Foreign Manufacturers Liability Bill Hammers U.S. Business, Jobs

By July 21, 2010Briefly Legal, Trade

The House Energy and Commerce Committee is marking up a bill this morning that has the word “manufacturers” in it. Too bad it would hammer manufacturers in the United States with additional legal liability, onerous new import restrictions, and the potential of provoking global trade retaliation.

The bill is H.R. 4678, the Foreign Manufacturer Legal Accountability Act. The original goal was to find a way to hold foreign companies accountable when they ship products into the United States, even when they have no actual physical presence in the country. There should be some way to serve the company with papers when they’re being sued.

Fair enough. Unfortunately, the sponsors have decided against incorporating any recommendations from the U.S. business and trade community to achieve that goal. Instead, they have produced an unhappy mixture of measures that will only please protectionists and trial lawyers. Dow-Jones story.

The National Association of Manufacturers, Association of International Automobile Manufacturers and
Organization for International Investment have just a joint letter to the committee sharply opposing the measure. (Available here). It’s a tough letter:

The proposed legislation would harm the U.S. economy and impose unprecedented and burdensome requirements on legitimate companies based in the United States and abroad. It could also have the perverse effect of destroying U.S. manufacturing jobs by discouraging investment in U.S. manufacturing facilities at a critical time for our economic recovery.

We agree with the sponsors of H.R. 4678 that foreign manufacturers, like domestic producers, should be legally accountable for injuries caused by products they sell in the United States. Unfortunately, as currently drafted, this bill would harm U.S. companies and do little to protect consumers from unscrupulous companies that make defective or harmful products. At a minimum, U.S. manufacturers with foreign subsidiaries and foreign manufacturers with U.S. subsidiaries should be exempted from coverage because they already are fully accountable for the safety of their products under applicable regulatory and tort law and maintain sizeable assets in the United States. The manager’s amendment fails to provide any true relief or exemption because of its requirement that companies waive their basic legal rights to a fair defense against even frivolous claims.

The bill risks severing critical supplier relationships benefiting U.S. manufacturers and supporting hundreds of thousands of U.S. jobs; it invites retaliation by other countries that would enact mirror legislation, the letter argues. Further, it violates the Hague Service Convention of 1965, runs afoul of Articles III and XI of the General Agreement on Tariffs and Trade (GATT), and abrogates U.S. commitments to key trading partners under the WTO.

The letter concludes:

The legislation is unfair, unnecessary and counterproductive. It violates U.S. international obligations, and it broadly punishes responsible American companies and U.S. subsidiaries of foreign parents that are not the source of the problem. International conventions exist to ensure service, and many foreign companies already have U.S. subsidiaries subject to suit in U.S courts. The legislation would also interrupt important supplier relationships and subject U.S. companies to the jurisdiction of foreign courts, including countries with less developed judicial systems, should other nations adopt similar requirements, thereby adding additional barriers for U.S. exporters.

The bill was introduced in February and only recently has the committee decided to pay attention to it. It’s now being rushed through the full committee, one suspects in order to have it among the bills to be considered during the House’s upcoming “manufacturing week.”

It’s fine for House leadership to adopt a “manufacturing” theme. But doing so should not provide a cover for passing legislation that disadvantages manufacturers in the United States, costing jobs in the process.

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