CPSIA – Deaf Congress Makes Up Its Own Justifications for New Law

The recently approved H.R. 4678 Foreign Manufacturers Legal Accountability Act of 2010 is based on testimony given by several of the usual suspects. Consumer groups filed testimony portraying the need for this law as rather “obvious”:

Consumers Union (June 16, 2010): “While [the CPSIA] has made great strides in improving product safety, and will continue to do so as its implementation continues, the CPSIA focuses on improving safety by requiring that children’s products subject to mandatory standards be tested to ensure compliance with the standard. The law does not address bringing foreign manufacturers into our civil justice system. However, to fully protect consumers from unsafe products, wherever they are made, American consumers must be able to hold manufacturers accountable when they are harmed – no matter where the products are made.”

Consumers Union goes on to assert: “If a foreign manufacturer knows that they cannot be held responsible in U.S. courts for the products they sell, this knowledge has a likely significant impact upon their manufacturing decisions. Do they use the stronger, more expensive component? Do they ensure that the product meets the safety standards? Do they prioritize safety if they know they are not accountable to U.S. consumers in U.S. courts? Holding manufacturing entities accountable in our civil justice system acts as an important deterrent to unethical and potentially harmful business conduct.”

The Briefing Memo for the mark-up (prepared by the Dems) takes up the anti-business, leftist consumer group cause, namely that we need to change the rules to allow consumers to sue foreign manufacturers to protect our way of life. The new law is intended to overcome a little legal wrinkle preventing true consumer justice – the U.S. Constitution:

“In addition, even if a victim successfully serves process on a foreign manufacturer, the manufacturer will likely challenge the exercise of personal jurisdiction over it by a U.S. court. Under well-established constitutional due process principles, before a U.S. court can exercise personal jurisdiction over a defendant it must consider: (1) the defendant’s purposeful minimum contacts with the state in which the court sits, and (2) fairness to the defendant of being subjected to jurisdiction in that state’s courts. . . . H.R. 4678 requires foreign manufacturers and producers that import products into the United States to designate a registered agent who is authorized to accept service of process here in the United States. . . . Registering an agent consistent with the Act constitutes acceptance by the manufacturer of personal jurisdiction of the state and federal courts of the state in which the agent is located.”

Problem solved! Congress found a way to circumvent the framers’ intent. That darned Constitution gets in the way of good government, you know.

Notably, the “urgent” need to go around the Constitution was not echoed in the CPSC’s own testimony:

“Additional authority allowing the CPSC to require foreign manufacturers designate a U.S. registered agent for service of process could be helpful in some cases – particularly those involving administrative requests for documents or information.”

“In a few cases, however, the lack of a registered agent for service of process has hindered the Commission’s ability to develop information that would help us to provide relief to consumers.”

“The lack of a registered agent for service of process has also been recognized by Chinese industry groups, and some local lawyers in China have provided legal advice seeking to exploit this situation . . . . This type of sentiment appears rare.” [Emphasis added]

Opponents to the bill made arguments similar to those previously highlighted in this space (see above and here): American Association of Importers and Exporters and National Customs Brokers & Forwarders Association of America.

I estimate that our business will lose 25-50% of our foreign suppliers and untold numbers of component factories if they are required to have a registered agent under this new law. Most of these sources are irreplaceable in our business (for a variety of reasons). That means that the products we make at these factories will have to be discontinued. Too bad for us, I guess. This could happen quickly, too.

I wish that were the only problem. The lame-brained notion that foreign countries will allow U.S. citizens to cross borders to take domestic assets to settle foreign disputes will prove to be delustional. U.S. companies will soon be greeted by reciprocal registration requirements or even harsher laws exposing them to onerous trade barriers and significant new legal risks. Again, our business is squarely in the bullseye of this maelstrom. We have worked tirelessly for more than 20 years to build an international network of dealers for our products. That creates JOBS here. Anyhow, it is inevitable that a law like this will spawn a need to register our company in dozens of countries abroad, meaning we would need to hire a law firm for each country, translate all the laws, decide if we want to bear the expense and risk of registration. Our foreign business would evaporate quickly and efficiently.

The basic idea that our country actually needs this law is hard to comprehend. Where are all the hungry plaintiffs’ attorneys who can’t put food on the table? Which rights aren’t being satisfied? For each product imported into this country, there must a U.S. importer. Why isn’t that pool of assets enough to satisfy this need, as it has been for years and years? Why doesn’t importers’ exposure under the U.S. tort system provide enough incentive to address Consumers Union’s parade of horribles above? I thought that’s why we have our crazy tort system in the first place. No answer has been provided by Congress to these questions. They just gave us a wonderful new law to worry about.

Thanks so much, Democrats in Congress. We love ya! And we can’t wait to vote AGAINST you! See you at the polls.

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CPSIA – Deaf Congress Makes Up Its Own Justifications for New Law

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