Assume that U.S. retailers do have legal liability for defective products from China. What steps could U.S. retailers take when using products imported from China that would minimize their liability exposure?
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If US retailers are legally liable for defective goods that they import from China, the steps that they need to take will have to be taken before the product is imported. They must set up legal agreements with the Chinese firms before they start to do business.
The first thing that the US retailer should do is to require that the firms it works with have high standards for quality control. It could refuse to do business with any firms, for example, that do not meet ISO standards. By doing so, the US retailer can reduce the likelihood of defective products and can show that it has done its part to ensure that the products will be safe.
However, the US firm should also make sure that it is insured against loss. It should require that the Chinese firm take out insurance of its own against liability. Preferably, that insurance should be based in the US and should name the US company as one of the insured parties. This will make sure that the US company can make claims against the insurance policy and it will keep the US company from having to navigate the Chinese legal system.
These are some steps that a US company can take to reduce its risk of liability when buying from firms in China.
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