When we began importing products from Asia a few years ago, I distinctly recall my excitement about our new venture: this business, I thought, would be easy money. I imagined our company to be an air traffic controller, directing incoming products from China to soon-to-be customers after a quick layover at our warehouse. But I was naïve. The bewildering complexity of the process gradually became apparent as we encountered unexpected curve balls with each new transaction. It never ceases to amaze me how little we know: there are always new obstacles of which every new firm should be made aware, yet are not made aware. As an import firm, we are legally responsible for all liability associated with the manufacture and use of our products.
The truth is that, at best, there are limited avenues to educate ourselves on the broad range of pitfalls awaiting us. Even if your company is sufficiently resourced to staff in-house counsel, many experienced attorneys with whom I have spoken to continue to scratch their heads about the increasing proliferation of new laws and their undecided interpretations. We are exposed to tremendous liability once our products leave our warehouse. We usually, and sadly, have to suffer through the hard lessons that business in a complex and changing regulatory environment poses.
Recently, against the odds, our company got lucky. We were within a day or two of placing a large purchase order for a children’s product that contained a small drawstring cord to be placed strategically around a child’s neck to assist with a specific feature. After carefully contemplating the safety consequences of this cord, we added an emergency safety release mechanism to the drawstring. Only by a fortuitous fluke internet search did we happen upon the U.S. Consumer Product Safety Commission’s (CPSC) website. On this site, we read page after page about the millions of dollars of fines levied by the CPSC for violations of safety standards with respect to drawstring cords. It turns out that many children have lost their lives or been seriously injured by drawstrings worn around their necks or waists. As my jaw hit the floor, I wondered: Why, as a parent of a two-year-old, have I never heard of this? What else haven’t I heard of that poses a serious danger to my son?
Thankfully, we found out about this issue and proceeded to alter the design to make sure the product did not enter the gray area of a potential recall. I have been forever humbled by this experience and am so thankful that what could have happened didn’t.
Not only would an importer be fined severely for selling a product on a current CPSC recall list (or on a future recall list that we are not yet aware of), but it would be responsible for taking back all of its product and, in almost all cases, issuing a full refund to the retailer, middle-person or consumer. Unfortunately, liability does not end there. Many large retailers have also been fined for selling non-compliant products and, due to product liability statutes, contractual provisions, and tort law doctrine, their legal teams are well-equipped to sue offending suppliers. The requirement to recall product not only applies to items that are currently selling or have recently sold, but to all products sold in the past that violate what the CPSC has deemed “unsafe.” More importantly, how could any of us live with ourselves if one of our products caused serious harm to a person or child?
As importers of children’s products, we have to ensure that we perform due diligence, inform ourselves, and dutifully complete the product testing requirements mandated by the federal CPSC-issued CPSIA (which are vague even to many attorneys), as well as California’s Proposition 65 requirements if we sell to retailers or consumers in California (Yes, this includes retail websites). I would highly recommend that your company add a thorough and current review of the CPSC website to your quality control checklist. If you have any questions about a related product or a new product in development, I would also recommend contacting the CPSC directly or consulting an attorney who specializes in product recalls. Like most government entities, the CPSC is short-staffed, however, the U.S. Office of Management and Budget rated the CPSC “Effective,”— the highest rating given. In other words, the CPSC will move quickly if they determine a product to be unsafe. While not all products fall under the watchful eye of the CPSC, 15,000 types of consumer products do, and the CPSC guidelines can be helpful to legal defense in the event of a product suit falling outside the CPSC’s jurisdiction. Please check the following link to determine if a product you are importing or manufacturing may be regulated by another governmental agency: http://www.cpsc.gov/federal.html.
We were naïvely confident that we had done enough safety testing to ensure that our product would not pose any safety issues. Even if it were completely safe from a practical perspective, it would be terrifying to get that initial contact from the CPSC stating that our product was not compliant as well as the associated ramifications. The scary thing is that the agency’s decision to move forward is completely up to its interpretation of its own regulations and, as we know, the federal government is well funded to fine and prosecute companies. As entrepreneurs, we all want to make money. But to do so in the long term, it’s crucial to mitigate our risk.
The CPSC website is www.cpsc.gov. For recall information, click on the “Recalls and Product Safety News” link.