Recalls of Foreign-Made Products Lead to Increased Scrutiny at Home

For companies that provide products made overseas to consumers in the United States, the years 2007 and 2008 may come to be remembered as watershed years. Those two years were plagued by an unfortunate series of high-profile safety recalls that involved products made overseas, namely in China. Seemingly one after another, recalls announced by the Food and Drug Administration (“FDA”) and the Consumer Products Safety Commission (“CPSC”) had American consumers checking the food that their pets ate, the toys that their children played with and the medicine that their doctors prescribed.

The recalls were unsettling in both scope and detail. They included:

• Pet food tainted with melamine that allegedly sickened or killed hundreds of cats and dogs (See, e.g., Food and Drug Administration, FDA's Update on Tainted Pet Food, April 22, 2007, available at http://www.fda.gov/bbs/topics/NEWS/2007/NEW01615.html);
• Popular brands of toys with surface paints that contained lead and could be toxic if ingested by young children (See, e.g., Consumer Products Safety Commission, RC2 Corp. Recalls Various Thomas & Friends' Wooden Railway Toys Due to Lead Poisoning Hazard, June 13, 2007, available at http://www.cpsc.gov/cpscpub/prerel/prhtml07/07212.html, and Consumer Products Safety Commission, Mattel Recalls Various Barbie' Accessory Toys Due to Violation of Lead Paint Standard, Sept. 4, 2008);
• A line of toys coated in a chemical that, if ingested, may have caused children to become comatose, develop respiratory depression, or have seizures (Consumer Products Safety Commission, Spin Master Recalls Aqua Dots ' Children Became Unconscious After Swallowing Beads, Nov. 7, 2007, available at http://www.cpsc.gov/cpscpub/prerel/prhtml08/08074.html); and
• A common blood-thinning medication contaminated with oversulfated chondroitin sulfate that supposedly triggered serious allergic reactions and severe hypotension in some patients (Food and Drug Administration, Questions and Answers on Heparin Sodium Injection, June 18, 2008, available at http://www.fda.gov/cder/drug/infopage/heparin/heparinQA.htm).

The negative publicity and concern generated by the 2007 and 2008 recalls described above have since ushered in increased government oversight of products made overseas, as well as sweeping legislation aimed at protecting consumers. This article discusses recent federal government action in response to the recalls and related emerging issues of which international manufacturers, importers and the attorneys who advise them should be aware.

The Interagency Working Group on Import Safety

On July 18, 2007, President George W. Bush issued Executive Order 13439, which established the Interagency Working Group on Import Safety (“Working Group”). 72 FED. REG. 40,053 (July 18, 2007). The Working Group was created “to ensure that the executive branch takes all appropriate steps to promote the safety of imported products.” Id. The Working Group is chaired by the Secretary of the Department of Health and Human Services and is joined by senior officials from the following agencies: Department of Health and Human Services, including the Food and Drug Administration; Department of State; Department of Treasury; Department of Justice; Department of Agriculture; Department of Commerce; Department of Transportation; Department of Homeland Security, including U.S. Customs and Border Protection; Office of Management and Budget; United States Trade Representative; Environmental Protection Agency; and Consumer Product Safety Commission. Id. The Working Group is tasked with providing written recommendations regarding import safety to the President. Id. To date, the Working Group has produced three Reports to the President and a draft guidance for the industry on good importer practices.

September 2007 Report to The President

The Working Group's initial report demonstrates that the scope of the issues being addressed by the Working Group is vast. The United States currently imports approximately $2 trillion worth of products annually from more than 150 countries, and experts project that this amount will triple by 2015. Interagency Working Group on Import Safety, Protecting American Consumers Every Step of the Way: A Strategic Framework for Continual Improvement in Import Safety, Sept. 10, 2007, at 4, available at http://www.importsafety.gov/report/report.pdf.

The Working Group found that, historically, federal agencies have relied on inspections, examinations and other interactions with imported goods at a port-of-entry to determine whether or not a product can enter the United States, which “provides a one-time, sometimes incomplete, assessment of whether imported products meet U.S. safety requirements.” Id. The Working Group found several deficiencies and challenges associated with this historic system. Id. at 7-9. As a result, the Working Group determined that those deficiencies and challenges “require a paradigm shift from an intervention, border-focused strategy to a life-cycle approach that stresses a risk-based approach to prevention with verification that identifies high-risk segments of the import life cycle and verifies the safety of products at those important phases.” Id. at 11.

