“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.

U.S. Can’t Kick the Protectionist Habit

(The Montreal Gazette)

Economists keep on showing that “protectionism” does the opposite of protecting a whole economy, but powerful interests in the United States keep turning to protective measures of narrow benefit every time they think they can get away with it.

Campaigns to “Make it in America” and “Buy America” cropped up swiftly after the economic meltdown of 2008. Exporters to the U.S. – including Canada, the U.S.’s main trading partner – protested furiously, pointing out that for the economy overall, proliferating protective barriers only exacerbate a downturn, and could even push the world into a full-blown and protracted recession. Cooler heads finally prevailed and a government procurement agreement went a long way to resolving the Buy American problem.

But the U.S. economy is still struggling, especially in the Rust Belt of the Midwest and northeast. And Americans have not given up on protectionism. The latest scheme is the Foreign Manufacturers Legal Accountability Act. It comes as no surprise that the bill is sponsored by a Democrat from Ohio who’s fearful about November’s congressional elections. Read more here.

Buy American, The Sequel? New Canada-U.S. Trade Battle Looms Ahead

(Lee-Anne Goodman — The Canadian Press)

Seven months after the Buy American resolution, Canadian manufacturers are poised to become ensnared in yet another protectionist piece of U.S. legislation even though the Chinese are the intended target.

Gary Doer, Canada’s ambassador to the United States, is sending a letter this week to congressional leaders, urging them to consider the impact on the Canada-U.S. trade relationship if the Foreign Manufacturers Legal Accountability Act passes Congress in the weeks to come. “As we are each other’s largest trading partner, Canada is concerned this legislation seeks to solve a problem that does not exist,” Doer wrote. “It could instead result in unintended consequences of unduly burdening our bilateral trade.”

The act, currently before the U.S. House of Representatives, is aimed at ensuring that the foreign manufacturers of defective protects can be served with legal papers. It was the result of the Chinese drywall fiasco that has damaged some U.S. homes and made homeowners sick; consequently, it isn’t expected to face many hurdles in Congress.

The act is part of a “Make It In America” initiative by nervous Democrats who are hoping it will score them points in what’s known as the Rust Belt, a manufacturing-heavy region of the Midwest and northeastern United States where exasperation about the widening trade deficit is off the charts. Rust Belt Democrats are vulnerable to defeat in the November mid-term elections less than eight weeks away. Read more 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.

Legislative Update: Registered Agents, China Currency, Food Safety on Tap for September

(world Trade Interactive)

Congress is now out of session for its annual summer recess, but lawmakers and trade groups are keeping a number of trade-related issues on the radar screen for possible action once the House and Senate resume activity in mid-September. These include registered agents for foreign manufacturers, China’s currency and food safety. Read more here.

U.S. Legislation on Foreign Manufacturer Liability Could Have Consequences for Wide Range of Companies

(Brenda Jacobs and Marinn Carlson, Sidley Austin LLP)

Proposed U.S. legislation would require all foreign manufacturers of certain products and product components to consent to be sued in U.S. courts as a condition for their goods to be imported into the United States. The bill, the Foreign Manufacturers Legal Accountability Act, may have significant consequences for foreign manufacturers and any U.S. corporate affiliates, and for U.S. importers – including U.S. manufacturers that source their components overseas.

The FMLAA would require non-U.S. manufacturers of consumer products, cars and auto parts, drugs, medical devices, cosmetics, biological products, chemicals, and pesticides to maintain registered agents in the United States to accept service of process and to consent to the jurisdiction of U.S. state and federal courts for lawsuits related to the products covered by the bill. It would then restrict U.S. imports of covered products to those produced by registered manufacturers, either by requiring importers to certify that goods are being sourced from registered companies, or by banning imports from non-registered companies.

Proponents of the legislation point to recent product safety concerns relating to imported products, such as drywall and toys with lead content, and state that the bill is intended to ensure that U.S. plaintiffs can sue foreign manufacturers for damages for defective products sold in the United States. However, the legislation as currently framed has the potential to lead to unintended consequences, including expanded liability for U.S.-based entities related to foreign manufacturers and onerous new trade hurdles that could slow or impede the entry process for imported products. Opponents also point to risks that U.S. exporters could be subjected to similar requirements in other countries. Read more here.

Experts Predict Passage of the Foreign Manufacturers Legal Accountability Act of 2010 : What Does This Law Mean to U.S. Importers and Exporters?

(Katten Muchin Rosenman LLP)

One of the more controversial bills brewing in Congress is the Foreign Manufacturers Legal Accountability Act of 2010. Although a variation of this bill was introduced in the Senate Finance Committee last year, it received little attention. Just last month, however, a House version of the bill passed the Subcommittee on Commerce, Trade, and Consumer Protection, and many trade experts are now predicting that the bill will pass.

The Act was developed in response to reports of defective Chinese drywall that damaged houses and sickened people, and the uproar that resulted upon finding that the Chinese manufacturers could not be held accountable under U.S. law for the defective products. It would require foreign manufacturers of “covered products” to designate a registered U.S. agent to receive service of process on behalf of the company. This, in essence, would allow foreign manufacturers to be sued in the United States for any civil action related to those covered products. The law would also prohibit any person from importing covered products from manufacturers who do not have registered agents in the United States.

The products that would be covered under the act consist of those that are regulated by the Food and Drug Administration, the Consumer Product Safety Commission, the Environmental Protection Agency and the National Highway Traffic Safety Administration. This includes – among other goods – consumer products, chemical substances, pesticides, cosmetics and motor vehicles. The law also extends to component parts of these products. Read more here.