Four years ago, the Transportation Safety Equipment Institute (TSEI) decided enough was enough. It had seen mushrooms sprout all over the lighting-products landscape in America — in the form of overseas companies manufacturing noncompliant lighting and flooding the market here.
So TSEI decided to identify all the companies it knew were producing and importing noncompliant lighting products, finishing with a list of nearly 50. TSEI embarked on a project in which it built a databank with catalogs, e-mail addresses, and Web sites for those companies.
“While we were doing that, 50 more companies popped up,” says Art Richardson, immediate past president of TSEI and vice-president of sales for Peterson Mfg. “You push one down in New York and it pops up in Los Angeles.”
Despite stiff fines — one as high as $650,000 — and a series of recalls imposed by the National Highway Traffic Safety Administration (NHTSA), the landscape is still littered with mushrooms. TSEI would love to see drought-like conditions, but the clouds keep unleashing mushroom-friendly moisture.
“Anybody can fly to China and buy a couple of container loads of vehicle lighting and ship them over here,” Richardson says, “and they'll come right through customs like a greased pig and go right to your address; and you can go out on the street and starting peddling them. I say it's a little bit like fighting al-Qaida. It seems like they're in every cave.”
Richardson says most of the noncompliant lighting — which does not meet the minimum performance requirements as outlined in Federal Motor Vehicle Safety Standard 108 in the United States and Canadian Motor Vehicle Safety Standard 108 in Canada — is coming from China and Taiwan, but notes that India also has entered the fray.
“Labor is no problem,” he says. “The costs of the molds over there are a fraction of what they are here, and the time to build them is an absolute fraction of the time they are here, simply based on low labor.
“The price difference between those products and the ones the three major lighting companies (Peterson Mfg, Grote Industries Inc, and Truck-Lite Co Inc) produce is about 30-35%. In the case of Peterson Mfg, if we were to import that noncompliant product, you might find a 20-25% differential because of our overhead costs. But if some guy decides to open up a little warehouse in Wherever, Wyoming, and all he has invested is just the cost of getting the goods, you might see upwards of 35%.”
TSEI president Brad Van Riper, vice-president of research and development at Truck-Lite, says the significantly lower cost is appealing to OEMs and distributors who are feeling pricing pressure and looking for lower-cost solutions.
“But when they're tipping over some of these rocks, they're finding that the lower-cost solutions are not compliant products,” he says. “These unqualified and non-reputable suppliers do not understand photometrics, light output, or the mechanical performance. The lamps are being matched up against traditional core lighting products that have been around for years, but they're using lesser-quality diodes that don't put out as much light or they don't understand the performance requirements, and we're getting a lot of dimly lit products.”
“We're talking about safety. The lighting products that are being installed on today's vehicles are a critical component in ensuring equipment is visible and able to communicate with other drivers and vehicles that are on the road.”
Dominic Grote, vice-president of sales and marketing for Grote Industries, says that in his company's 104-year history, it has invested much time and money in the research, development, and production of legally compliant lighting. But now it is losing market share to importers who not only are selling noncompliant products, but are seemingly doing it with wanton recklessness.
“We have the knowledge and know how and understanding of photometric labs,” he says, “and when it gets to the point where people are bypassing that step in the process, they come in with somewhat of an unfair advantage, not having gone through the burden of a legally compliant lamp. And, they're putting faulty product into the marketplace.”
“We're not against offshore competition. We're against competitors that aren't playing on the same field. It's not a level playing field.”
Richardson puts it another way: “Truck-Lite, Grote, and Peterson … we're not all clean in the sense that we don't import. We all import product. But the product we import meets our standards. We know what those standards are, and we do not bring in substandard product or noncompliant product. It would be insanity for us to do that.”
What can be done?
Well, NHTSA delivered a blow in May 2003 when it imposed a $650,000 fine on American Products Co (APC) for selling tail lamps without reflective material required to make the lights easier to see. The company, based in Corona, California, also replaced red lamps with clear ones, a violation of federal standards. Those lights commonly have been sold as “clear” tail lamps or “Eurotail” lamps.
NHTSA said that since 1999, when American Products Co was founded, its lamps had been the subject of four recalls involving thousands of lighting products that had been used on a variety of vehicles, from Chevy S-10 and Ford F-150 trucks to the Dodge Neon, Mitsubishi Eclipse, and Honda Civic.
APC president Brian Torres countered that many of those lights were older models that were no longer sold, adding that they were marketed for off-road and show-vehicle use and were not sold as replacement kits for OEM lamps.
He said some of the products were purchased from overseas suppliers and others “were manufactured under our interpretation” of regulations “that are 20 and 30 years old. Unfortunately, NHTSA challenged those interpretations.”
His view was that with so many noncompliant products out there, his company was being singled out because it was the largest, and was a supplier to the nation's five largest automotive chains, including Pep Boys, AutoZone, and Advance Auto Parts.
