DiligenceChina

SMEs with supply chains stretching back to China should read yesterday’s NYTimes
“Companies in U.S. Increase Testing of Chinese Goods” with a mixture of dread and, well, more dread. If you haven’t figured out a way to limit your liability yet, your days of blissful, politically correct ignorance may be coming to an end. The scratchy music is about to stop and you are the last ones scrambling for a seat.

The Chinese government has already made many politically correct mutterings about increasing inspections (plus they have plans to execute a guy for a related offense, which goes a long way to demonstrating sincerity – at least until the 2008 elections and maybe for a while after that). The FDA has flown off the handle twice (toothpaste, seafood) with the kind of hare-brained over-reactions that only a bad-science bureaucrat could understand – but the committees they answer to are probably ready to call it a job well done after one more impotent panic attack (I’m thinking something in the citrus family later this summer – but that’s just a guess). Congress is finding its ground on this – focusing on food safety is a lot easier for voters to understand than currency and balance of payment issues – especially when their constituents are likely to be fully employed but receiving Wal-Mart wages – and spending those wages on Wal-Mart imports.

To quote the NYTimes piece:

‘Fusing fear of China’s growing economic power with worries about food safety, politicians like Mr. Brown and Senator Charles E. Schumer, Democrat of New York, have made it clear that food safety is an issue that resonates with voters.
“We’re saying to business, ‘You better protect yourself because right now neither the Chinese government nor the American government is doing a very good job of protecting you,’ ” Mr. Schumer said.‘

New Yorkers have long known to suspect and dread almost every word that escapes Chuck Schumer’s lips, but now it’s time for ALL business people from every corner of America to feel that same suspicion and dread. If there’s a way for Congress to screw up both food safety AND international commerce at the same time, you can bet they’ll find it. They’ll wake up at the crack of 10 and work until almost 4 in the afternoon if they have to, but you can rest assured that there are bad bills and stupid debates ahead. Sure, China will be made out to be the BIG villain – but China is far away and kind of abstract (and unresponsive). But business has always made a ready target – particularly with elections and primaries rolling up on us.

Until now you SMEs could stand shoulder-to-shoulder with your big-brothers in the Fortune 500 — defending your inalienable rights to poison puppies and toddlers from within the downy warmth of your impenetrable corporate blankies. But that defense only worked when you were a relatively small, insignificant player. As long as the giant corporate villains were doing things far more monstrous on a far larger scale (i.e.: lead-coated Thomas the Tank Engines. My God, even weeks later, it just sounds so EVIL), it would be hard for anyone to criticize the struggling small businesspeople too harshly.

Well, two things have happened in the last couple of weeks that have the potential to cut into those long Hampton weekends. First, those schmucks from Jersey with the tire distributorship screwed the pooch pretty bad for all of us. Not only did they manage to rack up an actual body count (2 confirmed killed, 1 injured - with LOTS more in the wings) but it seems that these brain-surgeons knew for years that there was a potential safety issue. Furthermore, they’ve botched the recall and will likely dump the whole affair in the lap of some obscure federal agency (National Highway Traffic Safety Administration?!?) that is nowhere near capable of handling it well. Second – the Fortune 500 big-shots are doing the duck & cover thing – bulking up their staffs and going through all the legal-esque motions that will allow them to stand up in court and pretend that human life means something to them. They’re testing, visiting and inspecting – doing all the stuff that you should have been doing since you started boosting your profit margins by sourcing in China.

So now what? Just as Congress and the bureaucrats are turning up the heat, the worst offenders are coming home to Jesus leaving you guys looking greedy, evil and unredeemed. Well don’t worry – someone still loves you. Well, maybe LOVE is bit strong, but they’ll be willing to take your money to save you — assuming it’s not already too late. You’ll have to judge for yourself (unless of course you procrastinate too long, in which case the Honorable Sheldon P. Ross will be the judge. Kidding. Just kidding.)

For Quality Control and Inspections: You are not your brother’s keeper, but you may be liable for your subcontractors and partners sins and misdemeanors. Talk to these people if the pangs of guilt – or fear of exposure – are keeping you up at night:

Sebastien Breteau of Asia Inspection, Yes, he’s French. Does that really matter to you right now? Grow up already. He does this for a living, and he’s supposed to be very good at it.

Paul Stepanek, the big boss at US Active . Mostly for manufacturing, but can help you on those pesky labor-exploitation and dangerous product problems that are suddenly becoming oh-so passé.

For value added sourcing. Have those prices that seemed too good to be true suddenly become too good to be true? Give these two guys a call – and specify that you want to source from the NON-EVIL list of manufacturers. Sure it’ll cost a little more – but a clean rap sheet is so worth it.

David Dayton of Silk Road International

Ashton Udall of Global Sourcing Specialists.

Sweet dreams.