If you import products into Australia, or run a dropshipping business sourcing products from overseas, there is one risk that is easy to underestimate. You may be the business your Australian customer comes after, even when the problem started with an overseas supplier.
Your supplier may be based overseas, but your customers and Australian regulators are here. If a product is defective, unsafe, non-compliant or simply not what was promised, you may be the one dealing with refunds, complaints, recalls or regulatory issues.
That is why the important question is not just whether you can buy the product at the right price. You also need to think about how well your business is protected if something goes wrong.
The problem often starts before the goods arrive
You find a supplier, approve the sample and place a large order. Then the shipment arrives and the product is different from the sample, a component has changed, the goods fail testing or the packaging does not meet Australian requirements.
At that point, saying the factory caused the problem may not help much. You may already have customers asking for refunds, stock you cannot sell and money tied up in the order.
We have seen importing businesses get into trouble where the sample was compliant, but the manufacturer later changed a component for the production run without clearly telling the buyer. The issue was not obvious until the goods had already arrived in Australia. By that point, the importer had paid the supplier, incurred freight costs and was left working out whether the stock could still be sold.
For dropshipping businesses, the risk can be even harder to manage because you may never physically handle the product before it reaches the customer. Your protection therefore needs to be built into the supply arrangement before problems arise.
Don’t assume your supplier understands Australian law
One of the more common mistakes we see is relying too heavily on an overseas supplier saying a product is “compliant” or “certified”. The real question is, compliant with what?
The supplier may be referring to the rules in its own country, a European or US standard, or a certification that does not address the Australian requirements applying to your product.
Depending on what you import, Australian requirements may involve customs and biosecurity, mandatory safety or information standards, electrical safety, food or therapeutic goods regulation, labelling, product bans or intellectual property.
That is why statements such as “we already sell this product to Australia” should only be a starting point. You still need to check whether the certification applies to the exact product you are buying and whether it addresses the Australian requirements that apply to your business.
Check whether the goods can actually come into Australia
Certain products are subject to import conditions before they even reach the Australian market. This can include permits, treatment requirements, certificates, declarations or inspections.
Where biosecurity requirements apply, the Department of Agriculture, Fisheries and Forestry’s BICON system is an important place to check. Australian Border Force requirements and product-specific restrictions may also apply.
The important point is not to build your importing process around what the overseas supplier tells you. They may know how to manufacture the product, but that does not mean they know whether you can legally import and sell it in Australia.
You may be treated as the manufacturer in Australia
Under the Australian Consumer Law, the legal definition of a manufacturer can extend beyond the overseas factory that physically made the goods.
In certain circumstances, if you import goods into Australia and the overseas manufacturer does not have a place of business here, your business can be treated as the manufacturer. That can expose you to obligations and claims relating to unsafe or defective goods.
You also have separate obligations as a supplier of consumer products. Depending on the product, this can include checking mandatory standards, product bans, safety, testing and possible recall or reporting requirements.
This is why your supplier agreement should give you meaningful protection if the supplier causes a problem that your business then has to deal with in Australia. That may include warranties, compliance obligations, indemnities, testing requirements and provisions dealing with recalls and defective goods.
Check what the test certificate actually covers
A test certificate or compliance report can be useful, but it does not automatically prove that the exact product you are importing complies with Australian requirements.
Check what product was tested, whether it was the same model and specification, which standard was used and who carried out the testing. You should also check whether any materials, components or manufacturing processes have changed since the testing was completed.
A supplier may provide a genuine test report that relates to a slightly different version of the product. That small difference may still affect safety, performance or compliance.
For higher-risk products or larger orders, independent testing or pre-shipment inspections may be worthwhile.
Key issues to cover in your contract
Make sure the contract describes what you are actually buying
Importing relationships often begin informally through emails, messages, quotes or purchase orders. That may be manageable for a small test order, but it becomes riskier as volumes and values increase.
Your supply agreement should clearly describe what the supplier must provide, including relevant dimensions, materials, components, packaging, labelling, approved samples and Australian compliance requirements.
If there is a dispute later, you want to be able to point to a clear contractual standard and show exactly what the supplier was required to deliver.
