The Chief Asia Inspector Blog

Paying the cost of unsafe imports

Interesting opinion article in the Mercury News, written by professors of law at University of California - Berkely.

2 of their opinions made me react :

1. First on the FDA implementation in China :

"Several weeks ago, for example, the Food and Drug Administration opened its first office in Beijing. This is a fine idea, but how will the eight employees working at the FDA's China facility inspect even a meaningful fraction of the $321 billion worth of goods imported from that country each year?"

I can only agree.. Though this FDA move is a clear improvement in the collaboration at state levels between the US and China on the products quality and safety issues, it is only symbolic in my opinion, and won't have much concrete consequences...

2. Then, our 2 professors have an interesting proposal :

"Where U.S. regulators expect a threat to consumer protection from foreign goods and services (because, for example, foreign regulatory structures are ineffective), they should increase the penalties for dangerous products levied on domestic companies involved in the importation and sale of the goods."

This is an interesting one, and I agree that there is much to be done at a legislative level in western countries to impose stricter supply chains to local companies. However, I would add that it is important to understand the supply chain itself, and who should hold the highest liability when unsafe imports are put on western markets.

My point is that it is easy to blame it on the Importer - often a SME - when he is only repercuting the cost pressure he gets from the final distributor (big retail groups) on his own Chinese or Asian suppliers. Ultimately, the real decision makers on the quality of imported goods are often big corporate retailers, who won't deal direct with Chinese factories, and who transfer the liability and risk of importing to smaller specialists importers.

So who should pay when something goes wrong ? And, more importantly, who should pay to make sure everything goes right (by implementing for ex. systematic quality controls at the source) ?

The global trend of QC Outsourcing is joined by Wal-Mart

While last year's quality problems in China with toys and some other consumer products created awareness among western consumers and companies importing from China - no significant move in the importers' habits happened as a result of this - it seems that the toxic milk scandal occurred a few weeks ago is finally leading to shifts in common practices, both in China and Western countries.

Indeed, while the China Government is leading their programme of quality control certification across a myriad of industries, the world's biggest importer of Chinese goods Wal-Mart has just fired 180 staff from their Chinese sourcing offices, and appointed a third party company for all their QC in China.
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The price of quality

Following a recall from 2006 (see the details from the U.S. Consumer Product Safety Commission) , Reebok has just been fined a record US$ 1 Million for their violation of the US Federal Hazardous Substances Act.

The facts are pretty well known (a 4 year old kid died of lead poisoning after swallowing a made-in-china bracelet given away by Reebok), and the manufacturer's efforts to "fix" the issue (a 500,000+ pieces recall), communicate on it and prevent it from happening again seem real.

What is interesting here is that it sets a speaking example of the cost of non-quality (US$1 M for the fine, plus the cost of the worldwide recall, plus the purchase cost of 500,000 bracelets - probably around US$ 500,000). We are talking about a financial loss for Reebok of at least US$ 2 M I believe (and I am not counting the brand image damage).

I guess it makes the relatively small investment for setting up proper quality controls in China worth it...

Total Recall

The list of recalled made-in-Asia products keeps getting longer and longer…

It seems no one is safe anymore: to name only a few , your kids may damage their brain or become comatose when playing with their favorite toys, you can ingest poisonous chemicals while brushing your teeth should you observe basic hygiene rules, or die after eating your daily portion should you be a pet...

You might also learn that your kids’ clothes were actually manufactured by Indian children, some as young as 10.

For more of these pleasant stories, you can consult the US Consumer Product Safety Commission here  (for all products) or here (for toys only), the US Food and Drug Administration here, or the EU recalls list here...

Should we put all the blame on Asian suppliers and stop doing business with them ?

I don't think so; these stories are only a strong reminder that international trade is risky - and that you can not pressure for lower prices on one hand, and not watch out for the quality on the other hand. Finding the balance is what makes it difficult - but this is also where importers can bring value to their clients !

Don't mess up with Quality in China...

These past weeks have seen a number of stories unveiled about quality issues on China productions, mainly on the food & drugs industries - and recently in the Toys industry.
There are stories about this bun maker using cardboards found on the streets in his products, the counterfeit drinking water sold in Beijing, or the infamous use of antifreeze chemicals inside toothpaste...
Finally, these last days, Dora the Explorer returned home, with Mattel announcing a recall for 1.5 million toys made in China (containing excessive lead levels).

The matter is getting very concerning for the Chinese government. The execution of the the ex-Food & Drugs Administration chief Zheng Xiaoyu, after being convicted for bribery charges (he took about 6,5 million RMB to let defective drugs get SFDA approval, ultimately causing the death of at least a dozen patients) will certainly not be enough to restore the reputation of the "made in China".

Figures given by the Herald Tribune sound scary : 23,000 cases uncovered of fake or low-quality food between December & May, only 81% of the food tested in a nationwide survey up to safety standards (improving from 78% the year before),

Chinese government was prompt to react, with the implementation of guarantee seals from the Quarantine administration on all food exported items in next September, the tightening of drugs approval procedures, or the implementation of a daily reporting system on food safety.

The risk that these stories hamper the long expected restoration of the Chinese leadership with the coming Beijing Olympics in August 2008, while the world will be watching closely, is high.

I can't help but insist on the importance of the Quality Inspections on-site, as much for every importer buying from China, as for the manufacters themselves who are willing to establish their reputation and improve.

Child Labor : still a long way to go ...

Given the business I am in with AsiaInspection, I can only react to the news of Beijing Olympic Games merchandises being manufactured by Chinese rogue factories employing children...
There is a highly symbolic value to this news, which brings together 2 of the most popular topics, one positive and one negative, when it comes to China. Moreover, the story comes to light, quite ironically, when yesterday was the official World Day against Child Labor.

This is obviously a highly-debated subject, but I still find it interesting that Olympics officials can tell reporters about the factories involved: "They have told us they did not employ child labor at all"... Told us ??

In my opinion, the least they should have done,  when they knew the whole world was watching every of their steps, and when they are supposed to convey positive ethical values through the Olympic spirit, was to order / impose a proper Social Audit program on all suppliers & factories involved...

Direct from the Factory - episode 5

After a short period of silence (for which I apologize - business is business...), I give you a new episode of our Factory Inspections !

We are in Chengyang, Shandong, and our inspector was brought to the "packing line" where he found working conditions and processes not exactly up to the client' standards !

Although we see conditions in factories globally improve in major industrial areas, remote areas seem slow to catch up...

Direct from the Factory - episode 4

This new episode of our Inspections video brings us in Linyi, Shangdong province.
The so-called factory was actually nothing more than a shed, with the courtyard used to store and dry the products... Unsurprisingly, the Inspection result was Failed !

Direct from the Factory - episode 3

Another episode of our Inspections videos series, gathered around China. This time we are in a Glass Factory, located in northern China (Shangxi province), where, as you can imagine, there have been some arguments about working safety conditions...

Direct from the factory – episode 2

Sorry to keep you in suspense. Here's another video from the same inspection as episode 1. The guy is speaking in Chinese but he's basically explaining the product defects to the factory staff: wrong component color (silver instead of black), inaccurate logo size and dimensions of the packaging box. As you can imagine, they failed the inspection. I hope you're finding these videos interesting. I'm planning to put up another just as soon I have a bit more time.