Although the “paradigm shift” described above is probably the most notable aspect of this preliminary report by the Working Group, there are a few other notable issues of which manufacturers, importers and their attorneys should be aware. One of the challenges singled out in the report is the need for additional authority. “In some cases, federal government officials lack the authority to identify or effectively address products found to be unsafe, to punish bad actors, or to implement effective preventative measures across the import life cycle.” Id. at 8. Another one of the challenges is circumvention. “Companies and individuals may engage in circumvention to avoid U.S. restrictions on imports of certain merchandise from a particular country, inspection requirements, or refusal of entry.” Id. at 9. Given those perceived challenges and the amount of attention that is focused on import safety currently, manufacturers, importers and their attorneys can expect to see an increase in new or enhanced regulations regarding imports by the federal government. Moreover, manufacturers and importers can also expect to see an increase in enforcement actions regarding imports by the federal government. Finally, three “organizing principles” ' prevention, intervention, and response ' make up the Working Group's strategic framework. Id. at 11-12. This means that not only can manufacturers and importers expect to see an increase in regulations and enforcement actions, but they can expect to see an increase in regulations and enforcement actions at each stage of the stream of commerce ' from manufacture (prevention), to import (intervention), to post-market oversight (response).

November 2007 Report

The second report prepared by the Working Group builds upon the initial report and proposes specific recommendations and action steps, with short-term and long-term timelines, to improve import safety. Interagency Working Group on Import Safety, Action Plan for Import Safety: A Roadmap for Continual Improvement, Nov. 6, 2007, available at http://www.importsafety.gov/report/actionplan.pdf. The Working Group's Action Plan is, in a word, ambitious. Some may even consider it to be revolutionary.

The Action Plan proposes 14 broad recommendations to improve import safety. Those recommendations are to: 1) create new and strengthen existing safety standards; 2) verify compliance of foreign producers with U.S. safety standards and U.S. security standards through certifications; 3) promote Good Importer Practices; 4) strengthen penalties and take strong enforcement actions to ensure accountability; 5) make product safety an important principle of our diplomatic relationships with foreign countries and increase the profile of relevant foreign assistance activities; 6) harmonize federal government procedures and requirements for processing import shipments; 7) complete single-window interface for the intra-agency, interagency, and private sector exchange of import data; 8) create interactive import-safety information network; 9) expand laboratory capacity and develop rapid testing methods for swift identification of hazards; 10) strengthen protection of intellectual property rights (IPR) to enhance consumer safety; 11) maximize the effectiveness of recalls; 12) maximize federal-state collaboration; 13) expedite consumer notification of product recalls; and 14) expand use of electronic track-and-trace technologies. Id. at 11, 15-39.

In addition to the 14 recommendations outlined above, the Action Plan describes 50 proposed action steps that can be employed to address the recommendations. For manufacturers and importers, some of the notable action steps include mandatory and voluntary certification programs (Id. at 17-20), Good Importer Practices (Id. at 20-21), information sharing obligations (Id. at 31), information gathering obligations (Id. at 38-39), and investment in new technologies (Id. at 39).

If any of these action steps are imposed through regulation, they could increase substantially the regulatory obligations of certain manufacturers and importers, as well as the amount of time, effort and money that those manufacturers and importers have to spend on regulatory compliance. Because some of the proposed action steps were given short-term timelines for implementation, it is important that manufacturers, importers and their attorneys continually monitor this rapidly-changing regulatory environment.

July 2008 Report

The third report prepared by the Working Group describes its efforts to followup on the recommendations and implement the action steps laid out in the Action Plan. Interagency Working Group on Import Safety, Import Safety ' Action Plan Update: A Progress Summary, July 1, 2008, available at www.importsafety.gov/report/actionupdate/actionplanupdate.pdf. The report details two important goals achieved by the Working Group: consumer product safety and food and feed safety addressed in agreements that CPSC and FDA signed with their regulatory counterparts in China. Id. at 2.

On Sept. 11, 2007, the CPSC signed a Memorandum of Understanding (“MOU”) with China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) regarding consumer product safety. Particularly, AQSIQ “agreed to intensify its efforts to prevent the manufacture and export of unsafe products and prohibit the use of lead paint in toys exported to the United States.” Id. at 8. AQSIQ agreed to cooperate on product safety initiatives in “four key consumer product areas” ' fireworks, electrical products, lighters, and toys. Id. The cooperation agreement includes provisions for the exchange of standards information; training on product testing; the exchange of information on emerging hazards; and tightening controls on the quality of inputs from sub-suppliers. Id.

