Product Liability Critical for Wholesalers Partnering with International Suppliers

In today’s global economy, wholesalers and manufacturers often partner with international suppliers around the world. From component and materials manufacturing to full production of consumer goods, wholesalers rely on a worldwide supply chain. In the state of Utah, Utah wholesalers insurance protects against product liability risks, providing coverage against claims of faulty materials, manufacturing practices, and hazards. This Utah wholesaler insurance is critical for any organization that utilizes international suppliers.

The Role of International Suppliers in Wholesaling Operations

For wholesalers in the United States, international suppliers are sought out as a means of controlling expenses. Production of parts and materials used in consumer goods can be more cost-effective when produced overseas, ultimately reducing the costs passed onto consumers. In some cases, manufacturing capability in the U.S. falls short of needs – or is unavailable at any capacity — requiring wholesalers to leverage global supply chains. 

Pitfalls of International Supply Partnerships

With the advantage of reduced costs luring wholesalers into partnerships with international suppliers, there are also drawbacks. If foreign components are used in the manufacture of a consumer good, and those components are faulty, poorly-made, or hazardous, significant product liability risk exposures are possible. A single product liability claim can wipe out any cost advantages of using suppliers from other countries. These claims can overwhelm even the most robust Utah wholesaler insurance policy. 

This potential risk exposure is made more complicated by several factors, including:

  • Inability of smaller U.S. based wholesalers to adequate evaluate international suppliers for financial solvency.
  • Difficulties in securing proof of product liability insurance from international suppliers.
  • Complex foreign corporate laws regarding product liability claims, leaving U.S. firms unable to recover losses. 
  • Logistical concerns of size, location, and capability of foreign suppliers.

When choosing to partner with an international supplier, U.S. wholesalers must carefully weigh these potential pitfalls against the cost savings they may experience in sourcing products from overseas.

Protecting Against Product Liability Claims

As more companies utilize foreign suppliers in the production and sale of consumer items, the risks of product liability claims grow. Faced with significant hurdles in terms of government protection or support, wholesalers have several options available to help them manage risks.

First, domestic insurers are tightening requirements for loss recovery protections. Utah wholesaler insurance providers may mandate proof of adequate financial assets, manufacturing practices, and reliability of international supply partners before writing insurance coverage. 

Jurisdictional exclusions in foreign-based product liability insurance can present challenges to U.S. wholesalers. These policies often have startlingly low coverage limits as well. To overcome these challenges, wholesalers can leverage contractual agreements with suppliers. Utah-based companies with influence over their foreign partners may include language in contracts that require certain protections, including:

  • Appropriate product liability limits.
  • Terms and conditions favorable to both international partners.
  • Elimination of exclusions barring U.S. based consumers from filing product liability claims in the originating country/countries.
  • Inclusion of certain liability provisions such as coverage against reputational harm and business interruption. 
  • Requirements for foreign suppliers to participate in a U.S. based insurance program as a contract condition.

For companies in the United States, thorough vetting of foreign product suppliers is a critical component of risk management. Just like Utah wholesaler insurance, due diligence on the part of wholesalers before establishing international partnerships can turn up potential issues before they can result in an expensive product liability claim. Wholesalers should demand financial and insurance proof from their suppliers, no matter where they may be located. With this strategy and with the protection of Utah wholesaler insurance, companies based in the U.S. can still take advantage of costs savings inherent in foreign supply chains while protecting their interests against liability claims. 

About BTC Insurance Services

Founded in 2011, BTC Insurance Services has proudly served Utah businesses with comprehensive and custom-tailored insurance coverages for a decade. We pride ourselves on fostering long-term client relationships with a personalized and hands-on approach, and have established a reputation built on quality and transparency. For more information about our products and services, we invite you to contact one of our reputable agents today at (855) 944-3457, or send us a message here.

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