Take A Closer Look


Since its inception, the U.S. Consumer Product Safety Commission (CPSC) has encouraged companies to implement active product safety management programs. Since 2010, however, the CPSC has made this a bit more official. This article will examine the CPSC’s previous guidance on safety programs, describe the new requirements and proposed rules and discuss what they might mean.

Prior Guidance On Safety Programs

Shortly after it was created in the 1970s, the CPSC published the Handbook for Manufacturing Safer Consumer Products. The most recent edition of the handbook came out in 2006 and discusses product safety policies, organization and training as well as all aspects of design, manufacturing, quality, corrective actions, etc. In other words, it discusses safety procedures that the commission believes are appropriate for any company making consumer products.

At the beginning of the handbook, manufacturers are encouraged to adopt “a comprehensive systems approach to product safety, which includes every step from the creation of a product design to the ultimate use of the product by the consumer.”

In addition, the CPSC’s Recall Handbook, in existence for many years but most recently updated in March 2012, has had sections on the appointment of a recall coordinator, development of a company recall policy and plan, and extensive suggestions for the creation and retention of records to support a recall.

The safety processes advocated in these handbooks are just suggestions and not legal requirements. In addition, they are similar to those procedures employed by companies that have a well-functioning safety effort. So, there is nothing particularly new here that a company with a comprehensive safety program shouldn’t already be doing.

New Requirements For Safety Compliance Programs

Recently, however, new requirements for safety compliance programs have been inserted by the CPSC into various documents.

  • Factors To Consider For Civil Penalties

In 2010, the CPSC published in the Federal Register a final rule of factors that the staff will consider when deciding whether they will seek civil penalties. The rule (16 CFR §1119.4(b)(1)) clearly states that product safety programs are one of the factors to be considered.

In addition, the commissioners released a statement dated March 10, 2010, concerning these new factors thatsaid, in part:

“The safety/compliance program factor takes into account the extent to which a person (including an importer of goods) has sound, effective programs/systems in place to ensure that the products he makes, sells or distributes are safe. Having effective safety programs dramatically lessens the likelihood that a person will have to worry about the application of this civil penalty rule. Any good program will make sure that there is continuing compliance with all relevant mandatory and voluntary safety standards. This is not the same as saying if one’s product meets all mandatory and voluntary standards that the Commission will not seek a civil penalty in appropriate cases. The Commission expects companies to follow all mandatory and voluntary safety standards as a matter of course.”

  • Consent Decrees

At the same time the new civil penalty factors were being finalized, for the first time, the establishment of a product safety management program was included in a consent decree for civil penalties. In a March 4, 2010, agreement, Daiso Holding, a U.S. subsidiary of a Japanese company, agreed to pay just over $2 million in fines for violating various laws and regulations concerning the sale of toys and children’s products.

The consent decree required Daiso to hire a product safety coordinator who was approved by the CPSC to do, in part, the following:

  • Create a comprehensive product safety program;
  • Conduct a product audit to determine which of defendants’ merchandise requires testing and certification of compliance with the FHSA, CPSA and any other act enforced by the CPSC;
  • Establish and implement an effective and reasonable product safety testing program in compliance with the FHSA, the CPSA, and any other act enforced by the CPSC;
  • Create guidance manuals for managers and employees on how to comply with product safety requirements;
  • Establish procedures to conduct product recalls;
  • Establish systems to investigate all reports of consumer incidents, property damage, injuries, warranty claims, insurance claims and court complaints regarding products under the jurisdiction of the CPSC that defendants imported into the United States.

The consent decree contained more specific requirements and included monitoring requirements.

  • Safety Requirements In Civil Penalty Settlement Agreements

The CPSC did nothing further to impose safety requirements until they were inserted into civil penalty settlement agreements starting in February 2013. In the first agreement, Kolcraft, a manufacturer of baby products including strollers and bassinets, agreed to pay a $400,000 civil penalty. In addition, the company agreed to implement and maintain a compliance program that contains the following elements:

a)      written standards and policies;

b)      a mechanism for confidential employee reporting of compliance-related questions or concerns to either a compliance officer or to another senior manager with authority to act as necessary;

c)      effective communication of company compliance-related policies and procedures to all employees through training programs or otherwise;

d)     senior manager responsibility for compliance;

e)      board oversight of compliance (if applicable); and

f)       retention of all compliance-related records for at least five (5) years and availability of such records to CPSC upon request.

Then-Chairman Tenenbaum and Commissioner Adler issued a joint statement in connection with this agreement saying they were concerned that Kolcraft had been the subject of a dozen recalls since 1989 and that some further action was required. The commissioners also made it clear in their statement that having an adequate safety program does not get a company off the hook for failing to timely report a safety problem.

Every settlement agreement for civil penalties since May 2013 has had some compliance requirements. Based on this history, it is virtually certain that future settlement agreements will contain some type of requirement for the establishment of more robust safety compliance programs. It is still an open question as to how compliance will be audited and monitored and when the CPSC will require that additional processes and procedures be established. In addition, it is unknown what the CPSC would do if the firm never fully complies with these requirements after they have agreed to them.

Safety Requirements In Corrective Action Plans

The last CPSC action concerning compliance programs is contained in a notice of proposed rulemaking published in the November 21, 2013, Federal Register. This rule deals with voluntary recall notices, but also allows the CPSC to mandate compliance programs as part of corrective action plans (CAP). The requirements for safety programs are the same as those in the civil penalty settlement agreements described above.

This proposed interpretative rule also provides that the corrective action, including an agreement as to the establishment of a safety program, is legally binding. Therefore, if this rule is approved, the CPSC would be able to legally enforce the compliance program if the company does not comply.

It is unclear how the CPSC will be able to evaluate the procedures and controls of the manufacturer or product seller and determine whether they are insufficient or ineffectual. Who will do it? When will they have time to do it? What is the basis of their determination? Will the recall be postponed until this analysis is done?

The comment period ended in February 2014 and all that remains is to wait until the staff and commissioners decide what to do.

A Final Caution

It is certainly possible for a company to have a robust safety program and to have information that the CPSC believes should be reported, but not to report it because the company does not believe there is a defect or substantial product hazard. So, reasonable minds may differ. But, that doesn’t justify imposing new procedures on a manufacturer who may already have sufficient programs in place.

Manufacturers should consider all of these requirements and evaluate their own programs. They should also consider the new ISO standard (ISO 10377), which sets forth some best practices in safety management as well as other studies and reports on what is an effective product safety management program. (See articles at www.productliabilityprevention.com regarding the new ISO standard and other product safety management best practices.)

Most companies don’t do a sufficient job, especially as they begin to sell globally and have to monitor safety issues and incidents around the world. Therefore, it would be prudent for any company to pull their safety program out of the file cabinet and take a look at it with fresh eyes.

Being proactive about complying with these requirements before you have a safety problem is the prudent and responsible thing to do. Dealing with these issues after a problem arises increases the risk of it turning into a huge problem for your products and your company anywhere the product is sold.

Kenneth Ross is a former partner and now Of Counsel in the Minneapolis, Minnesota, office of Bowman and Brooke LLP where he provides legal and practical advice to manufacturers and other product sellers in all areas of product safety, regulatory compliance and product liability prevention including safety management, recalls and dealing with the CPSC. He can be reached at 952-933-1195 or kenrossesq@comcast.net. Access his other articles at www.productliabilityprevention.com.



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