NRF Says Requiring Foreign Manufacturers to Have U.S. Agent for Lawsuits Isn’t Necessary

For Immediate Release
Contact: J. Craig Shearman (202) 626-8134
shearmanc@nrf.com

NRF Says Requiring Foreign Manufacturers to Have U.S. Agent for Lawsuits Isn’t Necessary, Could Delay Imports

WASHINGTON, July 26, 2010 – The National Retail Federation told Congress today that foreign exporters don’t need to have a registered agent in the United States in order to be sued over defective products, and that legislation requiring them to do so could slow down imports of consumer merchandise while exposing U.S. companies to retaliation abroad.

“The retail industry has no objection to the aims of this bill – to subject foreign manufacturers to the same legal liability as U.S. companies for defective products they sell in the United States,” NRF Vice President and Trade Counsel Erik Autor said. “However, as drafted, this bill is not only an ineffective and unnecessary mechanism to achieve that objective, it also threatens to impose unacceptably high costs on U.S. industry and the economy.”

Autor’s comments came in a letter to members of the House, which could vote soon on H.R. 4678, the Foreign Manufacturers Legal Accountability Act. The bill was approved 31-22 by the House Energy and Commerce Committee last Wednesday. The measure would require foreign companies that export products to the United States to maintain a registered agent who could be served with legal papers in the event of a lawsuit or other legal proceeding. The legislation would impose an import ban on products from foreign manufacturers or producers who fail to comply.

Autor said the measure isn’t necessary because the Hague Service Convention of 1965 already provides an effective mechanism for serving legal papers on foreign companies. The convention has 59 signatories, including the United States and China, and serving paperwork typically takes only about two months.

Even if a foreign company could not be properly served or successfully sued, the U.S. importer or retailers of a defective product would continue to be liable to pay the full judgment from a lawsuit, Autor said. “Therefore the bill offers no additional legal redress or protection to U.S. consumers or companies in product liability cases involving foreign-made products.”

The bill does not specify how a U.S. importer would establish that a foreign manufacturer has a registered agent. Autor said that opens a wide range of questions, such as whether documentation would have to be filed with U.S. Customs and Border Protection and if lack of proof could be grounds to blocking an item from entering the country. It is also unclear whether documents would be filed annually or would be required for each shipment of goods, and whether they could be handled through CBP’s computer systems and whether CBP has the resources to handle the additional data.

“By failing to answer these critical questions, the (legislation) will create significant delays for importers, serious inconsistencies with CBP’s enforcement model, and substantial hurdles to effective enforcement and compliance,” Autor said.

If enacted, the requirement would be a clear violation of U.S. obligations under international trade rules of the World Trade Organization, potentially exposing billions of dollars worth of U.S. exports to the threat of trade retaliation by other countries, the letter said. The legislation could also invite copycat requirements in other countries. For example, a U.S. retailer who sells to foreign customers over the Internet or through a mail-order catalog could be required to hire a foreign agent or be banned from selling in a country with such a requirement.

Autor said a proposal to expand the registered agent requirement to include manufacturers of companies incorporated into products finished abroad and imported into the United States would only worsen the legislation and could “threaten to grind global supply chains to a crawl.”

As the world's largest retail trade association and the voice of retail worldwide, NRF's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. www.nrf.com 

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