WASHINGTON (Sept. 10, 2007) — The ongoing recall involving tires manufactured in China has brought considerable attention to the tire industry in the media and Congress.
Without a doubt, questions about the safety of those tires—made by Hangzhou Zhongce Rubber Co. Ltd. and imported by Foreign Tire Sales (FTS) Inc. of New Jersey—and, for that matter, the safety of any tire, is a concern to all in our industry.
The issue here is not tires that are made in China. Rather, the concern is that all tires sold in the U.S. must meet all U.S. safety regulations, and both manufacturers and companies that import these tires must be accountable for them regardless of where they are made.
Over the past decade, tire imports to the U.S. have grown to 45 percent of all tire shipments from 21 percent. By 2010, the Rubber Manufacturers Association (RMA) estimates that 55 percent of U.S. tire shipments will be imports.
Motorists must be assured that imported tires comply with all U.S. federal regulations.
The Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act of 2000 added several new federal tire safety requirements for tire manufacturers. Tires sold in the U.S. must comply with stringent safety regulations, most of which were updated after the TREAD Act was passed by Congress. Strict regulations for tire sidewall labeling, rigorous new federal testing standards and a government early warning reporting system were instituted. RMA members—most of the major tire makers that have at least one manufacturing facility in the U.S.—have spent more than $1.5 billion to comply with these new rules.
For manufacturers that build tires in the U.S., uniform, total government enforcement of tire regulations is critical in order to provide consumers with the additional confidence of tire safety and to ensure a level competitive playing field with offshore manufacturers.
The Hangzhou/FTS incident illustrates some of the issues than can arise when tires are imported to the U.S. As the importer for a tire manufacturer with no U.S. presence, FTS is responsible for the tires it brings to the U.S. market.
Although initially claiming that a recall would force it into bankruptcy, FTS has since said it will move forward with the recall and, in fact, did that Aug. 9. Hangzhou disputes FTS' claim about the tires being defective and has provided a statement to the National Highway Traffic Safety Administration (NHTSA), which continues to investigate the matter.
For RMA member companies that fully comply with U.S. regulations and cooperate with safety officials when concerns arise, this incident has potential public policy ramifications. No one wants another similar situation to occur. However, any potential remedy should focus on any gaps the Hangzhou/FTS situation has revealed.
Companies that already comply with federal rules and are willing and able to address safety issues should not be penalized with additional regulatory burdens.
The tire distribution chain also can be affected by a tire safety issue. Tire distributors that import products to the U.S. may be responsible for reporting under the federal early warning reporting system.
Tire dealers who sell non-compliant products or tires that develop safety issues also could face legal issues. As an example, a number of state attorneys general are working together to determine which retailers have sold the affected Hangzhou-made tires.
The Tire Industry Association (TIA) has begun consultations with Zurich North America (formerly Universal Underwriters Insurance Co.), TIA's recommended property and casualty insurance provider, about dealer liability for imported tires. At a minimum, Zurich has suggested a few key points for those considering whether to import tires:
* Consult qualified legal counsel to discuss your potential liability and how to obtain certificates of insurance;
* Negotiate and commit to writing directives on how a dealer and a manufacturer will jointly handle recall and warranty issues;
* Obtain a certificate of insurance from the manufacturer's liability insurance carrier that does a substantial amount of business in the U.S., and make sure the manufacturer has adequate limits—have an insurance representative and qualified legal counsel review the certificate;
* Obtain “additional insured vendor” status on the certificate and get 30-day notice of any cancellation or non-renewal; and
* Even if products are manufactured in the U.S., obtaining certificates of insurance are good security.
Safety is the tire industry's No. 1 priority.
Collectively, the industry strives not only to build the safest and most reliable products but also seeks to educate motorists about proper tire care. RMA and TIA work together to further the industry's safety goals.
However, all of that effort may be diminished if tires entering the marketplace fail to comply with U.S. standards. In addition, an offshore manufacturer that fails to take responsibility for its products and leaves an under-financed distributor responsible for an incomplete recall is not fair to manufacturers in the U.S. that take responsibility for their products. Nor is it fair to consumers who depend on our industry to put safety first.
Donald Shea is president and CEO of Washington-based Rubber Manufacturers Association. Roy Littlefield is executive vice president of the Tire Industry Association in Bowie, Md.