This is the second blog post in our mini series surrounding importing and wholesaling liability. View our first article here.
Importing is big business in Canada, the internet has made it look easy to find the perfect product to sell for your e-commerce business. Before you order any products from overseas, it’s important to take a step back and evaluate your liability as an importer.
You’ve sourced a unique product from China and plan to use private labelling to sell your products through a third-party distributor like Amazon, seems like a profitable idea, right? Unfortunately, unlike other online business ventures, importing products comes with a unique set of risks.
When you sell through a third-party distributor, most of the time they will not accept being the importer of record, leaving you on the hook for all potential losses. If someone were to come after your company for a product defect, the financial damage would fall directly on you. This is because it is difficult to be successful in recourse against a foreign manufacturer. The courts have very little reach in assigning liability to these overseas manufacturers, since they do not have a domestic presence.
The products you sell also have insurance requirements that will not be covered by foreign manufacturers. It is not uncommon for an Amazon seller to be accused of infringing intellectual property or to be sued for a product defect, resulting in the suspension of your online storefront and potentially shutting down your business altogether. Even though Amazon only requires insurance after you reach a certain sales threshold, it is important as an online seller to inquire about product liability and commercial general liability insurance for your business early on in the process. You’ve spent your hard-earned time and money setting up your business – don’t let it go to waste.
It is your responsibility as an importer to ensure that your manufacturer is producing products that meet the Canadian regulatory compliance standards. For example, a product manufactured in China that is certified and exported using Chinese standards may not necessarily meet Canadian standards. This means ensuring that the product your manufacturer ships is the same product that you sampled. Consider having your first shipment sent to your own address, even if you plan on having all of your following shipments directly fulfilled by Amazon.
What are some ways you can protect your business?
- Consider finding a manufacturer in Canada or the US instead
- Conduct quality control assessments
- Conduct product inspection tests
- Look up and become familiar with the potential liability risks of your chosen products
- Complete extensive research in order to ensure your product does not infringe on intellectual property including patents, trademarks and copyrights
- Make sure that your product it not restricted or prohibited for import into Canada
- Make sure that your product meets Canadian packaging and labelling requirements
The most important step you can take to protecting your business is by working with the right insurance broker that will help evaluate your risk potential and address your insurance needs. The cost and amount of insurance your business needs will vary based on a number of factors including your product type, the associated risks and the locations you do business in. A reliable broker can help answer any questions you have and ensure that you obtain adequate coverage for your company. Get in touch with one of the expert brokers at Fuse Insurance today by filling out our online quote application or giving us a call at 1-866-387-FUSE (3873).