the factory for inspection because of the need for epidemic prevention and control, and outsiders cannot enter the factory. I said I could not sign for acceptance without inspection.” The person in charge of Jiangxi Yikang’s business said that for this matter, he has repeatedly Communicate with the contact person of CSG Smart Science & Technology Company, but there is no result.
The other party insisted that Jiangxi Yikang sign the acceptance report with the pre-marked acceptance, otherwise it will not ship the goods.
On the “New Equipment Seller Factory Report” provided by Jiangxi Yikang, there are signatures and computer typing notes in the “Acceptance Evaluation” column: “The equipment meets the contractual requirements and can operate normally. It is agreed that both parties will deliver the goods at the agreed time!”
“Out of trust in big brands and really anxious to produce masks off the assembly line, so I signed the shipment.” Jiangxi Yikang business person in charge Mr. Li said: “Unexpectedly, the mask making machine came back just after trial production, there was a problem. .”
After the machine entered the factory on May 15th, after trial production, the technicians found two problems: “The bridge of the nose lacks photoelectric induction, and there should be no material break; when the elastic non-woven roll is used to the end of the material (5%), There is unevenness, and the speed needs to be reduced.”
“I discussed with the technical department and consulted the brothers’ production units. Everyone felt that the machine might have defects, but the specific issues and problems have not been found out yet. Therefore, I made a note in the acceptance conclusion: the equipment runs longer. It is short and cannot be fully evaluated for the time being, but the overall condition of the equipment is relatively good.” Mr. Li said.
May 29, 2020 is the time for the second machine to be shipped. CSG SMART SCIENCE & TECHNOLOGY COMPANY still refuses Jiangxi Yi to enter the production plant for face-to-face acceptance. However, in the acceptance evaluation of the second “Seller’s Factory Acceptance Report”, it was still marked: “The equipment meets the requirements of the contract and can operate normally, and the two parties agree to deliver the goods at the agreed time.”
Since the problem of the first machine has not been resolved, the staff responsible for the acceptance of Jiangxi Yikang wrote a note in the evaluation column: “Install and debug at the factory before acceptance.”
Mr. Li said that after the trial production of the second machine, more problems were discovered.
A technician from Jiangxi Yikang Company said: “The mask maker machine is not operating normally. The first is that the film is not stable, and the width is 90_100mm; the second is that the mask sheet is not thermally sealed, and it will spread out if you pull it gently; and there will be horizontal stripes. Offset, unstable; in addition, when the speed of the first machine is greater than 650, the ear straps will be wrinkled.”
Mr. Li said that because of the continuous problems, he especially noted when signing the acceptance report: “There are three problems that need to be improved, please pay attention to your company.”
In response to Jiangxi Yikang’s request, the intelligent sales staff of CSG Smart Science & Technology Company gave a solution. It is estimated that there is a problem with the raw materials of the ear straps and recommended another raw material manufacturer.
Mr. Li said: “From May 21 to August 10, 2020, we have conducted many communications and consultations with the sales and adjustment personnel of CSG Smart Science & Technology Company. At the same time, we have changed three raw material suppliers based on the recommendation of the relevant personnel of CSG Smart Science & Technology Company. But the results are the same.”
“At that time, our whole factory was really tossed up and down, and the old problems were not solved, and more and more new problems appeared. For example, the production speed could only stabilize at 400-600 pieces/min and the pass rate was far. Not reach the 97% agreed in the contract. At the same time, it was found that the equipment’s built-in correction system was abnormal, the mask maker machine’s automatic rejection function and stain detection function were abnormal, the automatic roll change could not be normal, the cutter quality was poor, the machine noise was too large, The drive belt and shaft are too damaged, the debris cannot be perfectly absorbed by the vacuum, resulting in excessive dust in the workshop, and the firmness of the mask ear strap connection does not meet the national technical standards. I really have a big head.” Mr. Li With a wry smile, he said that under his feet were boxes of finished masks.
Lost more than 20 million yuan, demanding a refund but turned into a defendant
Mr. Li said that in view of the unresolved problems of the two machines, Jiangxi Yikang rejected the request of CSG SMART SCIENCE & TECHNOLOGY COMPANY to continue to take away the remaining two machines.
