ILMA Compoundings August 2016 - (Page 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

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

FROM THE CEO
FROM THE PRESIDENT
BOARD BRIEF
NOTES FROM NLGI
THE HEART OF ILMA
In Memoriam Mike Ryterski (1920–2016)
Radco Industries Promotes Brian Finch
Manufacturing Day is Coming! October 7, 2016
THE EVOLUTION OF GROUP II
VOICES & VIEWS
INTERNATIONAL INSIGHT
FOCUS ON ETHICS
FAMILY BUSINESS
RULES & REGS
POWER PLAY
LEGAL EASE Preparing for Brexit
THE WHITE PAPER

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