This is an important warning to all companies that improvised themselves as importers of personal protective equipment during the coronavirus pandemic.
Read this before you get yourself involved in a situation that might cause you serious trouble for years to come.
The situation mask and PPE importers are faced with
Let’s review the facts, so you understand the situation you have placed yourself into.
1. A non-negligible portion of the PPE imported from China is substandard
I can’t reveal any identifiers here, but we have been checking a number of batches of PPE products recently and we have found these in an alarming proportion of cases:
- Masks that are obviously filtering nothing, or that are found (in a lab) to be filtering only 40% of small particles
- A batch of alcohol detergent bottles in which 1 bottle out of 1 contains absolutely no alcohol
- Infrared thermometers that show an amazing lack of accuracy
We have also heard of cases such as these:
- Gowns that happen to be made of the wrong material
- Masks that allow an excessive buildup of CO2 — typically when the manufacturer adds extra layers without thinking of the consequences
The international press has kept coming up with examples of defective products, too. This LA Times article does a good job outlining the most prominent cases.
I can’t draw precise conclusions from this set of anecdotal evidence, but I would not be surprised if 20% to 50% of all PPE products sold into Europe and the Americas were substandard in one way or another.
(Yes, that’s enormous. Yes, it might be exaggerated. But you will be better off taking this into account in your business plan.)
In that case, will you be able to avoid all that bad product? You can’t be sure, can you?
2. These products are purchased, and often distributed, without being tested
Deals are confirmed in a matter of hours. As soon as the products are ready, they have to be shipped out right away. They are several reasons for this:
- It is very urgent. People are shouting for the right protective products.
- There is a risk of another buyer out-bidding the original customer. It has already happened many times!
- Air shipment rates are insanely high and rising.
It means there is usually no time to conduct proper laboratory tests before the goods are shipped out.
For more information on this, read 9 Reasons Why You Can’t Buy Face Masks with Low Risk in China.
3. You qualified one factory, but another one may be the real producer
The Chinese Customs have put a lot of pressure on the exporters. Many companies know they can’t be the manufacturer of record, even if they sell the goods EXW. So, what do they do? They produce, and a more established manufacturer resells the products in its name.
If you don’t station 1 or 2 people to continuously monitor the input of materials, the manufacturing, and the output of finished products, this will probably happen in at least one of your orders.
In these cases, you know absolutely nothing about the origin of the materials, the hygiene conditions under which production happened, the quality system, etc.
4. Many people count on these products for survival – faulty stuff is not tolerable!!
We are up to about 200,000 official deaths due to COVID-19. This is not just a “bad cold”.
Health professionals are exposed to infected cases and take it very, very seriously.
Perhaps more importantly, many people must absolutely have the right equipment to avoid becoming mass transmitters: those working on food preparation, the cashiers at supermarkets, and so on.
5. There are going to be many trials related to the management of the epidemic
In France, many groups are already suing the government for its supposed mishandling of the situation (not keeping an appropriate stock of PPE, not educating the public about the virtues of wearing a mask, deciding the lockdown only after the elections, and so on). Expect to see this in many countries.
It will also happen against private groups that imported PPE that was found non-compliant. I guess some legal actions are already underway.
6. You really, really don’t want to be liable for deaths or massive economic damages
As most people know, the liability on products sold in the USA is virtually limitless. Pretty scary.
In the European Union, the approach is different but companies that place medical or PPE products on the EU market are exposed to serious liabilities, too.
7. You probably won’t be able to recoup any of that loss from the Chinese supplier
First, you probably purchased from them without a contract, since it is very hard to get any manufacturer of those products to sign even a 1-page contract these days. And you have certainly paid the supplier entirely by the time you receive the products.
Second, the Chinese authorities want to make it very clear that you, as the importer, are responsible for any issue. (See the form exporters and importers have to sign, starting yesterday.) There is really no way for the importer to dodge the bullet!
EDIT 6 June 2020:
Some very public lawsuits are starting to come up in the news. For example: U.S. Files Charges Against Chinese N95 Mask Maker, from the WSJ.
“We will aggressively investigate and charge manufacturers that put our medical professionals and first responders at risk in fighting this crisis,” said New Jersey U.S. Attorney Craig Carpenito, whose office is co-prosecuting the case.
