"After a summer of tainted dog food, toxic toothpaste and contaminated fish, some consumers have begun to experience "import anxiety attacks" when browsing the aisles at the local megastore. Many of us used to assume that some hyper-vigilant government agency or trustworthy U.S. corporation carefully screened our consumer goods for us. Mattel's recall of 9 million Chinese-made toys (due to unsafe levels of lead in the paint) suggests that this faith may have been misplaced. In mid-July, in response to widespread concern regarding foreign imports, President Bush ordered the formation of a working group to analyze U.S. safeguards and "promote the safety of imported products." The group has recommended that the government do more to ensure safety of goods before they arrive in the United States. The report outlines a new, prevention-based strategy for targeting high-risk imports, but admits that the private sector must take "a leading role" in protecting consumers. U.S. companies will still shoulder much of the responsibility for our safety, and that may not be a bad thing.
The sheer volume of foreign imports into the United States makes it impossible for our regulatory commissions to examine and approve every item. This year, U.S. companies will import goods worth an estimated $2.2 trillion from all over the world and $341 billion from China alone. The Food and Drug Administration and the Consumer Product Safety Commission (CPSC) simply cannot open every container, inspect every box and test every tube of toothpaste — especially when the CPSC employs less than 100 inspectors and investigators across the nation. These federal agencies were never intended to exercise that kind of micro-oversight.
Instead, the U.S. system places much responsibility on the domestic importer, holding him answerable for the quality of goods purchased from overseas. When these goods are re-sold on the domestic market, the importer is legally accountable to both consumers and the U.S. government. When there's a problem (like diethylene glycol in your toothpaste), consumers can take legal action and federal agencies can levy a variety of penalties ranging from recalls to jail time. This system may close the barn door after the cows are already out, but it provides importers with the greatest incentives to supervise foreign manufacturers. The assumption is that a company will oversee its imports in order to protect its reputation, dodge expensive lawsuits and avoid government penalties. American importers have been undeniably negligent, but they can improve supervision far more quickly and effectively than government agencies.
In contrast, the European Union (EU) places much of the regulatory responsibility on the national government. When legislators like Representative Etheridge call for greater federal oversight of U.S. imports, they are really moving us away from our market-driven approach towards the EU model of governmental management. In theory, this might sound like a good idea. Who wouldn't like dispassionate, white-coated government inspectors carefully testing every can of imported dog food? In reality, however, the result is an inflated bureaucracy, suffocating regulations and rising consumer prices. Even the EU is waging a war on its own red tape. The United States simply imports too much stuff for the government to serve as the sole gatekeeper.
While the size and scope of U.S. trade seems incompatible with the EU model of government micro-management, there are still things both private industry and federal agencies can do. American companies need to establish substantial foreign offices, with their employees on-site to monitor production. They need to test their own imports before putting them out on the market. To reassure holiday shoppers, Disney has announced that it will test its own products for safety. U.S. businesses may also need to establish information-sharing networks, to notify each other when a foreign manufacturer cuts too many corners. Contracts with foreign manufacturers should detail quality and safety standards. Over the last several months, we've seen corporate America reap the fruit of its own carelessness. Clearly, things at the orchard need to change.
Though private businesses should shoulder much responsibility, we can ask our federal government to take some useful action. The U.S. Department of Commerce should expand and enforce labeling regulations, which require imported goods to be clearly identified with country of origin information. If you cook with olive oil imported from Tunisia, it should say so on the label. A coffee cup made in Taiwan should be clearly marked. Shoppers can then make more informed choices about everything from haddock to hair spray. When companies have been negligent in overseeing the safety of imports, government agencies should have the resources to investigate and impose appropriate penalties. And, as it is still legal to sell voluntarily recalled goods, the Consumer Product Safety Commission (CSPC) should be granted the power to ban recalled items from store shelves. U.S. companies are working to win back the trust of nervous consumers. The American public has high standards, and prudent companies will strive to meet them — or find themselves closed for business.
Jan de Beer is a Senior Associate at Frost Brown Todd LLC and practices in the firm's Corporate Department.