House Energy & Commerce Committee Clears Foreign Manufacturer Legal Accountability Act with Import Ban; Ways and Means to Seek Changes

July 27, 2010

Last week, the House Committee on Energy and Commerce approved a the Foreign Manufacturer Legal Accountability Act (H.R. 4678) with a controversial measure that would impose an import ban on covered products from foreign manufacturers that do not agree to register an agent in the U.S. that will be subject to the jurisdiction of U.S. courts for U.S. lawsuits. If enacted, the bill would apply to foreign manufacturers of drugs, devices, cosmetics, biological products, consumer products, chemical substances, pesticide, and automotive parts that are sold as original equipment or replacement parts.

However, the Committee on Ways and Means, which has jurisdiction over the trade element of the legislation, has already signaled that this provision could result in violations of U.S. obligations under the General Agreement on Tariffs and Trade (GATT). Therefore, the Ways and Means Committee will likely try and change to the provision to a less restrictive measure.

One option said to be under consideration would require importers to make declarations to U.S. Customs and Border Protection (CBP) that the companies they are importing a covered good from have a registered agent in the U.S. who could be served with papers in product liability suits. Importers failing to make such a declaration could be held liable for civil penalties, including seizure and forfeiture of a product, as well as criminal penalties. Private sector sources are pushing to make this declaration an annual blanket declaration rather than a transaction-by-transaction declaration.

Currently, legal papers for a lawsuit have to be translated into the native language of the foreign company and transmitted to it through its national government. Once served, foreign corporations usually argue that they do not have sufficient legal contacts in the U.S. to be subject to U.S. jurisdiction. Proponents of the bill argue that the legislation is about putting foreign firms on equal ground with U.S. manufacturers, who are already subject to U.S. product liability cases.

More information on this legislation, and its potential requirements for U.S. importers and foreign manufactures, will be posted on www.barnesrichardson.com as it becomes available.