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China Suppliers Are Hidden

August 7th, 2007

Mattel has relented to public pressure and released the the name of its supplier – well, maybe.

When the story broke in the WSJ, I went over to Google and typed in the name of the supplier said to be responsible for the defective toys - Lee Der Industrial. Might have been a typo there, I don’t know. Only four listings came up, and two of them were for a link back to the WSJ article.

It’s hard to imagine one of the largest suppliers to the largest toy company in the world – for 15 years, no less – remaining so anonymous. But it is possible. And this kind of anonymity may have very much to do with the quality problems coming out of China in the first place.

I’ve written on this before: Importers like to keep their factories a secret. No importer wants to see the competition come in and enjoy an advantage they created for themselves. The factory naturally prefers it the other way around. They don’t want to be so hidden. But when a buyer is big enough and it asks the factory to “lay low”, the supplier simply does what it is told.

The irony here, of course, that suppliers engage in production shenanigans in part because they know they are not likely to be found out by the market. Hey, what happens in Dongguan stays in Dongguan.

One point of the WSJ article is that there is little the U.S. government can do to force an importer to reveal his sources, as it were. My own view on the subject is that an importer should have no recourse for secrets when a product recall affecting safety is issued. In the case where your company has been found importing a product that is toxic – sorry – game over.

In the U.S., we enjoy first amendment rights, and yet journalists can be jailed for protecting their sources. Law enforcement officials may obtain search warrants sometimes a bit too easily. And yet importers are allowed to sit on their hands while parents agonize over the toys their children play with. It is time to discuss this situation intelligently, and that discussion should include talk of legislation. Protecting the importer’s supply chain is of interest to business, but it is not a greater good than that of public safety. Mattel may have acted in good faith in this case, but there is no guarantee that another importer will act as responsibly.

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