Tainted toothpaste, toys contaminated with lead paint and unwholesome seafood have heightened concerns over import safety in the United States. As legislators focus on protecting U.S. consumers, new regulations for import trade into the United States will soon start to take shape. U.S. businesses and their suppliers and foreign competitors should pay close attention to the ongoing debate and changing landscape of import regulation, and be aware of any potential restrictions that may affect their products. Though the full extent and nature of the new U.S. requirements are uncertain, they will likely be more restrictive than current rules and practices.
Only well-prepared businesses and industries will be positioned to understand the import safety debate, comment on it and quickly restructure their operations to comply with the new system, saving brand identity and valuable market share.
Two recent documents appear likely to influence the structure of the new U.S. import system. The first is a report commissioned by President George W. Bush on improving U.S. import safety, and the second is an import safety bill introduced by John Dingell, the chairman of the House Committee on
Energy and Commerce.
The Report to the President On 10 September 2007, the results of a blue ribbon panel examination of the U.S. import system were released in the Interagency Working Group on Import Safety’s Report entitled “Protecting American Consumers Every Step of the Way: A Strategic Framework for Continual Improvement in Import Safety”. If implemented, the recommendations of the report will affect foreign exporters to the United States as well as U.S. businesses that depend on imports.
Perhaps of greatest significance, the report proposes a systemic shift in the U.S. import safety regime, from a “snapshot” to a “video” approach. By this, the report’s authors mean that importers and their foreign suppliers should be ready to switch from a system where imports are simply inspected at the port of entry (a “snapshot” approach) to a system that looks at the entire “import life cycle” of goods, from production through to sale (a “video” approach).
The practical impact of this change will be significant. Foreign suppliers and exporters will be tasked with developing adequate control systems and making sure, through testing and certification, that they are meeting the terms of their control systems.
U.S. Government oversight of this process is likely to be similar to that of the Hazard Analysis and Critical Control Point, or HACCP systems, currently employed in the U.S. poultry and beef industries. Implementation of these requirements across a complete supply chain could effectively make mandatory the security criteria for participation by U.S. importers in the currently voluntary Customs Trade Partnership Against Terrorism (C-TPAT) program.
The report makes several additional recommendations: more effective government (local, federal and foreign) intervention through risk-based inspection; stronger penalties for bad actors and more effective enforcement of product recalls; connecting the data silos to make sure that there is an effective flow and sharing of relevant information regarding imports between U.S. government agencies; and stronger protection of intellectual property rights and enhanced surveillance for counterfeit products. These last two recommendations are due to concern that harmful imports may enter the United States masquerading as legitimate products.
The Dingell Bill
The Food and Drug Import Safety Act of 2007, introduced by Congressman Dingell, proposes several additional processes for ensuring the safety of imported drugs and food.
The Dingell bill would create a user fee for all imported food and drug shipments. These fees, in turn, would be used to hire more inspectors and to increase analysis of imports by U.S. Food and Drug Administration (FDA) laboratories. In addition, the Dingell bill would grant the FDA mandatory recall authority, require country of origin labelling for imports and require that all food imports enter through ports located in metropolitan areas that have FDA testing laboratories. Further, the bill would prohibit any food imports not originating from a certified foreign facility or a certified country. “Certified” is meant as meeting U.S. standards. Finally, the bill would increase financial penalties for manufacturers and importers who violate the Federal Food, Drug and Cosmetic Act.
Trade Obligations Affecting New Import Measures
As the United States and its trading partners, including EU Member States, seek to strengthen import measures following recent import scares, they will need to ensure that new restrictions comply with their international trade obligations. Two World Trade Organization (WTO) agreements are especially relevant to the types of measures contemplated by the report and the Dingell bill. These are the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and the WTO Agreement on Technical Barriers to Trade (TBT Agreement).
The SPS Agreement focuses on measures taken by WTO members to protect human, animal and plant life or health. Fundamental to the SPS Agreement are the requirements that measures such as import restrictions not be maintained without sufficient scientific evidence and be based on risk assessments, and be no more trade restrictive than necessary to achieve the importing country’s appropriate level of protection. The TBT Agreement deals with technical regulations and standards, imposing on WTO members requirements that imported products be accorded treatment no less favourable than domestic products. Measures cannot be more trade restrictive than is necessary to achieve a legitimate objective, such as national security or the prevention of deceptive practices.
As the United States and its trading partners seek to strengthen import controls, legislators and regulators alike should take into account the multilateral obligations contained in the SPS and TBT Agreements. The rules of the SPS and TBT Agreements may be particularly relevant in the event that U.S. trading partners seek to retaliate in kind for enhanced import restrictions or denial of access to the U.S. market. It is conceivable that more stringent U.S. requirements will serve as a catalyst for heightened retaliatory restrictions among U.S. trading partners. Businesses with international trade should stay appraised of new trade restrictions and relevant developments at the WTO.
Businesses should start to prepare for a much higher level of U.S. import scrutiny. If they have not done so already, businesses should examine their production, distribution and sales models, highlight areas where potential risks exist and work to develop science and standard-based means to reduce that risk. Businesses with integrated supply chains are likely to be the ultimate winners in the switch to a HACCPstyle system of controls. Integrated businesses will be better equipped to impose and enforce requirements on suppliers, and will find a “video” approach less burdensome. Moreover, businesses geared toward supply chain security programs, such as C-TPAT in the United States or the Authorised Economic Operator program in the European Union, may find it easier to convert to whatever new requirements emerge. On the other hand, companies with no culture of supply chain security, or those that ship goods on a piecemeal or drop shipment basis, may find it difficult to establish the necessary measures to satisfy the impending changes to U.S. import safety requirements.