The European Commission’s recently published annual RAPEX report on dangerous consumer products has highlighted a 32% increase in reports on products presenting a serious risk to consumers. 60% of the reports came from just five European countries, which included the United Kingdom, with products originating from China being the subject of almost half of all reports. This should cause companies across the EU to think carefully about the true cost of doing business with suppliers in China and how to minimise the potential risks in terms of not only product safety, but also brand reputation.
RAPEX alert system
RAPEX is the EU rapid alert system for all dangerous consumer products, with the exception of food, pharmaceutical and medical devices. It allows for the rapid exchange of information between EU member states plus Iceland, Liechtenstein and Norway and the European Commission of measures taken to prevent or restrict the marketing or use of products posing a serious risk to the health and safety of consumers. Both measures ordered by national authorities and measures taken voluntarily by producers and distributors are covered by RAPEX.
The most significant impact for businesses of a product being notified to the national authority can include the requirement for the cessation of product sales, the withdrawal of the product from the market, the provision of information to consumers about the risks of using the product, and the recall of the product from consumers.
Increase in notifications
The latest RAPEX report highlights the fact that 924 notifications were made to RAPEX during 2006 involving products presenting a ‘serious risk’. Most alarmingly the number of notifications has more than doubled since 2004 with a 32% increase since 2005 alone. Of the 2006 notifications, 60% came from just five countries, with the UK making up 10% of the notifications.
(See PDF for Table)
The UK recorded the biggest percentage increase in notifications of 114%, but a significant element of this is considered to be due to a far greater level of surveillance and reporting by UK producers and manufacturers (and the retailers who are the public interface).
Most unsafe products
The products that resulted in the most notifications were toys, with 24% of the total notifications and the main risk associated with toys was choking hazards and suffocation. Toys have also now replaced electrical appliances as the most notified product, pushing electrical appliances into second in 2006 with 19%.
The main risk from electrical appliances is clearly electric shock but this is often combined with the additional risk of fire. Motor vehicles were third in the list with 14% and lighting equipment fourth with 11%. These four categories make up 68% of the notifications.
Chinese products cause particular concern
By far the majority of products deemed unsafe originated from China, which was responsible for 48% of all notifications, which is over ten times more than for any other individual country. The main reason for this is likely to be the high volume of products being imported into the EU from China and less stringent controls as to the standards of manufacture.
The European Commission has responded to this latest report by agreeing a “Memorandum of Understanding” between the EU and China to collaborate on consumer product safety. The Memorandum puts in place a number of practical measures.
In particular, joint meetings are held and RAPEX information in respect of Chinese products is made available to the Chinese authorities in order to allow follow-up to take place on emerging safety issues.
In addition to the Memorandum, a specific Roadmap for safer toys has been agreed. The aim of the Roadmap is to outline a strategy for improving the safety of toys manufactured in China and exported to the EU and is supported by manufacturers’ associations in China and the EU. The Roadmap also includes a commitment from the Chinese government to strengthen the inspection and supervision of toys exported to Europe.
The findings in the latest RAPEX report have a number of significant practical implications for companies in the UK, which should now:
- Review current product supply agreements and due diligence procedures from the perspective of the likely risk of safety issues arising and the practical and commercial impact of such issues.
- Seek to limit their own liability where possible and avoid limitation of supplier liability.
- Put in place appropriate new supply agreements with suppliers, to include adequate legal and financial protection should corrective measures be required to deal with a dangerous product.
- Implement a risk management plan to ensure continual monitoring of the source and quality of products from suppliers and ensure that suppliers undertake proper documented quality control procedures.
- Review existing product liability insurance cover and seek to implement measures to ensure that key suppliers of products which may present risks have such insurance in place.
- Assess the merits of any cost savings on outsourced product supplies compared with the risk and subsequent costs if a product supplied is deemed dangerous.
- Spread the commercial and financial risk by sourcing products from more than one supplier.
- Ensure that a comprehensive incident management plan is in place to deal with the investigation and notification of safety issues, PR and brand protection measures, the implementation of recalls and alternative product sourcing arrangements.
In a global commercial environment where maximising profit is the key to any successful business it is important to recognise the risks that go hand in hand with sourcing supplies from developing countries, such as China, where attention to quality and safety does not necessarily have quite the same emphasis as might be expected. Those companies who recognise the commercial benefits that such arrangements can bring, but who also recognise the potential commercial and legal risks and who proactively plan effectively to minimise such risks will invariably be at the forefront in their business sectors and will be best placed both in the short term and long term to compete effectively in their national and international markets.