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Foreign Manufacturers Legal Accountability Act

September 2nd, 2009

trFinancial Times published an article last week that led me to learn about “The Foreign Manufacturers Legal Accountability Act of 2009.” First, something about the article. The 3,000-word piece highlights an accident that involves China-made fireworks and a related legal battle:

“The story of the accident that maimed Robert Silverman, and his subsequent quest for damages, starts in 1994, during an Independence Day fireworks display he was mounting in Annapolis, Maryland, and winds through interminable court hearings, depositions and writs. It tells us much about how – in a world where anyone can sell into any market – domestic legal systems are ill-prepared to protect consumers damaged by foreign-made products. And because the company that Silverman sued is Chinese, it tells us much about modern China and the way it does business.”

The case was brought to a Pennsylvania court, which awarded the plaintiff millions in damages — $7 million — but the Chinese company responsible for the fireworks chose a “do nothing and hope that it will go away” strategy, which effectively worked.

The article’s conclusion…

“Past chances to bring China to heel — in the days before it became the manufacturing powerhouse it is now - have been missed…”

…is similar to a point made on the last page of my book:

During the Clinton Administration…there was a chance for the United States to hold out for political and economic reform in China, but the opportunity was lost.

Curious about the article, I got in touch last week with one of those interviewed. Thomas Gowen is an attorney who practices out of Philadelphia. He has testified before Congress, arguing that we should pass laws that make it possible to hold foreign companies accountable for faulty products. He told me about the recently introduce bill – The Foreign Manufacturers Legal Accountability Act of 2009 — proposed by Senator Sheldon Whitehouse earlier this year, which may close a “loophole” that an increasing numbers of lawyers have been taking advantage of.

Gowen explained that foreign companies sued for product failure are using something called the “Asahi Motion” as a defense. Asahi, which was decided by the U.S. Supreme Court in 1987, enables corporations to get out of product liability by claiming that they had no idea their wares would wind up in a given jurisdiction.

For example, a consumer in Massachusetts who suffers injury from a product made in China may sue the overseas supplier. The supplier responds by saying its importer was not based in Massachusetts, but in California. It had no idea the product sold to California might wind up in a state on the U.S. East Coast. (So much for Thomas Friedman and his “flat world” thesis.)

The number of cases that cite Asahi, according to Gowan, has risen sharply in recent years. This is due in part due to the success that attorneys have had with the defense. While on the phone with me, Gowan did a search on Lexis and noted that Asahi has been cited 5,953 times. The figure was up sharply since his congressional testimony given just a few months ago.

Many have criticized me for not offering solutions in my book, but I have made suggestions — in talks and online. To improve the quality situation in China, one thing that we can do is make it easier to bring suit against those who originate quality problems. Importers are not to blame, but those who produce faulty goods. There is a carrot in China with no stick. It is in our interest to support a bill like the Foreign Manufacturers Legal Accountability Act, and, if China knows what’s good for it, it will provide leadership that makes such legislation unnecessary.

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Note: Image at the top is an advertisement from the New York Times this past week. It is part of a “cash for clunkers” program launched by Toys R Us. The campaign invites consumers to bring in old baby products in exchange for those made by certain branded firms. The move is related to safety concerns, and I have previously written about the link between China and baby product failures. I’ve also written something about problems with Chinese fireworks.

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