On Dec. 11, 2007, FDA and AQSIQ signed a Memorandum of Agreement (“MOA”) regarding food and feed safety. The MOA is significant because it “requires AQSIQ to establish a registration and certification system to ensure food and feed exported from China to the United States meets FDA requirements.” Id. at 6. Also on that date, FDA signed an MOA with China's State Food and Drug Administration (SFDA). Under this MOA, SFDA “will also establish a system to certify that a firm's manufacturing processes and products meet FDA requirements” and senior officials from FDA and SFDA “will meet annually to discuss and review progress.” Id; see also Agreement Between the Department of Health and Human Services of the United States of America and the State Food and Drug Administration of the People's Republic of China on the Safety of Drugs and Medical Devices, Dec. 11, 2007, available at http://www.fda.gov/oia/agreements/Drugs-and-Medical-Devices.pdf.

Manufacturers and importers who do business in China should be aware of these agreements and how they could impact their business both here and overseas.

Draft Guidance for Industry on Good Importer Practices

On Jan. 13, 2009, several agencies that are part of the Working Group published a draft guidance document on “Good Importer Practices.” 74 FED. REG. 1692-1693 (Jan. 13, 2009); see also Guidance for Industry, Good Importer Practices, Draft Guidance, available at www.fda.gov/oc/guidance/goodimportpractice.html. “In general, the recommendations advise the importer to know the foreign firms with whom they do business and through which the products they purchase pass, understand the products they import and their vulnerabilities, understand the hazards that may be introduced during the product life cycle, and ensure that these products have been properly controlled and monitored.” 74 FED. REG. 1693 (Jan. 13).

The Good Importer Practices are broadly organized by four guiding principles: 1) establishing a product safety management program; 2) knowing the product and applicable U.S. requirements; 3) verifying product and firm compliance with U.S. requirements throughout the supply chain and product life cycle; and 4) taking corrective action and preventative action when the imported product or firm is not compliant with U.S. requirements. Id. For each guiding principal, the Good Importer Practices set forth specific suggestions for manufacturers and importers to consider implementing to ensure the safety of their products. Id.

Although not currently final or binding, the Good Importer Practices can be a touchstone for proactive manufacturers and importers in uncertain times. They are also indicative of where industry standards are heading. Manufacturers, importers and their attorneys should be aware of the recommended Good Importer Practices and how implementing them may be able to help minimize future liability.

Agency Example: CPSC

Recent changes at the CPSC provide examples of how federal agencies are evolving to address safety concerns regarding foreign-made products. In July 2008, the CPSC issued an “Import Safety Strategy” in response to “a more than doubling of imports of consumer products into the United States over the last decade.” U.S. Consumer Product Safety Commission, Import Safety Strategy (July 2008) at 1, available at www.cpsc.gov/BUSINFO/importsafety.pdf. By the end of the 2007 fiscal year, imports accounted for approximately 44% of all consumer products sold in the United States, yet comprised over 75% of all product recalls overseen by the CPSC. Id. Going forward, the CPSC's import safety strategy will also include the implementation of new landmark legislation ' The Consumer Product Safety Improvement Act of 2008 (“CPSIA” or “Act”), which President Bush signed into law on Aug. 14, 2008, following concerns about import safety. See Pub. L. No. 110-314 (2008). CPSIA contains several notable provisions regarding children's products, including provisions about the use of lead paint (id. at ” 101(a),-(b)), mandatory third-party testing (Id. at ' 102(a)) and tracking labels (Id. at ” 103(a)-(b)). CPSIA also contains several notable provisions that are generally applicable, including provisions that require supply chain identification by manufacturers and importers (Id. at ” 211, 215(c)) and the creation or a consumer product safety database (Id. at ” 212(a)-(b)).

CPSIA will impact manufacturers and importers of foreign-made consumer products. Increased CPSC resources and power, scrutiny of consumer products safety, stringent standards, availability of public information and larger penalties dramatically increase the risk of greater liability. Manufacturers and importers and the attorneys who advise them must, therefore, pay close attention to the CPSC's frequent rulemakings and ensure compliance to minimize the potential liability risk.

