What is in your supply chain? The Man From FCPA has asked that question previously and now asks you to consider it again with the recent revelations that Mitsubishi Materials knew for months one of its subsidiaries was “tampering with quality information on airplane, car, and power-plant parts but continued to ship the products, including possibly to the U.S.” Unfortunately, this is yet another in the latest of fraud scandals involving Japanese industries where they misrepresented quality standard of products. Worse, the company discovered the problem in February, did not open an internal investigation until May, and then allowed the illegal practices to continue until at least late October 2017.

For any company doing business with a major supplier in Japan, you are now on notice that the “Made in Japan” brand which allegedly stood for quality, may well stand for something considerably less. While legal liability may eventually reach back to the Mitsubishi, this would not be a great comfort to any US product supplier who is facing the strict liability aspects of US product liability laws. For any US company with a Japanese supplier you need to put a “second set of eyes” on the products you are purchasing. This will be expensive and time-consuming but you must take these steps to protect yourself and your customers.

As for the brand “Made in Japan” going forward, it has taken another significant hit. It may well be the Japanese corporate governance style, “where departments often operate as independent silos and information doesn’t filter up quickly to management” needs rethinking. Yet even this structural defect does not excuse the company waiting so long to release information on the fraud. Coming on the heels of the Kobe Steel and Nissan Motors fraud scandals around quality control and quality assurance, there is should be a serious review by any company depending on “Made in Japan” for quality.

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