Chinese tire recall continues: Meanwhile, some dealers question its validity

Sept. 1, 2007

Foreign Tire Sales Inc.'s recall of some 250,000 light truck tires made by Hangzhou Zhongce Rubber Co. Ltd. is underway. But it's been slow going as comparatively few units have been pulled in, says FTS owner Richard Kuskin. "We probably have close to 4,000 returned tires in our stock."

Kuskin says FTS has used video news releases, newspaper ads and its own Web site to notify customers and help them identify tires under recall.

The recall, which began on Aug. 9, will end on Oct. 25, he says. To date, it has cost FTS "just under $1 million." Last month, Kuskin told Modern Tire Dealer the total cost of recalling a quarter-million units is projected to be less than $20 million.

Tires under recall were made by Hangzhou between early-2004 and early-2006 and sold under the Westlake, YKS and Compass labels (see the August 2007 issue of MTD for size and DOT information).

FTS says the tires are defective because they don't contain a rubber gum strip. Hangzhou maintains the tires are fine. In a July 31 letter to the National Highway Traffic Safety Administration (NHTSA), Hangzhou said "it was very clear that FTS made its initial determination without certain critical information necessary to assess properly the existence of a potential defect.

“The factual basis for FTS’ defect determination is highly questionable and unclear, at best.”


Scott Highfill, president of Great Western Tire, a wholesaler based in Spring Valley, Calif., near San Diego, had been selling the Westlake and YKS brand light truck tires that were later recalled. He says he and his customers have had no problems with them.

Great Western had been sourcing the tires from FTS. The dealership covers parts of Southern California and Arizona, and high temperature environments would eventually betray any sort of structural problem in the tires, says Highfill. "I guarantee you if the tires were bad, we'd know it."

Highfill doesn't buy from FTS anymore. "This has been a financial hit to our company that wasn't necessary," Highfill says.

Don's Tire & Supply Inc., a two-store dealership based in Abilene, Kan., sold some of the light truck tires that are being recalled. "The great majority were bought from FTS," says owner Don Nebelsick, and the rest were purchased from Strategic Import Supply, a distributor based in Wayzata, Minn.

"I had not seen any trouble with the tires. I think FTS kind of put the cart ahead of the horse and tried to do something that didn't need to be done."

When sourcing foreign-made tires from any importer, Nebelsick recommends that tire dealers "be well-versed on the importer's product liability insurance."

Due diligence ensures you are insured: Get advice, negotiate and put it all in writing

Being a direct importer can present significant opportunities for businesses. It also can bring significant exposures, according to Gerald (Gerry) Cecil, national account executive for Zurich North America's Direct Underwriters business unit.

When negotiating a deal to directly import products that you will distribute and not alter in any fashion, at a minimum you should:

* Consult qualified legal counsel regarding contract negotiations. Discuss your potential liability and how to obtain certificates of insurance.


* Negotiate and put in writing how you and the manufacturer will jointly handle recall and warranty issues.

* Obtain a certificate of insurance from the manufacturer's liability insurance carrier -- one that conducts business in the United States. "Make sure the manufacturer has adequate limits by having your insurance representative and qualified legal counsel review the certificate," says Cecil.

* Obtain additional insured vendor's status on the certificate and require a 30-day notice of any cancellation or non-renewal.

* Place the certificate in a dated file to follow up 30 days prior to expiration. Even if you think products are manufactured in the U.S., it is a good risk management measure to obtain certificates of insurance.

"Not addressing the product liability issue is like rolling the dice and hoping for the best, and hope is rarely a good strategy," says Cecil. "That's especially true when the product liability is strict -- which means that there is liability even when there is no proof of negligence -- and you are the only recourse to which an injured party in the U.S. has access."

Government crackdown?: Senator calls for 'import czar'

Chinese-made products have accounted for more than 60% of the federal Consumer Product Safety Commission's (CPSC) 178 recalls so far in 2007, according to a statement issued by U.S. Senator Charles Schumer's (D-N.Y.) office.

Schumer is calling for the creation of an "import czar" who would concentrate "on the rising tide of Chinese goods coming into the U.S."

The czar would be installed at the Department of Commerce and would "oversee all matters pertaining to consumer protection of imports, including coordinating efforts of other agencies charged with consumer safety related to imports."

Schumer also wants to mandate overseas inspections. "Currently, the National Highway Traffic Safety Administration and the CPSC do not require products entering this country to undergo inspections at their point of origin."