Delivery Performance Commitment for OEM Water Purification Equipment Manufacturers-Handling and Responding to Crisis of Water Testing Fraud and Substitution

I. Understanding the Water Quality Testing Fraud Scandal

In June 2024, multiple Taiwanese media outlets reported that a distributor of a certain water dispenser brand was involved in a water quality testing fraud for government agency water dispensers. The filtered water samples submitted for testing were swapped, and it was revealed that the distributor did not use the original manufacturer’s filters as required by the contract. Worse yet, the person responsible for the related company was referred to judicial authorities for investigation. The impact of this scandal on a brand that has been in business for nearly six decades is significant and far-reaching. In the water purification equipment manufacturing industry, brand manufacturers play a critical role. They must not only ensure that product production and quality meet consumer demands but also that the accuracy and authenticity of water quality testing are crucial, as it directly affects the brand's market reputation. Unfortunately, some brand manufacturers or distributors may engage in fraud due to cost pressures or other reasons, leading to a severe trust crisis and legal risks. Therefore, understanding and addressing the crisis of water quality testing fraud and tampering is a key issue that every brand manufacturer and OEM/ODM contractor must take seriously.

II. Integrity is the key to the sustainable operation of water purifier OEM manufacturers

 On April 25, 2024, the French Health Authority ordered the destruction of 2 million bottles of sparkling water by PeiXya, and a criminal investigation was launched simultaneously. Prosecutors accused PeiXya of using illegal methods to purify its mineral water. (Source: https://reurl.cc/xvvKRb)

Additionally, in September 2015, a well-known German manufacturer, VolksXwagen, was caught by the U.S. Environmental Protection Agency for installing special software in the car's engine control unit to cheat official inspections. If even German car manufacturers do this, it is likely that business owners from other countries may do the same. (Source: https://reurl.cc/2jjln4)

In ancient China, merchants were often referred to as "unscrupulous traders." Over the past few decades, this trend of deceit has significantly improved, and most merchants, in an effort to shake off the label of "unscrupulous traders," have incorporated the word "integrity" into their core values or business philosophies. Whether this is sincerely practiced or just for show, consistently reminding oneself to be honest in business helps create a better environment for corporate operations.

We still remember the 2014 Taiwanese inferior oil scandal, where many Taiwanese edible oil manufacturers were exposed for using waste oil, tainted feed oil, and substandard salad oil. This scandal cast a shadow over Taiwan’s food industry. It was only under societal pressure and government crackdowns that confidence in edible oil was restored.

Of course, we cannot guarantee that similar incidents won’t happen again in the future, but at the very least, the public has become more aware of food safety and now collectively monitors food and edible oil production factories, which is a positive development.

Although fraudulent incidents may still occur in other industries to varying degrees, exposing illegal behavior regularly serves as a warning to companies in all sectors that fraud can lead to severe consequences, thereby having a deterrent effect.

III. The Potential Risks of Water Testing Fraud

Water testing is a requirement imposed by the Taiwanese government on water purification equipment manufacturers or sellers, particularly for equipment sold to government agencies or for bottled water and water refill stations available on the market. This is to ensure clean drinking water for the public. It not only pertains to product compliance but also affects consumer health and safety. However, due to fierce market competition and cost control pressures, some OEM manufacturers may tamper with testing results to reduce expenses. Such fraudulent behavior not only violates industry regulations and legal requirements, leading to consumer complaints, product recalls, and even legal actions but also damages the market reputation of the brand or OEM manufacturer, potentially threatening the company's survival. Therefore, understanding and effectively preventing such crises is crucial for protecting the long-term interests of the business.

