Novel Solutions for Improving Import Safety

A Q&A with Cary Coglianese, University of Pennsylvania Law School, and Co-Editor of Import Safety:  Regulatory Governance in the Global Economy

Cary CoglianeseWhen it comes to consumer products, the world is getting smaller. Each year, trillions of dollars worth of manufactured goods enter the United States from more than 150 countries and territories worldwide. And the import rate is only increasing.

This is welcome news for consumers who want choice and convenience, all while stretching their scarce dollars. U.S. consumers can eat fresh tropical fruit year round, purchase inexpensive toys for their children, and install low-cost building supplies in their homes.

But our consumption of imported goods poses new challenges for a legal system that is structurally ill-equipped to deal with them.

“Recent scandals over harms created by consumer products continue to grow each year, whether it’s melamine in milk products or lead paint in children’s toys,” says Cary Coglianese, Penn Law’s deputy dean and Edward B. Shils professor of law and political science and director of the Penn Program on Regulation (PPR). “The problem is that our legal system was never designed to address the kind of challenges presented by globalization.”

Rather than accept the status quo, Coglianese and his PPR colleagues organized a conference in May 2009 to devise better ways to increase import safety. They have now published a book that is a direct outgrowth of the conference.

Import Safety: Regulatory Governance in the Global Economy, edited by Coglianese, PPR Fellow and Executive Director Adam M. Finkel, and Wharton Assistant Professor of Legal Studies David Zaring, was released by Penn Press in December 2009. Featuring contributions from scholars at Penn and across the globe, the book proposes novel solutions to the problems of import safety.

“If the old ways cannot adequately protect consumers,” writes Coglianese, “then new ways deserve policy makers’ and scholars’ serious consideration.”

Coglianese spoke with Penn Law about ideas for improving import safety, how the problem is fundamentally different from domestic product safety, and why government acting alone can’t keep consumers safe from imported goods.

Q:  What was the impetus for the import safety conference and, ultimately, the book?

A:  Significant import safety problems in the U.S. seemed to hit a crescendo last year. In a relatively short period of time, we saw scares from imported deadly pet food, toys made with lead paint, milk laced with melamine, poisonous toothpaste, and tainted heparin (a blood product). With the flow of imports into the U.S. swelling each year, we worried that the spate of import safety crises marked the beginning of a dangerous trend. Our existing legal system isn’t well-equipped to deal with the consumer safety challenges of globalization, and there is a dearth of fresh, cross-disciplinary scholarship about how to promote better policy making and improvements in public health and safety in an era of global trade. We saw a pressing need for both policy analysis and scholarship and set forth to fill that gap.   

Q:  In the U.S., we’re accustomed to dealing with safety issues in domestic products, whether through regulation, recalls, or litigation. But you suggest that the systems we’ve created to address domestic product safety issues are inadequate to solve the safety challenges that result from globalization. Why is that?

A:  Although consumers can be harmed just as much by domestic products as by imports, the import safety problem raises a variety of jurisdiction, legal, cultural, political and practical issues that are not present with domestically produced products and their regulation. In the past, most consumer products have come from manufacturers based in the same country and jurisdiction as the consumers who are buying those products and might ultimately be harmed by them. With globalization, the regulatory challenge is much more difficult. We can’t rely on recalls, since that only captures a small portion of safety problems, and of course only after some damage may already have occurred. Given the sheer volume of imported goods, we can’t rely on inspections, since regulators can’t inspect even a small portion of imported products. And we can’t rely on private litigation, in part because the courts’ authority can’t always reach manufacturers abroad. In many cases, just identifying the producers of ingredients and products in other countries poses daunting challenges.

Q:  What types of solutions does Import Safety propose?

A:  Import Safety addresses two principal strategies for increasing the safety of imported products.

First, our contributors address how we can use traditional regulatory strategies in smarter ways to combat the import safety problem. Penn Professor Richard Berk’s chapter on forecasting consumer safety violations, for example, details a strategy that regulators can use to deploy statistical techniques to identify products most likely to be unsafe. Since regulators can’t inspect every container ship that enters U.S. ports, they have to apply their inspection resources wisely.  With statistically sophisticated forecasting, they can better predict the ships needing inspection.

