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The tide continues to rise for Consumer Product Safety Commission (“CPSC”) civil penalties as the Commission announces a $987,000 penalty against Williams-Sonoma, Inc. and the company’s agreement to implement an extensive compliance program. On Monday, the CPSC announced that Williams-Sonoma has agreed to pay the civil penalty to resolve allegations that the company knowingly failed to report a defect in its Pottery Barn wooden hammocks. Williams-Sonoma also agreed to implement a comprehensive compliance program that arguably encompasses far more than the company’s alleged failure to report in a timely manner. 

According to the settlement agreement, the wood in the hammock stands allegedly deteriorated over time, and Williams-Sonoma had received notice of a consumer injury resulting from the failure of the hammock as early as November 2004 and had received its eighth incident report by the end of October 2006. The company, however, did not report to the Commission until September 2008, when it knew of 45 incidents. In October 2008, Williams-Sonoma and the CPSC announced the recall of 30,000 hammock stands. Because the alleged failure to report occurred prior to September 2008, it was subject to the CPSC’s previous civil penalty cap of $1.825 million instead of the current cap of $15 million.

In addition to the civil penalty, Williams-Sonoma agreed: (1) to implement and maintain a comprehensive compliance program designed to ensure compliance with all safety statutes and regulations enforced by the Commission (not just the Consumer Product Safety Act, which was the subject of the penalty); and (2) to maintain and enforce a system of internal controls and procedures designed to ensure timely and accurate reporting to the CPSC. The comprehensive compliance program is the same as that imposed in the settlement agreement entered with Kolcraft Enterprises, Inc. earlier this year. In a statement issued in connection with the Williams-Sonoma settlement, Commissioner Nord expressed concern that, for a second time, the CPSC had insisted on a comprehensive compliance program absent evidence of widespread noncompliance and that “the compliance program language in [the] settlement is another step toward just such a de facto rule.” She also noted that using recalls to justify imposing mandates unrelated to the problem (in this case, timely reporting) discourages participation in the voluntary recall process.

Companies with products subject to the CPSC’s jurisdiction should note that mandated compliance programs appear to be the new normal for civil penalty agreements, regardless of a company's history with the Commission as civil penalty demands continue to increase.

Associate Katherine E. Riley contributed to this post.  Ms. Riley is admitted only in Massachusetts.  She is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

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Yesterday Inez Tenenbaum, Chairman of the Consumer Product Safety Commission (“CPSC”), announced at the International Consumer Product Health and Safety Organization's ("ICPHSO") annual conference that she will not seek renomination when her term expires in October 2013. She took the position in 2009, and her confirmation brought the Commission to three sitting Commissioners for the first time since July 2006.

Much of her term has focused on implementation of the Consumer Product Safety Improvement Act (“CPSIA”) -- since the Act’s implementation in 2008, the CPSC has issued 40 final rules on children’s products, including cribs, toddler beds, and infant swings. Additionally, the CPSC has aggressively pursued litigation to seek recalls, filing four administrative lawsuits in 2012, and sought higher civil penalties for failure to file timely Section 15(b) Reports.

This announcement adds to existing uncertainty about how the Commission will look in 2014.  Currently, two of the five Commission seats are unfilled. Commissioner Nord also expects to leave the CPSC in October (her term ended last year, but she is serving an extra year to avoid having an empty seat). Unless Congress acts on the nomination of Marietta Robinson or the White House nominates, and the Senate confirms, a Republican, that would leave only Commissioner Robert Adler on the Commission.

Associate Katherine E. Riley contributed to this post. Ms. Riley is admitted only in Massachusetts. She is practicing under the supervision of principals of the firm who are members of the D.C. bar.

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The Consumer Product Safety Commission ("CPSC") recently announced a settlement with Whalen Furniture Manufacturing, Inc. (d/b/a Bayside Furnishings), resolving allegations that the company failed to file a timely Section 15(b) Report and imposing a $725,000 civil penalty. The penalty demonstrates that the CPSC will be particularly aggressive when it goes to a company to seek information, even if the product meets certain safety standards.

Over a two-year period, Whalen sold approximately 7,700 children’s boat-shaped beds that contain a toy chest with a 20-pound lid in the “bow.” The CPSC alleges that, in November 2007, Whalen received notice that a toddler had died after the toy chest lid fell on his head, but did not file a full incident report with the CPSC until March 2008 and only at the staff's request. Whalen denies the allegations and states that it believed the reported death did not represent a "legitimate incident" and that the beds passed toy chest safety tests completed by third-party testing agencies.

