Liability. It’s an interesting thing.
Although the definition of liability is legal responsibility, liability is actually like a game of hot potato between insurance companies and your supply chain – “you’re liable!” “No, you’re liable!” “No, they’re liable!”. Nobody wants to be the one holding the blame when the music stops. Why? Because the person that’s liable is the person who’s pocket the compensation will be taken out of.
What most importers don’t know?
Importers shoulder the blame. Once you bring something into the country and resell it, guess who becomes liable? You do. That’s it. There’s no passing the blame to your manufacturers; it falls solely on your shoulders.
Selling electronics? If they overheat and catch fire, it’s your responsibility. (Yes, the damage to property too.) Selling furniture? If there’s a structural flaw, it breaks and someone gets hurt, it’s your responsibility. Selling toys? Well, if anything happens to the kids playing with them, guess what? It’s your responsibility.
When am I liable for products I sell?
If you’re importing goods to resell inside the country, there are certain circumstances in which you’ll be solely liable. It’s helpful to know whether you and your business are included in these circumstances so that, if necessary, you can look into product liability insurance:
- If your business’s/brand’s name is on the product
- If you repaired, refurbished or changed the product
- If the product was imported from outside the EU
- If you cannot clearly identify the manufacturer
- If the manufacturer has gone out of business
These are all situations in which the importer would be solely liable – and expected to pay out any compensation.
When is the manufacturer liable?
Although a majority of the time importers assume all liability, there are a few exceptions to the rule. Certain situations allow the responsibility to be passed from importer to manufacturer.
- If you can show that the products were faulty when supplied to you without your previous knowledge
- If you can show that you gave customers safety instructions and warnings about misuse that could have caused the issue
- If you can prove that you included terms for return of faulty goods to the manufacturer in any sales contract you gave the customer
These are a few situations in which the manufacturer would be liable instead of the importer.
"I've been hit with a compensation claim - help!"
Unfortunately, there may be times when your customers hit you with compensation claims. Sometimes you may have to bite the bullet and pay out – however, if you have honestly taken precautions and acted in good faith, you can sometimes divert the liability to your supplier. How?
The due diligence defense is only applicable if you actually did your due diligence and made a real effort to take all precautions and measures to ensure that your goods would be safe. If you can prove that you took the necessary steps to avoid committing the offense, then the argument can be made.
A few examples of due diligence could be:
- Hiring a factory inspection
- Paying for quality inspectors to check the quality of the products before they’re shipped
- Ensuring to the best of your ability that all purchased goods are of trading standards and meet your countries laws and regulations (examples of this could include ensuring that your goods come with their necessary markings – an example being: if you’re importing toys, all toys in the EU must have CE markings so you’d need to ensure this marking was on your imported goods.)
- Showing that you researched a decent amount into the product
If you can prove that you did your due diligence and went through all the steps to ensure that the goods you imported were compliant to your domestic market’s standards, sometimes you can use the due diligence defense to prove that you’re not at fault.
Product Liability Insurance
Fortunately, however, importers can protect themselves against product liability claims using product liability insurance. What is product liability insurance?
Insurance that covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies.”
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