Product Regulatory Compliance: Importance and Impact

By Tom Killam and Cyril Mecwan

April 29, 2021 | Series 1 / No. 2

If the regulatory compliance for a product is not easily demonstrated, a manufacturer may be faced with an inability to ship the customer order, or a shipment of product getting held at the customs. This is because the company could not produce the proof of product regulatory approval in a timely manner. These are not uncommon occurrences and in general, a Compliance Engineer lives these events multiple times during his/her career.


Product Regulatory Compliance plays a significant role in the shipment of products to foreign and domestic customers. In order to have the Product Regulatory Compliance evidence readily available for an audit or a shipment is a function of verifying the validity, quality and availability of one's Regulatory Compliance documentation. Organizing and providing a secure and known location for the Product Regulatory Compliance documentation is an obvious and commonplace practice that is essential for uninterrupted shipment of goods. Giving such a practice a scientific, formal, mandatory and rule-based framework establishes the roots of the product regulatory compliance.

The importance:

The Product Regulatory Compliance is an omnipresent function in an enterprise.

  • Engineering, New Product Introduction (NPI), and Product Management: During new product development the Product Regulatory function must provide guidance to the design engineers as to the particular technical requirements that will apply to the product. The Product Regulatory team should develop a test plan and testing methodologies to assess the new product. Doing this helps sharpen the focus on the particular regulatory requirements that will apply to the product when the formal Product Regulatory testing will be conducted.  This also helps the Product Regulatory engineers understand where potential issues will arise in the design and testing phase.  Providing this guidance at an early stage prevents iterations of the design in order to meet regulatory requirements.  This early involvement in the design helps the new product to be designed considering the technical boundaries affecting the performance and safety around many critical parameters.  In many cases early testing on the prototypes against the limits set forth by the technical standards helps pinpoint problems that will cause non-compliance with the new design.  Waiting until the design is complete to perform these regulatory tests will usually result in having to do some redesign as well as regression testing for the improved design to validate that the design is in compliance.  This will cause longer times to market and increase the development costs that could have been avoided if all this work is done early in the design.  The development engineers incorporate the lessons learned from the failures and deviations found during the testing by revising the next iteration of the design, making the product more robust. In some companies, the Product Regulatory Compliance reports into the Engineering group, while others have the compliance function reporting to the Quality organization or even Manufacturing Operations.
  • Product Management & Marketing: The product regulatory approvals are often the last step before a product launch, and an important milestone in the new product introduction schedule. The Product Management and Marketing teams must have a clear plan for the markets for the new product.  It is very difficult to launch a product in all global markets on the same day.  This relates to the times that are required to Homologate (obtaining an official approval) a product into many different markets where approval times can vary by large amounts of time.  This global rollout is generally broken into different market segments that provide staggered availability dates for the product. This typically involves the development of marketing Waves that are groups of countries that have the higher priorities in the earlier rollouts to the customers. This list of waves will ultimately drive the product regulatory group to develop a plan with all of the timings required for the testing and approval phases of the product approval process to coincide with the planned market availability. In order to ship the product to any customers it is necessary to have all of the required approvals in place prior to shipment dates for a particular country. Importantly, the Marketing needs the full visibility of the approvals in order to set up the distribution channel or add the product to the existing channel.
  • Sales: The Sales teams need the product regulatory approvals in order to secure the availability of the product for its valued customers. In most businesses, the Order Management process will not authorize acceptance of a new order for this product until the regulatory approval is obtained (among many other things). The potential for new business in a new country or a region may drive the need for homologation in a new country.
  • Distributors & System Integrators: Conforming to the regulatory compliance and furnishing the required proof is the OEM’s responsibility. The third-party distributors and system integrators, who generally represent a local market presence, typically play the role of an importer of the product into a country, and are often the only contact with the end customer. Therefore, they typically require documented proof of compliance in order to make the product available to their end customers through its channels. 
  • Operations, Logistics & Quality: The product regulatory compliance often is part of the quality metrics which is presented during the Product Readiness Review taking place before the launch of a new product. On the other hand, at the point of shipment, Operations and Logistics need the necessary documentation in the form of proof – approval certificates, manuals, packaging labels etc. – without which the product may sit on the shipping dock or simply may be denied past a customs check point, delaying the shipment and delivery to the customer. In some companies, the Product Regulatory Compliance reports into the Operations group.
  • Customer Support:  Existing end customers, channel partners, and field sales often need the documentation in support of the product regulatory approval; they end up calling the Customer Support. Sometimes, this request could be for the approval documents required for the spares being shipped to the existing customers by the Services organization.
  • Legal: Lastly, in several companies, the Legal department gives the final nod to the product launch upon reviewing the completion of all regulatory milestones – the Product Regulatory Compliance is one of the important metrics which is reviewed and signed off by the Legal team. In some companies, the Product Regulatory Compliance reports into the Legal group.
The impact of non-conformance:

A lack of conformance may result into impact on multiple fronts, including on communities and on the business.

  • Safety and well-being: A lack of conformance may result into the lack of safety and well-being of people. According to the Consumer Product Safety Commission (CPSC), in 2019, there were an estimated 22,500 treadmill-related injuries treated at U.S. emergency departments among all ages (of which around 2,000 were children under 8 years of age).1
  • Revenue impact: It is not uncommon for companies missing the quarterly or annual revenue target because it could not ship available inventory due to lack of compliance documentation availability. We have known of incidents when a distributor could not pull the inventory into the country channel because the products were held at customs due to lack of documentation in support of the compliance approvals! As a result, the OEM could not register the necessary revenue recognition during a quarter, falling short on the CEO & CFO as well as the investor expectations.
  • Customer satisfaction: Missing an Order Commit date due to lack of regulatory approval directly impacts the customer satisfaction, which is one of the critical success factors in any business’ key metrics. Note that an OEM customer may be a reseller, distributor, system integrator, or an end customer.
  • Brand impact: Recalls from the market due to poor quality and performance may adversely impact the OEM brand. The bad press from an incident can be devastating to a company’s reputation which may never recover. In the infamous hoverboard issue, more than 10 companies were forced to recall 100,000 hoverboards after CPSC received about 100 reports of the lithium-ion battery packs that power hoverboards overheating, sparking, smoking, catching fire or exploding. 
  • Legal impact: Typically, good business practice dictates that a company secures product liability insurance prior to placing the product on the market. Generally speaking, product liability insurance rates for a product that meets all of the regulatory requirements will be significantly lower than a non-compliant product or a product that has no proof of compliance. If a non-compliant product is introduced into a market and an event occurs that brings to light a safety or health issue, there can be many ramifications that affect the company including fines and possible jail time for responsible persons.