Electrical Safety Office recalls
The Electrical Safety Office will require an importer to issue a recall if a product is found to be unsafe or does not meet Australian standards.
Putting aside the obvious dangers for customers, the consequences for the businesses involved can also be catastrophic.
There has been some noise in the media of late about electrical recalls and quite a few small businesses have been going into liquidation as a result of recalls. In the industry various organisations are now promoting recall business insurance.
Will that be effective for those businesses that are affected, at what cost, or will provisions in the terms and conditions make it useless?
Will insuring the risk away cause installation standards to slide?
A quick look at www.recalls.gov.au under the electrical section shows that recalls are far more common than you might expect.
Big in the electrical industry news at the moment has been Solar system DC Isolators, and not that long ago it was a spate of recalls of RCBO’s (safety switches).
Faulty DC Isolators have resulted in a number of serious house fires – and who wants to be responsible for that destruction and potential loss of life.
While faulty safety switches put people at risk of electricution when they should be protected.
Most electrical devices recalled are produced overseas, so what can be done?
The reality is that most products for sale in Australia from both large and small businesses are made overseas and imported into this country.
Many of those products are of high quality, whether from China, Indonesia, Korea, America or Europe. Regardless of where products come from, people make mistakes and unsafe products come into the hands of customers that will use them, and may be at risk from them. Because the manufacturer is overseas and may be operating in a different legal framework than exists in Australia, Australian Law treats the importer as the manufacturer and liable for the full cost of any recalls. If the importer is unable to meet this obligation and is put into recievership then the liability is passed down the supply chain. If no one in the supply chain is left then it is up to the consumer to bare the costs. This is how we arrive at the situation were a small importer suffers a recall and goes bankrupt, then the electrical contractors that used the products in good faith potentially go bankrupt, and finally the customers end up getting someone else to fix it at their cost.
We have seen examples of this with both RCBO’s and DC Isolators where a small company has imported and distributed the devices only to go bankrupt under the pressure of a recall notice. Examples are RCBO’s from CrispTech and DC Isolators from AdvanceTech.
Can a business insure against recall costs?
Yes, apparently you can, and a number of organisations are promoting this option including the MEA.
A big question I have is will the insurer expect some level of due dilligence, or are they happy to carry the risk for the unscrupulous or the sloppy?
Given the risks to an importers business, how and why do importers let this happen?
For a start we need to acknowledge that much of this is a result of a market overwhelmed by pricing pressure.
The contractor and the importer are therefore looking for pricing advantage; not to create a safety issue.
Why then do customers want to put their safety in the hands of the lowest bidder and the cheapest components?
My perspective is that people believe that the Australian standards provide for products and services that are safe, particularly in the electrical industry. Further that they therefore expect that because imports must adhere to Australian Standards regardless of the origin of the goods, who they bought them from, or what their price, they will be safe. Reality is not always so clear cut.
Keep in mind here that the market is price driven. For the Electrical contractor to get a best price, he must use a low cost importer, and the importer must use a low cost manufacturer. Often for low volume importers, they will not be dealing directly with a manufacturer, but more likely with an agent company who can source products from contract manufacturers. Once again driven by price. The importer is not stupid, they know what goes on so the importer may have intitial batches tested. And due to size of the importer and cost of testing the importer is not able to check all batches of the product forever. Then something changes in the supply chain, perhaps a change of contract manufacturer since the lowest bidder wins, and the product is no longer meeting the standards.
Big companies and established brands are not immune from recalls either, but there is a difference.
So how do we protect everyone?
For us, as a small business we can not afford a recall, nor does the thought of providing less than good quality in our work or products fit with our values.
As a result we look for a number of key criteria in selecting a supplier:
- must be big enough to weather a recall without significant financial hardship to the company
- must have a commitmment to the local market they cannot walk away from
- must be responsive to quality issues
- must have a strong track record of quality
- must have products you would be proud to provide to your best customers
If you can select suppliers that meet these criteria, you may still be involved in an Electrical Safety Office recall, and will still have a strong business and happy customers afterwards.