“Consumer Safety” Bill Could Boomerang against U.S. Manufacturers

(National Center for Policy Analysis – Daniel Griswold and Sallie James, Cato Institute)

Barriers to trade can be straightforward and transparent, or can take the form of rules and regulations proposed in the name of protecting public health and safety but have a secondary effect of restricting trade. An example of such a nontariff barrier is legislation now before Congress called the Foreign Manufacturers Legal Accountability Act (FMLAA), say Daniel Griswold, director of the Center for Trade Policy Studies at the Cato Institute, and Sallie James, a trade policy analyst with the center.

The sponsors of the legislation claim that their principal goal is to protect American consumers from unsafe foreign products, but there are warning signs that the bill may be more about restricting trade than protecting the public.

• The FMLAA would require foreign producers selling goods in the U.S. market to designate a legal agent located in the United States who could be served papers in a product liability suit.

• By registering an agent, the foreign producer would agree to accept the jurisdiction of the state and federal courts of the state where the agent is located.

The concern raised by advocates of the legislation is that American consumers harmed by foreign products will not be able to collect damages if the foreign-based producer has no legal presence in the United States.

Americans damaged by faulty products, whether made abroad or domestically, should be able to seek compensation through the courts. But the approach advocated by supporters of the FMLAA would not solve the problem, say Griswold and James.

Read the original article here.

Proposed U.S. Legislation Would Raise Risks and Costs of Exporting

(Gregory O. Somers, Ogilvy Renault LLP)

A bill currently before the United States Congress – the Foreign Manufacturers Legal Accountability Act of 2010 (FMLAA)-could, if made into law, have an adverse impact on businesses and manufacturers that export products to the United States. [...]

Implications for Canadian and other foreign exporters and manufacturers

Potential consequences of the FMLAA include:

• Comparative disadvantage: The expense associated with having a registered agent in the U.S. may decrease the competitiveness of foreign manufacturers and exporters in relation to their U.S. domestic counterparts.

• Regulatory difficulties: Exporters will face the challenge of overseeing the activities of their suppliers, as they may be required to declare that their suppliers meet the requirements of the FMLAA. Even compliant exporters may have their goods delayed at the border if there are irregularities in documentation.

• Increased exposure for liability: Ordinarily, foreign manufacturers are often well-advised to defend product liability lawsuits in their home country. The U.S. imposes greater burdens on manufacturers for product liability than foreign laws of many other jurisdictions. By compelling submission of exporters to the jurisdiction of U.S. courts, costs of litigation and the likelihood of a negative outcome may be significantly increased. Read more here.