Stop suppliers changing things without telling you
A supplier may change a component, raw material, subcontractor or manufacturing process after you approve the sample. Even a small change can affect quality, safety, performance or regulatory compliance.
Your contract should therefore make it clear that certain changes cannot be made without your written approval, particularly where testing was carried out on a specific product configuration.
Keep some leverage until you know the goods are right
Payment terms can be an important risk-management tool. If you have paid 100% of the purchase price before the goods are inspected, your bargaining position may be much weaker if a serious problem is discovered later.
Depending on the transaction, you might consider a deposit with the balance paid after inspection, milestone payments, retaining part of the purchase price or another payment structure that gives you some leverage until the goods have been checked.
Make sure you can reject bad goods
Your contract should also deal clearly with inspection, testing and rejection rights. You may want the ability to inspect goods before shipment, appoint an independent inspector, conduct testing, reject non-conforming goods and require replacement or reimbursement.
It should also address defects that are only discovered after delivery. A pre-shipment inspection should not necessarily mean that you have accepted hidden defects.
Who pays if there is a recall?
Product recalls can be expensive. Costs may include refunds, freight, warehousing, testing, disposal, replacement products, retailer charges and professional advice.
If a recall is caused by defective or non-compliant goods supplied by the manufacturer, your contract should clearly state who is responsible for those costs. It is much easier to agree on that before a problem occurs.
Protect your brand and your product
If you are importing private-label or custom products, you may be giving the manufacturer access to valuable trade marks, designs, packaging, drawings, specifications or confidential information.
Your agreement should make clear how that material can be used and whether the supplier can manufacture the same product for others, sell excess stock or pass your design to another factory.
You should also check the reverse position. If the supplier created the product, make sure selling it in Australia does not infringe another person’s intellectual property rights.
Incoterms don’t solve everything
Terms such as FOB, CIF, FCA and DDP can help clarify delivery responsibilities, transport costs and when risk passes between the parties.
However, Incoterms do not replace a proper supply agreement. They do not automatically deal with defective goods, product quality, Australian compliance, warranties, indemnities, intellectual property, recalls or payment disputes.
Insurance is useful, but know what it covers
Depending on your business, relevant insurance may include cargo or marine transit insurance, product liability insurance, product recall insurance or business interruption insurance.
The important thing is to understand what your policy actually covers. Cargo insurance may help if goods are damaged during shipping, but it may not help if the shipment arrives safely and the products themselves are defective.
What about modern slavery?
Under the Commonwealth Modern Slavery Act 2018, the mandatory reporting regime generally applies to entities that meet the statutory requirements, including the current threshold of at least $100 million consolidated annual revenue.
Smaller importers and dropshipping businesses are not automatically required to report simply because they source goods overseas. However, larger customers may still ask questions about where products are manufactured, labour practices, subcontractors and your own due diligence.
For higher-risk supply chains, supplier questionnaires, audit rights and contractual standards may still be appropriate.
A quick check before you place your next order
Question | Why it matters |
Can I legally import and sell this product? | Import, safety, labelling or industry rules may apply. |
Have I checked the supplier and product properly? | A good sample does not guarantee a compliant production run. |
Is the specification written down? | You need a clear standard if there is a dispute. |
Can the supplier change components without approval? | Changes can affect quality, safety and testing. |
Can I inspect before final payment? | This can preserve commercial leverage. |
Who pays if the goods are defective or recalled? | The costs can be substantial. |
Can I enforce the contract? | A legal right is more useful if recovery is realistic. |
The best time to fix an issue is before the next order
You cannot remove every risk involved in importing or dropshipping, but you can reduce the chance of being caught by problems that could have been addressed earlier.
Before your next substantial order, make sure you understand what Australian rules apply, how you will verify compliance, what happens if the goods are defective, who bears the cost of a recall or customer claim, and whether you can realistically recover losses from the supplier.
A well-drafted supply agreement, sensible payment terms, proper quality controls and a realistic enforcement strategy can put your business in a much stronger position if something goes wrong.
If you are importing goods into Australia, dropshipping from overseas or negotiating with a foreign manufacturer, our procurement contract lawyers can help you review the risks before you commit.
Contact Prosper Law to discuss your supply arrangement.
Updated: August 2026.
About the Author
Farrah Motley
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