As we embark on the sixth year of the Manufacturing Law Blog, we continue our annual tradition of making predictions. Last week, Matt provided his thoughts and predictions in the labor/employment arena. This week, I am providing our outlook for corporate compliance and litigation.
As we have documented in the Blog for the last several years, there has been a shift in the manufacturing community about how to handle contract management. There was a time when manufacturers in the supply chain would sign contracts and accept whatever was placed in front of them in order to make the sale. Over the past 2-3 years, manufacturers of all sizes have realized that implementing a contract management system or “playbook” is a sound approach.
This is not the traditional law firm solution, which includes redlining contracts and making suggestions that have no chance of being accepted. Many of our clients do not have any leverage so we need to identify potential risks and/or suggest creative language to attempt to mitigate the risk as much as possible. In other words, I expect that manufacturers will continue to implement internal systems to better assess the risks they are taking particularly if we are faced with an economic downturn.
Supply Chain Compliance
Another area that many manufacturers dealt with in 2018 is the increased pressure being placed on the supply chain to comply with a host of regulatory regimes. Everyone generally has heard of the alphabet soup of compliance such as GDPR, REACH, FCPA, Prop 65, Conflict Minerals, ITAR, EAR, etc. These compliance obligations have always been passed down the supply chain. The difference that we saw in 2018 is that OEMs and other larger customers are enforcing these compliance obligations in a more robust fashion using electronic programs, checklists and other means to ensure that their suppliers are actually complying. It is not enough to just affirm in a contract that you will comply. So, the question is – how does a privately held manufacturer comply without breaking the budget? Again, like with contract management, there are ways to comply with these regulations and satisfy your obligations without breaking the bank. I expect more manufacturers to dust off compliance plans and develop training programs with the help of a manufacturing law firm.
2018 was the year of the “tariff” for manufacturers. You could not read a manufacturing news story without mention of it. There is a lot of hype around tariffs and other trade regulations. Some companies have been able to absorb the costs by passing it on to their customers and others have not. In 2019, I expect that these discussions will continue. One area that I expect to see renewed focus on in 2019 is the impact that these policies will have on foreign direct investment (FDI). Some of our non-U.S. based clients/contacts have pulled back their investments in the U.S. while others have pushed ahead based upon the belief that companies need to be based in the U.S. to adequately address these economic policies.