“We've flown from nowhere right into the middle of NHTSA's radar screen,” he said at the time. “A lot of the products that NHTSA cited go back to the beginning of this company, many of which we will never find. NHTSA clearly targeted us as the big fish in the tank and sent a message to all the other fish. All the other little fish smelled the blood in the tank and they went into attack mode, hoping to eat us alive.”
While some industry observers felt the fine was not much of a hardship for a company with sales of $140 million a year, Richardson disagrees.
“To that company, that's a huge amount of money,” he says. “That hurt. That's a lot of pain. We told the government, ‘If you do that more frequently, people will start thinking about this before doing this.’”
Van Riper says the fine probably didn't have as much of an impact as NHTSA expected.
“It doesn't seem to be enough of a deterrent,” he says. “Maybe it's not widely known among Asian manufacturers. We monitor the market, and there are a few Asian suppliers of lighting that have come around and are producing some good product. But I'd say the vast majority of imported lighting product from smaller companies is noncompliant, based on our own evaluation and the testing we do in the market.”
Last year, NHTSA issued recalls of LED waterproof trailer light kits by Optronics Inc of Muskogee, Oklahoma, and lighting products by Unified Marine of Naples, Florida, for noncompliance.
The Optronics recall involved 15,544 of its TLL-9RK trailer light kits manufactured between December 20, 2002, and April 20, 2004. In its June 29, 2004, noncompliance report, Optronics director of quality assurance/purchasing manager Richard Tracy listed the product's manufacturer as Top Wonder Industrial of Shing Ping, Dongguan, China.
The Unified Marine recall involved 52,665 Road Warrior by SeaSense trailer light kits, roadside taillights, and curbside taillights between December 2002 and July 2004. In its September 24, 2004, compliance report, Unified Marine CEO David B Nirenberg listed the supplier as Signet Products LTD of Kowloon, Hong Kong.
Van Riper says NHTSA last July began an investigation in which it contacted 15 lighting companies and asked them to supply data demonstrating the basis for the certification and evidence that they were exercising “due care” — which, according to a widely recognized definition, is “the care that a reasonable person would exercise under the circumstances; the standard for determining legal duty.”
“So that means — at least in Truck-Lite's interpretation — that we periodically have to pull from production some samples of the product and test them to ensure they comply with current performance standards,” Van Riper says. “What some of the manufacturers have done is establish, with one sample, their conformance to the standard. But they haven't been exercisin ‘due care.’ So when samples are purchased from the field and tested, many aren't anywhere close to the photometric regulations in FMVSS 108.”
Van Riper says “manufacturer of record” is another concept that is widely misunderstood.
“I don't think it's widely known that if you're a distributor or OEM and you contract with a manufacturer of products outside of the United States and they ship product directly to your facility, you become the manufacturer of record by default,” he says. “That means you, as the manufacturer of record, have all of responsibility that a typical lighting company would have. That includes not only the certification and compliance requirements, but also the product liability side. In order to get rid of one of the middlemen, some companies are resorting to buying direct — more on the distributor side than the OEM side — and without understanding the potential issues they can get into.”
There are at least two encouraging developments:
TSEI and the Motor & Equipment Manufacturers Association (MEMA) are supporting a bill in the House of Representatives, HR 4152, introduced by Representatives Dave Camp and Sander Levin that would amend Section 337 of the Tariff Act of 1930 to guard against the importation of products falsely labeled or advertised as being compliant with a federal or industry safety or performance standard.
The federal appropriations bill passed by Congress in November includes funding for two additional positions within NHTSA dedicated to enforcement actions against noncompliant vehicle products.
“I think this issue will go on for quite some time,” Van Riper says, “but I think the government sent a message when it added staff to the enforcement group.”
Richardson got fired up when he picked up the February 7 issue of BusinessWeek. The cover contains the headline, FAKES!, along with pictures of two nearly identical motorcycles and the caption: “One of these Honda CG125 motorcycles is a Chinese knockoff.”
The story on the global counterfeit industry describes how Chinese counterfeiters are producing millions of motorcycles a year, with knockoffs of Honda's CG125 the most popular.
Although counterfeit parts are not necessarily noncompliant, they can be. And the two issues are strongly interrelated.
“The reason I got so excited when I saw that cover is because we're all sensible enough to know that it takes a lot of money to even begin to build a plant to start assembling motorcycles,” he says. “It is so blatant that even the very wealthy people in China are getting together to build motorcycle plants. They need to be slapped down real hard.”
“When you hit the Japanese motorcycle manufacturers between the eyes, they're going to get upset. The Japanese are not going to stand for this. The Chinese are going to start hearing noise from some powerhouses around the world, so maybe we'll get some action here. Our government passes laws and doesn't enforce them. Maybe this will get our government moving.”