When an importer places an order with a foreign supplier it is essential that the goods received conform to those specified in the purchase contract. Although detailed specifications may have been drawn up, and reference made to these in the contract signed, an importer must still take measures to ensure that the supplier provides products that meet the agreed quality requirements. An importer cannot eliminate entirely the risk of supplier noncompliance with these requirements. What an importer can and should do is to minimize this risk to the extent possible. Careful supplier selection and contract follow-up will help to keep supplier nonconformance to a minimum.
Before evaluating offers, and in any case before signing a contract, an importer should assess the potential supplier's capacity to meet the contractual commitments concerning quality conformance. This evaluation can be undertaken in several ways, with differing costs and degrees of reliability. The methods that can be used for such an assessment are to review the importer's past performance in meeting quality requirements and draw conclusions accordingly; examine the existing product liability regulations in the supplier's country; evaluate the quality control methods and procedures in the supplying company; and conduct an on-the-spot study of the supplier's ability to comply with quality requirements. The suitability of each approach depends on the nature of the product, the quantity to be purchased and the value of the order.
A simple method to appraise a supplier's ability to conform to quality requirements is to look at the supplying company's performance record. This approach is often used for low-value products and relatively small orders. An importer can make this performance appraisal from his or her own records for suppliers from whom the company has been making purchases in the past. For others the importer could rely on the supplier's market reputation. If the supplier already has a good reputation in the market, the risk of receiving faulty goods from that source is small. Even when the cost of nonconformance would appear low, an importer should make an effort to select reliable sources of supply by determining the degree to which the companies concerned have provided customer satisfaction. Because this approach is used mainly for small, low-value orders, the importer has limited financial loss if the goods do not conform to the specifications, because the shipment can be rejected or compensation claimed. Such a situation is, however, to be avoided to the extent possible because of disruptions that will result in production and delivery schedules.
A second method for assessing a supplier's ability to comply with quality requirements goes a step beyond looking only at past experience or market reputation. It relies on a somewhat more formal approach to minimizing the risk of quality nonconformance by considering the commercial laws, rules and regulations in force in the supplier's country, as well as quality procedures being applied in the company, as evidenced by manuals or other published material used by the supplier outlining the in-house quality control methods. Subjects that arise in this context include product liability and implied warranty, quality certification systems and the supplier's in-company quality management.
Product liability and implied warranty: Some countries have national laws on commercial contracts in general, and/or on the sale of goods in particular. One of the aims of these laws is to protect the interests of the buyer and provide for implied warranties that require that goods supplied be of "merchantable" quality, meaning that they are suited to the use intended.
For example, the provision on merchantable quality in the United Kingdom Sale of Goods Act 1979 reads as follows:
"Goods of any kind are of merchantable quality if they are fit for the purpose for which such goods are commonly supplied as it is reasonable to expect, having regard to any description applied to them, the price (if relevant) and all other circumstances. …