How do you handle defects in production batches?

QC standard: AQL 2.5 (ISO 2859-1). For 1000-unit run, 80 inspected per ISO standard, max 5 minor + 3 major + 0 critical defects allowed. If our QC detects defects below threshold: production passes. If 0.5-2% defect rate: proportional discount or partial replacement at client's choice. If >2%: full batch replacement at our cost, no questions. We document with photo report per inspection. RMA procedure documented in every contract. Average defect rate across our production: 0.4% (well below industry average 1.2%).