How can I deal with liability claims from buyers?
If you are an exporter of products, you have to take into account that you can be held responsible for damage caused by defects to your products. This is called product liability. Injuries caused by defects to your products can damage your name and corporate image. EU consumers may also require financial compensation for injuries caused by defective products. The EU legislation on product liability holds the producers and distributors responsible for injuries caused by defective products. In case of imported products, the EU importer is considered to be the producer and thus liable. However, your EU buyer may pass on a claim to you, if your products do not meet the agreed expectations.
Your product will be considered defective when it is not as safe as EU consumers may expect. This means that a product will not be considered defective solely on the basis of poor quality or because a safer version is on the market.
All circumstances are taken into account when deciding whether a product is defective, including:
- The manner in which a product is marketed;
- Any instructions or warnings that are given with it;
- What might reasonably be expected to be done with it.
An EU company can be held responsible if the product was defective and the defect caused the injury. Fault or negligence of your the company is not of importance. Injuries for which compensation can be claimed include death, personal injury and damage to private property other than the defective product itself.
The relationship between the defect in the product and the injury is called the causal relationship. The EU consumer has to prove this causal relationship. If he can not prove it, your EU buyer can not be held responsible. If a causal relationship can be proved, the liability may be reduced when the injured consumer was at fault.
Your EU client will pass on a claim to you if he expected a certain level of product safety (often established in agreed contracts) and this expectation was infringed. For example, if you declare in written that your products are produced conform EU safety requirements and they do not contain certain dangerous substances, your EU client may expect this is true. Furthermore, your EU client can expect a certain quality level that is guaranteed by a certificate. If it appears that you provided your EU client with a false or incorrect certificate, you infringed your EU client’s expectations. Another example of infringement is to not deliver a constant quality.
Liability claims can not be passed on to you if:
- You did not supply the product (e.g. the product was stolen or is a false copy of your product);
- The defect causing the injury came into being after the product was supplied by you (e.g. the product became defective because somebody further on in the supply chain handled it carelessly);
- The product was not supplied in the course of a business/for profit making (e.g. the product was donated);
- The defect was the inevitable result of compliance with law, e.g. EU safety regulations;
- The state of scientific and technical knowledge at the time when you supplied the product was not as such that can be expected from you to have discovered the defect if it existed in your products while they were under your control;
- In the case you exported a component, you may be successful in defending yourself if you are able to show that the defect was due to the design of the finished product or to defective specifications given to you by the producer of the finished product.
You as a producer or exporter must give high priority to quality and product safety. Make sure your products comply with the safety requirements as laid down in EU legislation. For example general product safety legislation, general food safety legislation or standards that specifically apply to your product sector (e.g. toys, chemicals, cosmetics and machinery) and make sure that the product has the quality as agreed. Producing according to internationally recognised product standards and having your products tested, will reduce the chance that a defect in a product is your fault.
- Review your quality control, quality assurance and testing procedures. Check if all stages of production (design, manufacture, presentation and marketing) help to ensure that only safe products reach the EU market. Perhaps the implementation of an accredited quality management system (e.g. ISO 9001) will help you to perform better in this area;
- Carefully formulate labels, instructions for use and disclaimers. Review your contractual arrangements with your EU client and others with whom you have relevant contracts (e.g. suppliers of components) to seek indemnity from other in the event of liability (e.g. delivery agreements that unmistakably regulate where your responsibility ends and where the EU client’s (or other party’s) responsibility begins);
- Assess whether an insurance cover, including product liability, may be an appropriate tool for your business.