In this post I’m going to cover the following topics:
- Excerpts from a 1 hour seminar on Compliance issues.
- We’ll talk about a code of conduct, social compliance and how to limit your exposure when sourcing overseas in China.
- It even gives some templates for what key documents and systems should look like.
God forbid somebody gets hurt or a banned substance is found in your product and the case goes to court. If you don’t have a written code of conduct and a file full of compliance records, the press and lawyers will eat you alive. They love it when they catch someone who does not even have a system, because it’s so easy to put the blame on you, even if it wasn’t your fault.
Unfortunately there is no standard for what the system should look like exactly. Should you audit suppliers every ten days? Or every ten years? There’s no standard written in law. But if you have a written manual of how you are going to manage the code of conduct, ethics, sustainability and so on, then, God forbid, your product or supply chain has an issue, you won’t be totally exposed.
Code of Conduct: More than just a piece of paper in China
Let’s expand this blog post by explaining what is code of conduct and why it is of significance to your business, especially when you are dealing with international suppliers.
A code of conduct (also known as a COC) is a set of guidelines for not just your business but your sub-suppliers and their suppliers. A written code of conduct document protects the business and containing essential information on expectations for your employees and partners up and down the supply chain.
Code of Conduct: Sample Document for Reference
It is important to know what should be included in the code of conduct and how to ensure compliance with the local laws. If you don’t know what should be included on the code of conduct statement for you and your supply chain: here is a sample Code of Conduct for your reference. And if you’re dealing with China then I would advise you to have it in Chinese too.
Reality Check: The supplier’s “global coverage” doesn’t really have you covered!
“The supplier might say to you “don’t worry, we have global coverage for product liability”. But say some child gets hurt wearing your baby wear that you just imported into Australia. Is the Australian lawyer and the local government going to sue a factory in Bangladesh? No. They are going to come after you as the importer of record.
If you are a small company and just getting started are you going to spend a couple percentage points getting liability insurance? It’s your call- what do you have to lose in the worst case?
If you are a start-up, maybe you want to “wing it” at first.
But if you are a stable business, and you’ve got real assets and a reputation that you want to protect. Then you need to get serious about arranging your own liability insurance and more importantly putting a system in place to ensure the product is compliant in the first place.
It’s no secret that some suppliers are giving the impression at the trade shows and websites that they’re in compliance, when in fact they aren’t. So it’s up to you to validate things at various levels in the supply chain. At the very least (assuming you care about your brand and your profits), it is a bare minimum that you check out the working conditions at your supplier’s locations on a periodic basis and you ensure that there are written systems in place to catch non-compliance issues and take corrective actions.
China Supplier Contracts & Negotiations: Part 15: Product Liability & Regulatory Compliance
China Supplier Contracts & Negotiations: Part 16: Supplier Codes of Conduct
Let me know if you have any questions.
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