United States: Potential New Requirements For U.S. Businesses And Their Foreign Suppliers In The Wake Of U.S. Import Scares

Businesses should start to prepare for a much higher level of import scrutiny.

Ultimately, any private entity that stands to benefit from access to U.S. markets owes a duty to the American public to ensure that the products they export and sell comply with all applicable safety standards. Accountability for ensuring that these standards are met rests with all stakeholders across the import process, both public and private.
—Protecting American Consumers Every Step of the Way: A strategic framework for continual improvement in import safety. A Report to the President, September 10, 2007.

The reaction in the United States to the discovery of imported toys with lead paint and unwholesome foods has been vocal and swift. Businesses across the spectrum of U.S. industry have issued statements assuring consumers of the safety of their products and promising stronger preventative efforts in the future. Hearings on Capitol Hill and the President’s establishment of a blue ribbon panel to examine import safety in the United States soon followed.

On September 10, 2007, the results of that very important blue ribbon panel examination were released in the Interagency Working Group on Import Safety’s Report entitled "Protecting American Consumers Every Step of the Way: A strategic framework for continual improvement in import safety." The results and recommendations of the Report are very far reaching and, if implemented, will potentially affect foreign exporters to the United States as well as U.S. businesses that depend on imports and cater to U.S. consumers.

The Report’s Conclusions

The Report, which purports to develop a "strategic framework" for ensuring the safety of imports, reaches several conclusions that could significantly affect all U.S. businesses that rely on imports and sell to consumers (retail goods, pharmaceuticals, food products, to name just a few), as well as their foreign suppliers.

Moving from a "Snapshot" to a "Video" Approach in Import Safety

Perhaps of greatest significance to U.S. and foreign industry, the Report proposes a systemic shift in the U.S. import safety regime from a "snapshot" to a "video" approach. By this, the Report’s authors mean that importers and their foreign suppliers, should be ready to switch from a system where imports are simply inspected at the port of entry (a "snapshot" approach) to a system that looks at the entire "import life cycle" of their goods, from production through sale (a "video" approach).

This "video" concept is essentially a Hazard Analysis and Critical Control Points (HACCP)-style approach to imported goods, and is currently employed by U.S. poultry and meat processors. Under this system, importers would take a "preventative" approach to product safety by identifying "critical control points" in their production system—steps in the process where a potential risk presents itself—and then monitoring and testing at these points.

The practical impact of this change will be significant. U.S. businesses and their suppliers will be tasked with developing adequate control systems and making sure, through testing and certification, that they are in fact meeting the terms of their control systems. In many cases, this testing and approval will be left to third-party laboratories and certification bodies. Implementation of such requirements across a complete "supply chain" also could effectively make mandatory the security criteria for participation by U.S. importers in the still-voluntary Customs Trade Partnership Against Terrorism (C-TPAT) program.

Additional Conclusions

In addition, the Report proposes several other recommendations that U.S. businesses and their foreign suppliers should watch closely:

  • More effective government (local, federal and foreign) intervention through risk-based inspection
  • Stronger penalties for "bad actors" and more effective enforcement of product recalls
  • Connecting the data "silos" to make sure that there is an effective flow and sharing of relevant information regarding imports between U.S. government agencies
  • Stronger protection of intellectual property rights. The concern that harmful imports may enter the United States under the guise of a legitimate product gives rise to a recommendation in the Report that U.S. import safety efforts should include enhanced surveillance for counterfeit products and more robust enforcement of intellectual property rights.

What Can Businesses Do to Get Ready?

The President’s Working Group has committed to proposing an action plan to implement its conclusions by mid-November, 2007. In the meantime, the Report, its conclusions and the general state of U.S. import safety are open for public comment until October 1, 2007. Affected businesses should consider commenting on the Report, particularly if they have complex production and distribution channels—the less streamlined a business is, the more intricate and potentially burdensome a HACCP-style program will be. U.S. businesses that rely on unaffiliated foreign suppliers might face particular hardship.

In addition, businesses should start to prepare for a much higher level of import scrutiny. Although the book on what form that scrutiny will take is yet to be written, it is inevitable that, in the wake of recent events, changes are coming, and businesses that sell imported goods will be under closer surveillance. If they have not done so already, U.S. and foreign businesses should examine their production, distribution and sales models, highlight areas where potential risks exist, and work to develop science and standard-based means to reduce any risk. Not only is this good business in the here-and-now, it also may help prevent growing pains in the future as we move to a "video" approach to import safety.

A copy of the Report may be found at http://www.importsafety.gov/report/report.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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