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Toy Industry Needs Import Safety Checklist

Safety recalls frighten, repulse consumers, JPMorgan analyst warns

Guest Commentary
By Despina Keegan
Senior Trade Advisor, JPMorgan

February 19, 2008

• Safety Agency Waits 16 Months to Recall Lead-Laden Key Chains • Lawmakers Propose Bill To Prevent 'Stove Tipping' • Senate Passes Tough New Consumer Safety Bill • Infant Deaths in the Nursery Increasing • Sears Stove Tip-Over Case Illustrates Safety Agency's Shortcomings • Next Season's Toys: Technology Meets Hannah Montana • Toys Safer than Ever, Toy Makers Claim • Toy Industry Needs Import Safety Checklist • Toys Getting Safer, Safety Chief Claims • Plastic War Hits The Toy Industry • Feds Propose New Furniture Fire Rule • Safety Recalls a Sign of Success? • Congressional Leaders Send Message to Mattel • Another Industry Lobbyist To Head Safety Agency? • $30 Million Settlement in Thomas & Friends Suit • Consumer Protection Bills Spark Bitter Lobbying Battle • Time Running out for Consumer Safety Agency --- • More Consumer Safety News • Recall Notices

Recent waves of import product bans, alerts, recalls, and news headlines have generated extreme consumer shock around the world. The global media frenzy impacts all companies that source products abroad for domestic consumption by challenging their import safety practices.

Consumers are horrified by the alarming headlines including “As More Toys Are Recalled, The Trail Ends In China,” “China Toy Boss Kills Self After Recall”, “China Executes Former Head Of Drugs Safety Agency For Bribery,” “Why The West Must Regulate China’s Exports,” “Wider Sale Is Seen For Toothpaste Tainted In China,” “F.D.A. Issues Alert On Chinese Seafood,” “China Shuts Plants That Produced Tainted Medicine, Pet Food,” “US Calls On China To Improve Export Safety,” and “The Little Engine That Could Poison”.

The torrential problems facing today’s exports from China should serve as a wake-up call for all importers that the time to act is now – be proactive and not reactive. Do not wait to be the media subject of the next consumer product recall, scandal or catastrophe.

While today’s focus may be on China-made or sourced products it is not the only goods and materials source for large-scale importers. Make no mistake – unsafe and hazardous imports can originate from anywhere around the world and companies need to focus on their entire global supply chain, layer-by-layer, to know all that is necessary to ensure that the safety and quality of those products is not inferior or somehow compromised.

Import Safety Working Group

On July 18, 2007, President Bush issued Executive Order 13439 establishing an interagency working group on import safety. Chaired by the Secretary of Health and Human Services, the group includes members from key agencies such as Secretary of State, Treasury, Agriculture, Commerce, Transportation, Homeland Security, Attorney General, Director of the Office of Management and Budget, U.S. Trade Representative, Environmental Protection Agency, and Consumer Product Safety Commission (CPSC).

The group is tasked “to identify actions and appropriate steps that can be pursued, within existing resources, to promote the safety of imported products.” The group’s focus will include: foreign governments, foreign manufacturers, private sector exporters, U.S. importers, and federal, state, and local government agencies. The working group has to report to the President within 60 days (by mid-September) unless extended.

“We’ll be working with companies that import goods from around the world, to make sure that their practices meet the high standards that we set for the United States,” stated President Bush. Under the group’s radar is the identification of best practices utilized by U.S. importers in:

• Selection of foreign manufacturers
• Inspecting manufacturing facilities
• Inspecting goods produced before export or distribution in U.S.
• Identifying origin of products
• Safeguarding the supply chain

Import Czar Position in the Making

Major U.S. business leaders recently gathered to discuss the import quality crisis and recognized the need to do more as “the explosion in the volume and diversity of goods has overwhelmed even the biggest companies tasked with evaluating dozens of supply chains, many of which run two or three suppliers deep” reported a July 5 article in Fortune Magazine.

One of the ideas being circulated is to create an “import czar” position - a chief imports officer who can oversee global sourcing. Most companies lack a central figure to “reign” over global operations – it’s all about accountability, coordination, and the need to focus internally to ensure that someone is keeping watch over the shop.

What Are You Doing?

As the U.S. government looks for ways to step up enforcement of import safety, the question of all companies should be: “WHAT ARE YOU DOING TO MAKE SURE YOUR IMPORTS ARE SAFE?”

Companies must put consumer protection first and above any other motivations. In the end, we are all consumers and should expect nothing less! Before the U.S. government comes knocking on your door, here are some areas to consider as you evaluate your current business:

IMPORT SAFETY CHECKLIST

I    Inspections – Do you inspect your foreign factories (announced/unannounced)?
M    Management – Do you have commitment and corporate objectives
P    Policies – Do you have procedures to ensure corporate objectives are followed
O    Origin – Do you identify and verify product origin
R    Recalls – Do you have a program to inform consumers and agencies of defects
T    Testing – Do you test products (internally/externally) and document/track results
S    Suppliers – Do you have quality/safety requirements in writing/acknowledged
A    Audit–Do you have a product safety audit plan
F    Follow – Do you follow or benchmark what your competitors are doing or recommending
E    Examine – Do you examine what’s going on with your product outside the U.S.
T    Training – Do you train internal units and suppliers on product safety
Y    You – Know your product and must exercise reasonable care to protect consumers

Planning and Action

While import safety is finally receiving the U.S. Presidential treatment it deserves and consumers expect, companies should take note of the “good practices” suggested by one U.S. federal agency committed to protecting consumers - CPSC:

A July 2006 CPSC document titled Handbook For Manufacturing Safer Consumer Products discusses the basic concepts in a comprehensive systems approach for the design, production and distribution of consumer products. It is worth reviewing for further guidance as product safety ultimately depends on “purposeful planning and action.”

Conclusion

A famous American, Benjamin Franklin (1706-1790), once stated: “An ounce of prevention is worth a pound of cure.” Manufacturers, importers, exporters, distributors and retailers — take the proper precautions now and exercise reasonable care relating to products intended for U.S. consumption. Ultimately, those that put quality and safety first will succeed in the global arena and achieve consumer confidence.

About the author: Despina Keegan is a Senior Trade Advisor for JPMorgan Global Trade Services in New York. As a licensed attorney admitted to federal and state courts, Despina has extensive experience in customs and international trade law matters including, developing customized compliance and auditing programs, formulating training seminars and advising on product safety, recalls and the requirements of federal and state agencies.

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