Under CPSIA, manufacturers and importers will need to ensure that they, along with their partners in the supply and distribution chain, understand the applicable standards and the actions necessary to demonstrate compliance with the standards. Manufacturers will also need to identify and establish strong relationships with trustworthy third- party-testing laboratories and should also consider the benefits of purchasing test equipment to meet compliance standards. Manufacturers and importers need to develop and/or understand proper protocols for the testing of their consumer products to ensure compliance with applicable standards. Manufacturers and importers will also need to be aware of the identity of every party involved in the supply and distribution chain. Each party should also conduct a review of purchase orders and supplier contracts for compliance with the CPSIA, as well as an analysis of insurance terms, indemnity provisions, warranties, representations, and testing and recall obligations. Given the CPSIA's focus on children's toys, manufacturers and importers of children's products must be cognizant of applicable standards and rules, especially the lead paint allowance, mandatory third party testing mandate, and tracking label requirement. Additionally, manufacturers will need to develop a protocol that allows them to evaluate and respond to the safety reports they receive from the CPSC within 10 days to avoid the publication of erroneous or confidential information on the consumer product safety Web site.

Conclusion

This new legislation will also have dramatic effects on the future litigation landscape. The increased regulation of safety standards, testing, certifications of compliance, and advertising will likely result in a significant increase in the number of foreign product recalls. This, in turn, will yield increased litigation in the future. For example, plaintiff's counsel will benefit from the CPSIA changes as they have a Congressional mandate to the CPSC to establish safety regulations and standards which, if violated, can lead to CPSIA violation and negligence per se claims. Violations could also form the basis for consumer protection claims that require a statutory predicate offense. In addition, the public consumer safety database required by the CPSIA will easily point plaintiff's counsel towards the products with safety issues that can support litigation. The end result of this legislation, as well as other recent regulations and the overall heightened scrutiny that federal agencies have regarding imported products, is that manufacturers and importers will likely face a significant rise in litigation and are well-served to think strategically and creatively with their attorneys on ways to ensure compliance and avoid the specter of increased litigation.

Kimberly H. Clancy is a compliance director at Amgen, a biotechnology company. Brendan P. Sheehey is an associate in the Los Angeles office of Sidley Austin LLP. He practices in the firm's Litigation Group.

For companies that provide products made overseas to consumers in the United States, the years 2007 and 2008 may come to be remembered as watershed years. Those two years were plagued by an unfortunate series of high-profile safety recalls that involved products made overseas, namely in China. Seemingly one after another, recalls announced by the Food and Drug Administration (“FDA”) and the Consumer Products Safety Commission (“CPSC”) had American consumers checking the food that their pets ate, the toys that their children played with and the medicine that their doctors prescribed.

The recalls were unsettling in both scope and detail. They included:

• Pet food tainted with melamine that allegedly sickened or killed hundreds of cats and dogs (See, e.g., Food and Drug Administration, FDA's Update on Tainted Pet Food, April 22, 2007, available at http://www.fda.gov/bbs/topics/NEWS/2007/NEW01615.html);
• Popular brands of toys with surface paints that contained lead and could be toxic if ingested by young children (See, e.g., Consumer Products Safety Commission, RC2 Corp. Recalls Various Thomas & Friends' Wooden Railway Toys Due to Lead Poisoning Hazard, June 13, 2007, available at http://www.cpsc.gov/cpscpub/prerel/prhtml07/07212.html, and Consumer Products Safety Commission, Mattel Recalls Various Barbie' Accessory Toys Due to Violation of Lead Paint Standard, Sept. 4, 2008);
• A line of toys coated in a chemical that, if ingested, may have caused children to become comatose, develop respiratory depression, or have seizures (Consumer Products Safety Commission, Spin Master Recalls Aqua Dots ' Children Became Unconscious After Swallowing Beads, Nov. 7, 2007, available at http://www.cpsc.gov/cpscpub/prerel/prhtml08/08074.html); and
• A common blood-thinning medication contaminated with oversulfated chondroitin sulfate that supposedly triggered serious allergic reactions and severe hypotension in some patients (Food and Drug Administration, Questions and Answers on Heparin Sodium Injection, June 18, 2008, available at http://www.fda.gov/cder/drug/infopage/heparin/heparinQA.htm).