Here are some of the facts. The importer claims it’s all the Chinese maker’s fault, of course… but how come he didn’t do ANY verification?? He probably won’t he held as a hero in this lawsuit…
The half-million King Year masks were imported by a Delaware company, Indutex USA. Its president, George Gianforcaro, previously told The Wall Street Journal that he had orders to sell about 125,000 masks to buyers including nursing homes, a children’s hospital and a police department.
Mr. Gianforcaro has said he relied on a certification provided to him from a Chinese testing lab that showed the masks had met Niosh standards. He said Friday that he welcomed the charges against King Year and that his company is in the process of returning the masks to China.
The certification came from a “nonaccredited laboratory and appears to have been false,” according to the federal complaint.
King Year, in registering with the FDA to sell its products in the U.S., listed a company with a Delaware address as its required U.S. agent, according to the complaint. The company appears to be fictitious, the complaint said, and its listed address was a personal residence whose occupants stated they had never heard of King Year.
What you should do
I should start by stating that there is probably no way for you to get to a very low risk level. But let’s explore a few options:
a. The absolute best option
We are working for an established group that managed to find brokers willing to finance the first shipment. If lab tests show the products are substandard, the investor does not need to pay for the batch and will not distribute it.
The problem is, you may be unable to find and persuade such an accommodating supplier. This only works if you are quite established and if you purchase tens of millions of pieces.
b. The second best option
This is available to all buyers, and I am surprised more companies don’t do that:
- Have your representative pick some samples before shipment;
- Send those samples to a testing lab;
- Go ahead with the shipment, if you really can’t wait (and it will likely take more than 10 days, even by air);
- Hold the products in your warehouse until you have a positive testing report.
(By the way, several situations where a batch of masks was already in the importing country but was sold for a discount came to our attention. They are usually due to a failed lab testing result.)
And here is a bonus tip. Testing labs can be requested to give preliminary results, at a certain point in their process. And you could also design your own standard, to get an indication of quality earlier (we have done this based on the EN 149 standard, for example, and it is not an unusual thing to do).
c. Reduce your products’ claims, in order to reduce your liability
This is an option most people don’t think about. Let’s take the example of face masks.
In the USA, a face mask can be registered with the FDA under the code QKR. Its definition is as follows:
Face mask is intended to be worn by general public or healthcare personnel. The mask covers the user’s nose and mouth and may or may not meet fluid barrier or filtration efficiency levels. The device is subject to ED if labeling conditions outlined in the IIE guidance are met, for the duration of the COVID-19 public health emergency.
(Don’t take my word for it. Call the US FDA or the CDC if you want to be sure.)
In the EU, selling a face mask that falls neither in the scope of PPE regulation nor the medical devices directive is possible.
For example, the French association AFNOR came up with guidelines for what they call “barrier masks”:
This device is not intended to be used by health workers in contact with patients. FFP2 type filtering masks and masks for medical (or surgical) use are intended to be used by and are reserved for health workers.
This device is not a medical device in the sense of Regulation EU/2017/745, nor is it personal protective equipment in the sense of Regulation EU/2016/425.
d. The ever-green advice that is always good to follow
Professional purchasers tend to follow a certain process:
- Conduct initial (covert) due diligence on the manufacturer
- Request and verify the certificates, and make sure to get the detailed lab testing results
- Audit the factory, check the processes and the quality systems; if you are not allowed to do that, try to be allowed to send someone for a 2-hour “factory visit”. Anything is better than nothing.
- Try to have a presence during production, to keep an eye on what happens.
- Conduct a final inspection before shipment. Sometimes it detects serious issues. Even if you already paid for the batch, it is better to find out about issues at that point than later. The manufacturer can still fix the issues relatively easily in some cases.
- Work with a testing laboratory to confirm the products are up to the appropriate standard.
- Minimize the chances of products being swapped, stolen, or seized all along the road to your warehouse!
I am not the only one who suggests doing all this. Dan Harris over at the China Law Blog wrote a good checklist from his perspective.
So, did I get you scared? That’s a good thing. I also suggested solutions, so don’t hate me.
If you are new to this market but you really want to help your country fight the epidemic, I admire your resolve, but I am afraid you are taking high risks. We have been compiling guides for the USA and the EU:
We will be adding to them to make them increasingly detailed. I will keep writing advice for companies in your situation. That’s the best I can do to help out.
If you have any questions about this topic, please leave a comment or contact us. If we can help, we will let you know!