Liability Issues That Foreign Manufacturers Should Know About

From cars to electronics, the United States is an attractive market for foreign manufacturers to sell their wares. According to the U.S. Bureau of Labor Statistics, the United States imported $260.3 billion worth of goods in 2024, up $3.8 billion from November 2023.

Foreign companies spend years preparing to enter the U.S. consumer goods market. They negotiate incentives with federal, state and local governments. They choose where to establish their facilities and build them. They hire and train new workers. This article will discuss product liability issues manufacturers will face once their products hit the market.

Consumers sue sellers and product manufacturers because they contend they’ve suffered injuries due to defective products.

Product liability lawsuits generally stem from claims of defective design, errors in the manufacturing process or a failure to warn consumers of known dangers inherent to a product’s design.  Design defects include a failure of the manufacturer to follow accepted design standards, a failure to design the product so that it is fit for its ordinary and intended use, or implementing a design that renders the product unreasonably dangerous for its intended use. 

Design defects tend to involve entire product lines, as opposed to a single identifiable product.  Manufacturing defects, meanwhile, typically impact a single product or production run and usually arise from a manufacturer’s failure to comport the product to its design, the use of improper materials or a failure to maintain proper quality controls in the manufacturing process. 

When an identifiable hazard exists and a manufacturer cannot design around it without impacting the purpose or intended function of the product, a manufacturer has a duty to warn the consumer of the hazardous condition. 

Who is responsible for a defective product? Essentially, any entity that participates in bringing a product to market, from design to manufacture to distribution to retail sale. 

The consumer may pursue liability against the manufacturer under three different legal theories: strict liability, negligence and breach of express or implied warranty:

• • Strict liability: If a product is shown to be defective, someone is liable, regardless of negligence. Thirty-two states are strict liability states. Of the 18 exceptions, most depend on the availability of the manufacturer to explain itself.
  • Negligence: This means the failure to use reasonable care in the design or manufacture of a product such as failure to meet industry or internal standards or failure to meet state and federal regulations. It also includes claims for failure to warn.
  • Breach of Express or Implied Warranty: Express Warranties stem from a  manufacturer’s contractual obligations. Implied Warranties require products to be fit for their intended purposes.

The U.S. legal landscape is unique in that personal injury lawyers leverage a company’s participation in our capitalist economy to maximize jury awards.  They play to theories of a never-ending pursuit of corporate profits, which in turn supports themes of:

• • Corporate greed: a company values profits over safety
  • Cutting corners: a company rushed to get the product to market
  • Deception: a company hid information from regulators and/or consumers
  • Willful Ignorance: a company ignored its own internal testing data

Manufacturers are not without defenses.  Product liability begins with the existence of a product defect.  When injury lawyers can’t prove that a defect in the product caused the injury to their clients, manufacturers win.

Defense counsel identify and assist manufacturers to develop defenses, including:

• • Lack of defect
  • Lack of proximate cause
  • Alteration or modification of a product after it left the client’s control
  • Products represent the state-of-the-art, meaning at the time of manufacture, the products were as safe as technology reasonably allows and nobody else in the industry did it any better
  • Federal preemption
  • The actions of the user: misuse of the product, assumption of the risk, comparative/contributory fault
  • Contractual defenses
  • Shifting risks through well-drafted indemnity agreements
  • Marketing considerations

Domestic product liability cases rely heavily on expert testing and testimony.  It is imperative that manufacturers get out in front of liability investigations through the engagement of experts who will qualify in court to offer opinions supportive of their product. 

Important defense considerations include issues of venue and jurisdiction, whether to keep cases in state court or remove them for the (generally) greater predictability of federal court. These decisions directly impact a manufacturer’s exposure since they shape the course of a lawsuit, including:

• • July pools
  • Discovery burdens: what records to produce before trial
  • Rules on the qualification of expert witnesses
  • Scheduling
  • Motions practice

Damages for injuries and death arising from allegedly defective products include:

• • Compensatory Damages: medical/funeral expenses, lost income, damages for pain and suffering. Many jurisdictions have statutory caps on non-economic damages and evidence rules that impact the recovery of medical expenses.
  • Punitive or Exemplary Damages: these are imposed on corporate defendants to punish and deter conduct that disregards the safety of its consumers, usually in the name of preserving profits. Many jurisdictions have capped or eliminated punitive damages except in the most extreme cases.

Defense counsel advise manufacturers on how to minimize exposure to product liability losses before their products come to U.S. markets.  They provide input on product warnings and instructions, which is especially important where an international manufacturer coming to the United States attempts to translate product warnings and instructions to fit the U.S. market.  Once a manufacturer reaches U.S. markets, defense counsel advises them on field surveillance and how to respond to investigations from regulatory authorities, including the Consumer Product Safety Commission (CPSC) and the U.S. Food and Drug Administration (FDA). 

Foreign manufacturers will want to be prepared for any liability issues that arise from consumers’ use of their products in the United States. Please contact Jonathan Hall or any member of the Phelps products liability litigation team if you have questions or need advice or guidance.