Importers often play a delicate balancing act between reducing quality control expenses on the one hand, and minimizing product liability risks on the other. Many small importers are cornered in a situation where they have to sacrifice quality control. The results? Higher risks for the importer (if he gets caught) and for the final user (if the product is indeed unsafe). The question is, how to solve this dilemma?
I just found an interesting post entitled Paying the cost of unsafe imports on the Chief Asia Inspector blog. An option discussed is enforcing tougher penalties on the companies importing dangerous products. Importers are supposed to be aware of what they cannot sell on their domestic market, so they should be punished heavily whenever they resell unsafe products in their country. Or so the logic goes.
It does make sense. But is it the be-all-and-end-all solution? No!
Here are the comments that I particularly like, from the Chief Asia Inspector:
I would add that it is important to understand the supply chain itself, and who should hold the highest liability when unsafe imports are put on western markets.
My point is that it is easy to blame it on the Importer – often a SME – when he is only repercuting the cost pressure he gets from the final distributor (big retail groups) on his own Chinese or Asian suppliers. Ultimately, the real decision makers on the quality of imported goods are often big corporate retailers, who won’t deal direct with Chinese factories, and who transfer the liability and risk of importing to smaller specialists importers.
In other words, mega-retailers tend to buy more and more from intermediaries, who in turn take full responsibility for managing production. In this case, importers are pressured into accepting razor-thin margins. And of course, the fees corresponding to quality control (inspections and lab tests) would reduce this margin to an intolerable level.
I agree. Importers that don’t make sure their products comply with their country’s laws are guilty, but not entirely responsible. In a sense, they are forced into illegality–or at least into taking huge risks–just to stay in business.
Recently I was helping a European importer who was buying a product made of fabric and including a lighting system. I contacted several local laboratories to get the list of tests needed to confirm this product’s respect of EU regulations. The bill from a local SGS lab: nearly USD6,000. It was actually higher than the amount of margin the importer plans to make on this order! In the end, what happened? The buyer asked for certifications from his vendor.
Of course the supplier will produce such a document: he does not bear serious legal risks, and he does not want the order to be canceled. On his side, the importer knows perfectly that the certification he receives means nothing–the supplier would never pay these USD6,000 on his own to check what his own supplier sells to him.
I don’t have easy answers to solve this dilemma.
- Increased regulation (higher penalties and/or stricter controls by customs) might have an impact on behaviours, but only to a point.
- The supply chain structure certainly plays a role, but how to change the system? By forcing the retailer to retain some liability (and not transferring it all to the importer in their contracts)? It would actually diffuse responsibility!
- Can providers of quality control cut prices by removing some bells and whistles in their service offer? I don’t see the major firms playing this game, as they are mostly focused on their large clients’ needs.