“We used the two mask maker machines we bought back to produce more than 6 million masks before and after, but they were all substandard products after the appraisal of relevant departments.” Mr. Li said, they are notaries at the Hongcheng Notary Office in Nanchang City, Jiangxi Province. Samples of three masks were taken under the supervision of Jiangxi Provincial Medical Device Testing Center for testing. The final test results showed that all three masks were substandard products.
The main problem with these three masks is the tension on the ear straps. According to national standards, the tensile force of the ear straps of disposable medical masks should not be less than 10n, and the sample test result is 3n; the tensile force of the ear straps of disposable masks should not be less than 20n, and the sample test result is 5n; medical-surgical masks The tensile force of the ear straps should not be less than 10n, and the sample inspection result is 3n. This means that during use of these masks, a small amount of force can pull off the ear straps to make them fall off.
“We have invested more than 20 million yuan in buying the mask maker machines, purchasing raw materials, production, manpower and other aspects, and we have suffered heavy losses.” Mr. Li believes that this is all caused by the quality problem of the mask production machine provided by CSG Smart Science & Technology Company.
On July 29, 2020, CSG SMART SCIENCE & TECHNOLOGY COMPANY sent a “Reminder Letter for Pickup” to Jiangxi Yikang, urging it to accept the delivery of the remaining two mask making machines and pay the payment as soon as possible, otherwise, it will be handled as a breach of contract.
On August 9, 2020, Jiangxi Yikang replied that because the mask maker machine provided by CSG Smart Science & Technology Company could not produce masks that meet the national standards, it seriously violated the agreement in the contract. It requested the return of the machine and returned the paid 12.908 million yuan.
On December 31, 2020, CSG Smart Science & Technology Company took Jiangxi Yikang to court with a petition, demanding the payment of the remaining goods price of 3612,000 yuan and the payment of liquidated damages of 130,737.44 yuan.
How to avoid the risk of buying and selling mask making machines
Zhejiang Xinyuhong’s history of producing mask machines is not long. According to media reports, from January 28, 2020, Hangzhou Xinyuhong Intelligent Equipment Co., Ltd. has launched a mask making machine development project. The construction will officially start on February 10, and it is expected to be completed on February 10th. At the end of the month, the equipment can be assembled and debugged.
“It is only a few months before Jiangxi Yikang purchases its mask maker machine. Although the production of mask making machine is not complicated, it still has quite high requirements for talent reserves and technical experience.” Once represented several mask making machine disputes. Attorney Tan Kehao of the case believes that due to the surge in demand for masks during the epidemic, the sales of mask-making machines have also risen sharply, and the demand for machine debugging personnel has also increased linearly. Because of their strong professional skills, this type of personnel cannot be used for short periods of time. Training on duty within time has resulted in a large gap in the commissioning industry. When the machine is in hand, the commissioning personnel cannot be in place at the same time. At the same time, there are many uncertain factors in the commissioning process that cause the machine to fail to produce as planned.
Attorney Tan said: “When the seller is a strong party, some sellers only have a short quality objection period for selling machines, and the product is deemed qualified after the agreed objection period ends. All problems arising in the future will be resolved by the buyer. This leads to the buyer of the disadvantaged party cannot claim the right to the warranty period from the seller if the quality of the machine appears after the objection period.”
He suggested: “When signing the contract, the technical parameters and related quality standards of the mask making machine should be agreed with the seller; machine parts and accessories should be agreed; Warranty period and corresponding liability for compensation. Through such contract clauses, the seller is required to restrain the seller, so as to minimize the possible loss. If conditions permit, send personnel to the equipment production site to supervise the production process and require the equipment to be delivered before delivery. The equipment is received after the commissioning is completed and the acceptance is qualified. When conditions permit, it should be agreed in detail on how to perform the commissioning obligation. At the same time, the goods are received in a timely manner, and once the quality problem is found, the seller will be communicated in time. If the objection period has passed and no During the warranty period, if the problem is a concealed defect, the buyer can claim product quality responsibility within two years from the delivery.”
Source: Legal and Social Journal