Figure 1: General Inspection Process (Reference source: SGS)

Figure 2: Water delivery test falsification.(Reference source: SGS)

IV. How OEM/ODM Water Purification Equipment Manufacturers Can Prevent Fraud Crises

In light of the recent water testing fraud incident in Taiwan, let’s discuss how OEM/ODM water purification equipment manufacturers can gain the trust of brand clients. Could we be at risk of similar fraud incidents? And how can we prevent such fraud? From what I know, this fraud incident was committed by a distributor of a water dispenser brand. When the water sample was swapped, it was secretly recorded by an internal employee and reported to a public representative. The water dispenser brand should come up with strategies to prevent other distributors from reoffending and how to manage these distributors. I suggest that OEM/ODM water purification equipment manufacturers can utilize the following methods to prevent fraud and gain the trust of brand clients:

1. Products Subjected to Strict Inspections with International Certifications

Products should apply for various international certifications, such as NSF, Water Mark, BSMI, WQA Gold Seal, UL, CSA, KC, CE, SASO, FDA, API, ETA, EAC/CU-TR, FCC, RCM/SAA, and PSB. This is achieved through certification companies conducting strict, unannounced inspections to ensure that the products meet the quality standards set during the initial application, preventing fraudulent practices such as product swaps. Some certification companies require applicants to provide their production base when receiving an application. If the applicant is merely a sales company, they will send personnel to visit and audit the production factory. Only if the factory passes the audit will the applicant be allowed to submit their products for testing. Certification companies only accept applications for the complete product set, meaning they do not accept "water sample tests." They will also require applicants to provide information on product materials, properties, formulations, etc. After obtaining certification, the applicant must not change suppliers or materials, and the certification companies will conduct unannounced checks at the production site. If deficiencies are found, fines will be imposed, and the applicant will be required to make improvements or undergo retesting. This rigorous process will ensure that ODM/OEM applicants are less likely to commit fraud or swap products and help instill a habit of regulatory compliance.

2. OEM/ODM Manufacturers with Quality Management System Certifications

OEM/ODM manufacturers can possess various international certifications for product quality, environment, safety, and hygiene, such as ISO-9001, ISO-14001, and ISO-45001. These certifications involve further audits and corrections from ISO certification companies, ensuring that OEM/ODM water purification manufacturers stay on the right path.

3. Well-Equipped Laboratory Facilities

OEM/ODM water purification equipment manufacturers should strengthen their laboratory facilities. Having well-equipped laboratories indicates that the manufacturers have a strong commitment to quality and the capability to block inferior products or abnormal raw materials.

4. Whole Machines Tested, Not Just Water Samples

When OEM/ODM manufacturers spend money on third-party testing institutions, they should never resort to "water sample testing." The entire machine should be tested, and third-party institutions should conduct actual water production and testing. Even when manufacturers or consumers send water or machines for testing, there can be hidden complexities and professionalism involved. To distinguish between "water sample testing" and "whole machine testing," refer to the article "How to Determine SGS Water Quality Testing Content for Water Purifiers." Link

5. Inquire with Other Employees About Water Testing Methods for Verification

Since water testing is so crucial, if sending water for testing is allowed (and not through a third-party certified entity), an internal SOP (Standard Operating Procedure) should be established. Employees must strictly follow the SOP when sending water for testing. It would be best to include a requirement in the SOP for at least three employees to mutually sign and confirm that they witnessed the sealing of the water container, which could help prevent water fraud incidents.

6. Transparency in Raw Material Suppliers and Internal Production and Quality Assurance Processes

Establish a rigorous management system that selects qualified raw material suppliers and implements internal quality controls using IQC, IPQC, FQC, and OQC to ensure each inspection procedure meets strict standards. This includes tracking raw material inspections upon entry and maintaining records for each batch of products, along with implementing a production traceability system that allows each product’s manufacturing process to be traced. OEM/ODM water purification equipment manufacturers should also regularly inform employees that if a business owner makes a hasty mistake that could lead to fraud, they should be immediately reminded to halt any wrongdoing. This mutual reminder mechanism can help prevent fraud incidents.

7. Independent Directors and Legal Compliance

To prevent significant mistakes or fraud within OEM/ODM water purification equipment manufacturers, independent directors and legal compliance personnel can promote awareness and conduct regular internal audits and controls.

V. Conclusion

I believe that if the owners of water purification equipment companies can implement the strategies outlined in the fourth section, they should be able to avoid fraud crises.

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