The negative publicity and concern generated by the 2007 and 2008 recalls described above have since ushered in increased government oversight of products made overseas, as well as sweeping legislation aimed at protecting consumers. This article discusses recent federal government action in response to the recalls and related emerging issues of which international manufacturers, importers and the attorneys who advise them should be aware.

The Interagency Working Group on Import Safety

On July 18, 2007, President George W. Bush issued Executive Order 13439, which established the Interagency Working Group on Import Safety (“Working Group”). 72 FED. REG. 40,053 (July 18, 2007). The Working Group was created “to ensure that the executive branch takes all appropriate steps to promote the safety of imported products.” Id. The Working Group is chaired by the Secretary of the Department of Health and Human Services and is joined by senior officials from the following agencies: Department of Health and Human Services, including the Food and Drug Administration; Department of State; Department of Treasury; Department of Justice; Department of Agriculture; Department of Commerce; Department of Transportation; Department of Homeland Security, including U.S. Customs and Border Protection; Office of Management and Budget; United States Trade Representative; Environmental Protection Agency; and Consumer Product Safety Commission. Id. The Working Group is tasked with providing written recommendations regarding import safety to the President. Id. To date, the Working Group has produced three Reports to the President and a draft guidance for the industry on good importer practices.

September 2007 Report to The President

The Working Group's initial report demonstrates that the scope of the issues being addressed by the Working Group is vast. The United States currently imports approximately $2 trillion worth of products annually from more than 150 countries, and experts project that this amount will triple by 2015. Interagency Working Group on Import Safety, Protecting American Consumers Every Step of the Way: A Strategic Framework for Continual Improvement in Import Safety, Sept. 10, 2007, at 4, available at http://www.importsafety.gov/report/report.pdf.

The Working Group found that, historically, federal agencies have relied on inspections, examinations and other interactions with imported goods at a port-of-entry to determine whether or not a product can enter the United States, which “provides a one-time, sometimes incomplete, assessment of whether imported products meet U.S. safety requirements.” Id. The Working Group found several deficiencies and challenges associated with this historic system. Id. at 7-9. As a result, the Working Group determined that those deficiencies and challenges “require a paradigm shift from an intervention, border-focused strategy to a life-cycle approach that stresses a risk-based approach to prevention with verification that identifies high-risk segments of the import life cycle and verifies the safety of products at those important phases.” Id. at 11.

Although the “paradigm shift” described above is probably the most notable aspect of this preliminary report by the Working Group, there are a few other notable issues of which manufacturers, importers and their attorneys should be aware. One of the challenges singled out in the report is the need for additional authority. “In some cases, federal government officials lack the authority to identify or effectively address products found to be unsafe, to punish bad actors, or to implement effective preventative measures across the import life cycle.” Id. at 8. Another one of the challenges is circumvention. “Companies and individuals may engage in circumvention to avoid U.S. restrictions on imports of certain merchandise from a particular country, inspection requirements, or refusal of entry.” Id. at 9. Given those perceived challenges and the amount of attention that is focused on import safety currently, manufacturers, importers and their attorneys can expect to see an increase in new or enhanced regulations regarding imports by the federal government. Moreover, manufacturers and importers can also expect to see an increase in enforcement actions regarding imports by the federal government. Finally, three “organizing principles” ' prevention, intervention, and response ' make up the Working Group's strategic framework. Id. at 11-12. This means that not only can manufacturers and importers expect to see an increase in regulations and enforcement actions, but they can expect to see an increase in regulations and enforcement actions at each stage of the stream of commerce ' from manufacture (prevention), to import (intervention), to post-market oversight (response).

November 2007 Report

The second report prepared by the Working Group builds upon the initial report and proposes specific recommendations and action steps, with short-term and long-term timelines, to improve import safety. Interagency Working Group on Import Safety, Action Plan for Import Safety: A Roadmap for Continual Improvement, Nov. 6, 2007, available at http://www.importsafety.gov/report/actionplan.pdf. The Working Group's Action Plan is, in a word, ambitious. Some may even consider it to be revolutionary.