Second, our contributors suggest new ways of regulating altogether. Penn Law Professor Tom Baker’s chapter, for example, proposes requiring importers to buy insurance – in effect to become bonded, much like contractors in construction companies are bonded for harms that may occur if they come to your house to fix your roof. The reason we have insurance bonds in ordinary practice is to compensate people who are harmed when property damage occurs, and to provide a financial incentive for behavior that is socially desirable. If importers had to buy insurance to cover the losses that occur if they import unsafe products, the insurance would send a price signal that would encourage them to police the manufacturers they buy from overseas. In effect, we’d be leveraging the private sector to act as a surrogate regulator.

We have several other proposals in Import Safety aimed at leveraging the private sector. Since the government can’t be everywhere all the time, the question is:  What can the government do to create incentives for the private sector to police itself?

Cary CoglianeseQ:  You’ve said that the import safety problem crosses more than just international borders. What do you mean?

A:  Import safety is a problem that literally crosses jurisdictional and cultural borders. But the problem also crosses metaphorical boundaries between policy and research domains. Simply applying standard legal analysis is not enough. What society needs to solve this problem is a collaborative effort between experts from law, business, economics, political science, and other social sciences. When we invited participants to our import safety conference – and ultimately to contribute to the book – we deliberately put together a diverse, interdisciplinary group of scholars who could come up with sensible and creative regulatory solutions.

To illustrate the value of interdisciplinary inquiry in this domain, consider the chapter by Jonathan Baron, a professor of psychology at Penn. Baron asks whether people are more afraid of products simply because they come from overseas.  This is an important question for decision makers to consider before investing vast governmental resources.  If public fear of imported products stemmed more from parochialism than from real risk, that would potentially suggest the need for public education rather than risk regulation.  Baron shows, though, that the public tends to fear equally any unsafe product – whether domestic or foreign.  But when outbreaks of unsafe products do occur, the public tends to blame government for the failures of the private sector, thus highlighting the need for good policy research to help government more effectively protect consumers from unsafe imports.

Q:  Given the complicated and vast nature of the import safety problem, how can consumers go about making rational decisions about what products are safe to purchase?

A:  Unlike for regulators, the problems for consumers with unsafe imports are really the same as with unsafe domestic products. Consumers simply don’t have enough information about what’s in a product. Consumers can see that a toy has paint on it, for example, but not know whether the paint contains lead. They can pour a bowl of pet food, but have no way of knowing it’s contaminated with melamine.  They can squeeze a tube of toothpaste, and have no idea it contains toxic diethylene glycol.  This is true, whether the product is domestic or imported.

One simple step that consumers can take to prevent exposure to unsafe products is to be more attentive to recalls and other safety alerts that governmental entities issue. Unfortunately, consumers have been harmed because the news of a recall hasn’t reached them, or they haven’t responded to a recall they were informed about. People should take alerts about safety recalls very seriously and check whether they have the type of product that’s covered by the recall.

Q:  Many products these days are made from parts produced all over the world – and even those parts may contain components from various sources. Given that many manufacturers don’t control everything that goes into their products, how can they tackle the import safety problem?

A:  It’s not easy for manufacturers of products with components that come from multiple sources to know what safety risks to test for. There could be an infinite number of sources of contamination, and of course they can’t test for all of them. But there are things companies can do. For example, one of the chapters in Import Safety chronicles the European Union’s efforts to create rapid response alert systems to inform the public when safety problems arise with particular goods. An added benefit of these systems is that they help alert manufacturers to potential sources of defects or contamination in their supply chains. Many manufacturers closely monitor these alerts, and when they see one about contamination in a type of ingredient they use, they can test for that type of contamination in their products.

Q:  The crises cited in Import Safety generally occurred before the global economic collapse. Should we be concerned that economic pressures will make matters worse?

A:  Without a doubt, the global economic crisis has exacerbated pressures on manufacturers to keep costs down, and those cost pressures can ripple through the supply chain and lead suppliers to cut corners on safety.  In some cases, cost pressures lead unsavory suppliers to substitute unsafe ingredients for more costly but safe ingredients, like in the melamine in milk case.  For these reasons, the economic collapse has only intensified the need for sound regulatory responses – and for new scholarship to inform those responses. The publication of Import Safety now is, unfortunately, timelier than we ever imagined when we started working on the book.