Issue link: https://read.dmtmag.com/i/211845
LEGAL LINE Continued from page 11 Second, not only can any competitor or customer complain to the FTC, but also they can file a suit in Federal Court, most likely where it is convenient for them. They can ask the Federal Court to do everything listed above, except levy fines, but alternatively can ask for sanctions and legal fees. Interestingly, both of the above scenarios can proceed independently at the same time and can sometimes have inconsistent results. Regardless, being a target in these types of actions is highly risky and very costly. A real-world example from about 1995: A company in the Midwest imported bolts and nuts for holding railroad track together at switches and junctions and then sold them in the USA. The products were imported loose in 1000 kg wooden boxes and then mated and packaged in 50-count boxes at the company's Chicago plant. Although the importer-seller actually made other bolts and nuts at this facility and was long established as an actual fastener manufacturer, it simply labeled the 50-count packages "50 XYZ track bolt sets, XYZ Inc. Chicago, Illinois." What was missing was the designation that the bolts and nuts were really made in Pakistan. A competitor, who actually made these bolts in the U.S., filed a Federal Court lawsuit which resulted in the courtsupervised recall of every 84 bolt ever imported and sold, the reimbursement of every customer for the purchase price and the "in and out" costs, notification of appropriate governmental and industry authorities, and several very unpleasant recall notices in industry publications. This put the importing company out of business, but not until after it complied with the Federal Court Order. It also created a 12-month surge in the sale of genuine USA track bolts for the company filing the lawsuit and is an object lesson for every importer and reseller in the USA. Simply put, when in doubt, designate. What about the rest of the world? Many developing nations don't have "designation of origin" laws or don't enforce them, but China, the UK, Australia, New Zealand, Japan, Canada and many countries with very punitive duties on imports have similar laws. In fact, in some places, violations of country of origin laws and regulations can result in jail time. Interestingly, the EEC is several years behind having any workable regulations due to inter-EEC commerce issues and the multi-national way some companies do business in the EEC. What is the rule, the caution? Simply put, be completely honest about where your products come from and how your company does business. How is this accomplished? 1. Make sure any point of contact with the public does not imply or suggest that your imported products are domestic. You don't have to state that they are imported, but you can't create the impression that they are domestic goods. 2. Clearly label the actual products if not packaged (for example: GET, Rollers, Segments, Chain, etc.) with the country of origin, assembly, or manufacture. 3. If the products are packaged, clearly label the packages and any in-package materials using the same rules. 4. Never mis-state the actual content. If it's actually manufactured, assembled, or sold complete, where this takes place must be stated clearly. What about mixed products or kits? Again, candor and accuracy are the rules. Some examples: 1. "XYZ Cummins NSX engine rebuild kit is engineered, assembled and packaged in the USA from components manufactured in China, Canada, Brazil, Italy and the USA" (list in descending order by nominal value) 2. "XYZ GET kit, comprising teeth, adaptors and lock pins, was engineered in the USA and contains products manufactured in China and Brazil" 3. "This product contains parts and components manufactured in Romania and Serbia" Additionally, "not knowing" is not an excuse or justification. If you are buying from an overseas or even a domestic reseller, it is YOUR legal obligation to determine the origin of the products. If not accurately labeled, you must accurately label them. Simply put, the buck stops at your facility door. Further, even if you are brokering goods or having them drop shipped into the USA, the obligations are the same. You are the "seller" under law and regulation. And, you will be the one on the hot seat if the imported goods are not properly advertised and/or identified. In this context, setting up a domestic or even a registered foreign shell importing company to sell undesignated products to a "price sensitive" market is doubly dangerous, as it is not only deceptive to the public, it is a clear contrivance to avoid marking laws. The government of a smart lawyer for a competitor will cut through that like a hot knife, with potentially disastrous results As the final caution, the last port is not the "origin." For example, if you buy GET from Mexico that is made in China, they are Chinese goods, not Mexican. So, proceed with caution, always check your sources, and advertise and label with care. Simply put, if you get a "great deal" on products with a cloudy origin, it's not worth it, unless you can fairly trace the origin. As always, pay me now or pay me later. If there is any doubt, check your government's publications, and get professional advice before making that buying and selling decision. Next month, we'll look at marking and identifying imported goods that must comply with such regulations as EPA, OSHA, TUV, DIN, UL, ETL, and other restrictions to "free trade." ● IDA UNIVERSAL November-Dcember 2013