The Action Plan proposes 14 broad recommendations to improve import safety. Those recommendations are to: 1) create new and strengthen existing safety standards; 2) verify compliance of foreign producers with U.S. safety standards and U.S. security standards through certifications; 3) promote Good Importer Practices; 4) strengthen penalties and take strong enforcement actions to ensure accountability; 5) make product safety an important principle of our diplomatic relationships with foreign countries and increase the profile of relevant foreign assistance activities; 6) harmonize federal government procedures and requirements for processing import shipments; 7) complete single-window interface for the intra-agency, interagency, and private sector exchange of import data; 8) create interactive import-safety information network; 9) expand laboratory capacity and develop rapid testing methods for swift identification of hazards; 10) strengthen protection of intellectual property rights (IPR) to enhance consumer safety; 11) maximize the effectiveness of recalls; 12) maximize federal-state collaboration; 13) expedite consumer notification of product recalls; and 14) expand use of electronic track-and-trace technologies. Id. at 11, 15-39.

In addition to the 14 recommendations outlined above, the Action Plan describes 50 proposed action steps that can be employed to address the recommendations. For manufacturers and importers, some of the notable action steps include mandatory and voluntary certification programs (Id. at 17-20), Good Importer Practices (Id. at 20-21), information sharing obligations (Id. at 31), information gathering obligations (Id. at 38-39), and investment in new technologies (Id. at 39).

If any of these action steps are imposed through regulation, they could increase substantially the regulatory obligations of certain manufacturers and importers, as well as the amount of time, effort and money that those manufacturers and importers have to spend on regulatory compliance. Because some of the proposed action steps were given short-term timelines for implementation, it is important that manufacturers, importers and their attorneys continually monitor this rapidly-changing regulatory environment.

July 2008 Report

The third report prepared by the Working Group describes its efforts to followup on the recommendations and implement the action steps laid out in the Action Plan. Interagency Working Group on Import Safety, Import Safety ' Action Plan Update: A Progress Summary, July 1, 2008, available at www.importsafety.gov/report/actionupdate/actionplanupdate.pdf. The report details two important goals achieved by the Working Group: consumer product safety and food and feed safety addressed in agreements that CPSC and FDA signed with their regulatory counterparts in China. Id. at 2.

On Sept. 11, 2007, the CPSC signed a Memorandum of Understanding (“MOU”) with China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) regarding consumer product safety. Particularly, AQSIQ “agreed to intensify its efforts to prevent the manufacture and export of unsafe products and prohibit the use of lead paint in toys exported to the United States.” Id. at 8. AQSIQ agreed to cooperate on product safety initiatives in “four key consumer product areas” ' fireworks, electrical products, lighters, and toys. Id. The cooperation agreement includes provisions for the exchange of standards information; training on product testing; the exchange of information on emerging hazards; and tightening controls on the quality of inputs from sub-suppliers. Id.

On Dec. 11, 2007, FDA and AQSIQ signed a Memorandum of Agreement (“MOA”) regarding food and feed safety. The MOA is significant because it “requires AQSIQ to establish a registration and certification system to ensure food and feed exported from China to the United States meets FDA requirements.” Id. at 6. Also on that date, FDA signed an MOA with China's State Food and Drug Administration (SFDA). Under this MOA, SFDA “will also establish a system to certify that a firm's manufacturing processes and products meet FDA requirements” and senior officials from FDA and SFDA “will meet annually to discuss and review progress.” Id; see also Agreement Between the Department of Health and Human Services of the United States of America and the State Food and Drug Administration of the People's Republic of China on the Safety of Drugs and Medical Devices, Dec. 11, 2007, available at http://www.fda.gov/oia/agreements/Drugs-and-Medical-Devices.pdf.

Manufacturers and importers who do business in China should be aware of these agreements and how they could impact their business both here and overseas.

Draft Guidance for Industry on Good Importer Practices

On Jan. 13, 2009, several agencies that are part of the Working Group published a draft guidance document on “Good Importer Practices.” 74 FED. REG. 1692-1693 (Jan. 13, 2009); see also Guidance for Industry, Good Importer Practices, Draft Guidance, available at www.fda.gov/oc/guidance/goodimportpractice.html. “In general, the recommendations advise the importer to know the foreign firms with whom they do business and through which the products they purchase pass, understand the products they import and their vulnerabilities, understand the hazards that may be introduced during the product life cycle, and ensure that these products have been properly controlled and monitored.” 74 FED. REG. 1693 (Jan. 13).

The Good Importer Practices are broadly organized by four guiding principles: 1) establishing a product safety management program; 2) knowing the product and applicable U.S. requirements; 3) verifying product and firm compliance with U.S. requirements throughout the supply chain and product life cycle; and 4) taking corrective action and preventative action when the imported product or firm is not compliant with U.S. requirements. Id. For each guiding principal, the Good Importer Practices set forth specific suggestions for manufacturers and importers to consider implementing to ensure the safety of their products. Id.

