ILMA Compoundings August 2016 - 27

INTERNATIONAL INSIGHT

Global Enforcement: The
Stronger Role Less Taken
James Eggenschwiler

O

ne of the easiest wrong decisions to make in
international business occurs when your customer
(end-user or distributor) faces scrutiny by local
authorities about your product. Often you, the exporter, learn
of the situation in a hasty middle-of-the night phone call or
email from the importer that reveals more about the importer's
state of mind than it does about the situation. The facts will
differ, but each instance like this forces a very similar short list
of considerations that begin with wanting to know how this
happened and end with a strong desire to remain as uninvolved
as possible.
More often than not, exporters interpret the request as
either a grab for confidential information or a somewhat
veiled attempt to gain indemnity from the exporter. Both
interpretations can be true in these instances, but more
often than not the importer simply needs the exporter to run
interference and help resolve the importer's plight in the most
favorable way possible.

Barriers
Sometimes the matter simply requires an email with a document
attached. Sometimes. Like when the foreign authority needs
a registration number, and you have it. But that is typically the
way an importer raises the issue. In many situations (perhaps in
most), the context is more difficult - like when you don't have
the needed registration number, or when the local authority
requires information (like the complete ingredient list or the
production process) concerning your product in order to verify
that your product is market eligible or that your customer
doesn't need a special hazard permit.
Still more difficult and repelling to
exporters are instances where an
importing distributor is asking for

assistance in responding to an inquiry about corrupt conduct
relating to product-pricing discounts that were approved by
the exporter.
All but the first example are ones that should cause you, the
exporter, to consider intervening. But as experience reveals,
barriers abound. First, human nature tends to predispose
exporters toward leaving the problem with the importer. The
rationale includes: (1) the importer is best equipped to deal with
local authorities; (2) the authorities will be more favorable only
if the importer is within reach; (3) fear of unknown potential
for liability exposure if the exporter joins the matter directly;
and (4) fear of reputational tarnish by public association with
an importer now subject to enforcement. Each element of this
rationale is quite legitimate and often boilerplate advice by legal
counsel. For reasons we will explore later, the perceived "cure"
might be worse than the risks the exporter seeks to avoid.
The second barrier flows from the first - the exporter will
tend to adopt an informal/unwritten policy to only provide
what is absolutely necessary to produce the path of least
financial exposure to the exporter first and to the importer
second. This mindset is imminently practical, and it, too, fits well
with common advice. Unfortunately, it also tends to prevent
consideration of alternatives beyond the obvious - making
it an added hindrance to its own objective of finding the least
costly solution.
Other contributing barriers, like language, culture and other
similar difficulties, simply make the exporter more reluctant
to step in, thereby crystallizing the polarity between the
two parties. These contributors might be the first (or only)
reasons named by the exporter in support of its position,
but primarily so because a discussion of the rationale (any
of the components mentioned above) can itself damage the
relationship with the importer. Here, the exporter rolls the dice
on the regulatory outcome, hoping that is more palatable than
revealing the rationale.

Compoundings August 2016 * 27 * Vol. 66 No. 8
ILMA Compoundings August 2016

Table of Contents for the Digital Edition of ILMA Compoundings August 2016
