Schaumburg, Ill. – News reports of poison toothpaste and lead-laced toys have not just caught the attention of consumers. The nation’s importers, and the commercial lines writers who serve them, are keenly aware of the dire implications of unsafe products.
The advent of globalization has stretched supply chains and dispersed manufacturing all over the globe. While the regulations and standards vary by the country of origin, importers, retailers and manufacturers in the U.S. are ultimately responsible for performance and safety of their items. They cannot expect foreign suppliers to share in any potential liability litigation, because offshore companies often do not have adequate insurance coverage or assets in the U.S. This can leave an importer solely responsible for losses resulting from any aspect of product design, development and manufacturing.
Considering that the United States imported $1.85 trillion worth of goods and services into the country in 2006, the potential for liability litigation is similarly enormous. So how can companies mitigate these risks?
“There’s no technology fix, per se, to the problem,” A.V. “Rish” Riswadkar, liability line of business director in the Risk Engineering department for Schaumburg, Ill.-based Zurich North America Commercial, told INN. “It’s not a one-time solution.”
However, Riswadkar notes that technology has made supply chains increasingly transparent. “Corporations that are dealing with imports from overseas are gearing up for the transformation of the supply chain,” he says. “The technology now exists that shipments can be tracked every step of the way.”
Yet, on a 10-point checklist that Riswadkar compiled with colleague David Jewell, common sense and thoroughness supersede quick, technological fixes. Foremost, they recommend that importers perform "due diligence" analysis of a foreign manufacturer before entering into any outsourcing arrangement, including on-site visit and a review of references. They also urge companies to consult competent legal counsel familiar with laws in the supplier's country in all contract negotiations.
Riswadkar and Jewell also say that importers should insist on a written contract to document all terms and conditions of outsourcing arrangements and require prior notification and approval for any changes in materials, production processes, subcontractors and specifications
Lastly, they urge importers to arrange for on-site sampling and periodic audits by their own personnel and to perform additional inspections of incoming shipments at the port of entry and before distribution of products into the chain of commerce.
Source: Zurich North America