Although not currently final or binding, the Good Importer Practices can be a touchstone for proactive manufacturers and importers in uncertain times. They are also indicative of where industry standards are heading. Manufacturers, importers and their attorneys should be aware of the recommended Good Importer Practices and how implementing them may be able to help minimize future liability.

Agency Example: CPSC

Recent changes at the CPSC provide examples of how federal agencies are evolving to address safety concerns regarding foreign-made products. In July 2008, the CPSC issued an “Import Safety Strategy” in response to “a more than doubling of imports of consumer products into the United States over the last decade.” U.S. Consumer Product Safety Commission, Import Safety Strategy (July 2008) at 1, available at www.cpsc.gov/BUSINFO/importsafety.pdf. By the end of the 2007 fiscal year, imports accounted for approximately 44% of all consumer products sold in the United States, yet comprised over 75% of all product recalls overseen by the CPSC. Id. Going forward, the CPSC's import safety strategy will also include the implementation of new landmark legislation ' The Consumer Product Safety Improvement Act of 2008 (“CPSIA” or “Act”), which President Bush signed into law on Aug. 14, 2008, following concerns about import safety. See Pub. L. No. 110-314 (2008). CPSIA contains several notable provisions regarding children's products, including provisions about the use of lead paint (id. at ” 101(a),-(b)), mandatory third-party testing (Id. at ' 102(a)) and tracking labels (Id. at ” 103(a)-(b)). CPSIA also contains several notable provisions that are generally applicable, including provisions that require supply chain identification by manufacturers and importers (Id. at ” 211, 215(c)) and the creation or a consumer product safety database (Id. at ” 212(a)-(b)).

CPSIA will impact manufacturers and importers of foreign-made consumer products. Increased CPSC resources and power, scrutiny of consumer products safety, stringent standards, availability of public information and larger penalties dramatically increase the risk of greater liability. Manufacturers and importers and the attorneys who advise them must, therefore, pay close attention to the CPSC's frequent rulemakings and ensure compliance to minimize the potential liability risk.

Under CPSIA, manufacturers and importers will need to ensure that they, along with their partners in the supply and distribution chain, understand the applicable standards and the actions necessary to demonstrate compliance with the standards. Manufacturers will also need to identify and establish strong relationships with trustworthy third- party-testing laboratories and should also consider the benefits of purchasing test equipment to meet compliance standards. Manufacturers and importers need to develop and/or understand proper protocols for the testing of their consumer products to ensure compliance with applicable standards. Manufacturers and importers will also need to be aware of the identity of every party involved in the supply and distribution chain. Each party should also conduct a review of purchase orders and supplier contracts for compliance with the CPSIA, as well as an analysis of insurance terms, indemnity provisions, warranties, representations, and testing and recall obligations. Given the CPSIA's focus on children's toys, manufacturers and importers of children's products must be cognizant of applicable standards and rules, especially the lead paint allowance, mandatory third party testing mandate, and tracking label requirement. Additionally, manufacturers will need to develop a protocol that allows them to evaluate and respond to the safety reports they receive from the CPSC within 10 days to avoid the publication of erroneous or confidential information on the consumer product safety Web site.

Conclusion

This new legislation will also have dramatic effects on the future litigation landscape. The increased regulation of safety standards, testing, certifications of compliance, and advertising will likely result in a significant increase in the number of foreign product recalls. This, in turn, will yield increased litigation in the future. For example, plaintiff's counsel will benefit from the CPSIA changes as they have a Congressional mandate to the CPSC to establish safety regulations and standards which, if violated, can lead to CPSIA violation and negligence per se claims. Violations could also form the basis for consumer protection claims that require a statutory predicate offense. In addition, the public consumer safety database required by the CPSIA will easily point plaintiff's counsel towards the products with safety issues that can support litigation. The end result of this legislation, as well as other recent regulations and the overall heightened scrutiny that federal agencies have regarding imported products, is that manufacturers and importers will likely face a significant rise in litigation and are well-served to think strategically and creatively with their attorneys on ways to ensure compliance and avoid the specter of increased litigation.

Kimberly H. Clancy is a compliance director at Amgen, a biotechnology company. Brendan P. Sheehey is an associate in the Los Angeles office of Sidley Austin LLP. He practices in the firm's Litigation Group.