The $725,000 civil penalty continues the trend of the CPSC seeking higher civil penalties for untimely reports. All penalties imposed since October 2011 have been for over $400,000, and this penalty is the second largest since September 2011.
 

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President Obama has (again) nominated Marietta S. Robinson to fill the open Democrat seat at the Consumer Product Safety Commission.  The President nominated her last January, and she had a Senate confirmation hearing, but the Senate took no further steps to confirm her nomination.  The President has not nominated anyone to fill the open Republican seat, sparking speculation that the new Congress will not act until it has a pair of nominations (one D and one R) to consider.  If this Congress confirms Robinson's nomination, Democrats on the Commission would outnumber Republicans 3-1 -- Chairman Tenenbaum and Commissioner Adler are both Democrats, and Commissioner Nord is a Republican.  In addition, Commissioner Nord expects to leave the Commission in October (her term ended last year, but Commissioners may serve an extra year to avoid having an empty seat).

An experienced litigator, Ms. Robinson has practiced law for over 30 years.  She also unsuccessfully ran for a seat on the Michigan Supreme Court in 2000 and ran for Michigan Attorney General in 2002, but withdrew from the race.

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Earlier this week, the CPSC filed an administrative complaint against Star Networks USA, LLC, the seller of Star Magnicube Magnet Balls and Magnet Cubes. The Commission voted 2-1 to file the complaint, with Commissioner Nord voting against the f. As described in our previous post, the CPSC has already filed three other administrative complaints since July, an unprecedented use of its litigation authority. This is the third filed against an importer of high-powered magnet balls. The other two magnet ball-related lawsuits involve Buckeyballs and Zen Magnets. Although the products have warnings to keep the magnets away from children, CPSC believes they continue to present an ingestion hazard.

In July 2012, Star Networks and eleven other companies, at the request of the CPSC, agreed to withdraw their magnet ball products from the market. Star Networks, however, reversed its withdrawal in November, and the Commission filed this complaint after discussions with the company failed to result in a voluntary recall. The complaint alleges that the products have a defective design, warning, and instructions. The CPSC is seeking an order that the company stop selling the Magnicube Magnet Balls and Magnet Cubes, notify the public of the defects, and offer customers a full refund. The Commission claims that it has received over two dozen reports of ingestion of small magnets like those imported by Star Networks.

The consolidated case involving Buckeyballs and Zen Magnets continues. Maxfield & Oberton, the importer of Buckeyballs, announced this week that it would stop selling the product and is selling through product in anticipation of the "Buckypocalypse." Any company that relies heavily on product warnings should continue to watch these cases very closely.

Associate Katherine E. Riley contributed to this post. Ms. Riley is admitted only in Massachusetts. She is practicing under the supervision of principals of the firm who are members of the D.C. bar.

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On Wednesday, the CPSC filed an administrative complaint against Baby Matters, LLC, the manufacturer of Nap Nanny and Nap Nanny Chill infant recliners. The CPSC alleges there have been at least five deaths and over 70 additional incidents resulting from the use of the products. The Commission voted 3-0 to file the complaint after discussions with the company failed to result in an adequate voluntary recall.  Prior to this year, CPSC had used litigation to seek a recall in only a handful of situations, but this is the third lawsuit the Commission has filed in just five months.  The other two lawsuits involve Buckeyballs and Zen Magnets.

The complaint alleges that the Nap Nanny recliners have a defective design, warning, and instructions, posing a substantial risk of injury and death to infants, and seeks an order requiring the company to notify consumers of the defect and offer a full refund. In June 2010, the CPSC and Baby Matters announced the recall of first generation Nanny Nap recliners, offering $80 towards the purchase of the newer model, and improved instructions and warnings to owners of the second generation model. The company claims that the new incidents were due to consumer misuse, but, according to the CPSC, the previous corrective action was insufficient.

Companies conducting a recall should continue to review incident reports and remember that the CPSC is still watching. The Commission monitors recall effectiveness and, as demonstrated by the latest lawsuits, will aggressively push for further action if it thinks the recall did not address the problem.

Associate Katherine E. Riley contributed to this post. Ms. Riley is admitted only in Massachusetts. She is practicing under the supervision of principals of the firm who are members of the D.C. bar.

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The CPSC just issued the final rule on testing and certification for children's products. The final rule, effective February 8, 2013, requires manufacturers, importers, and private labelers to test representative samples of all children’s products to ensure compliance with the applicable safety rule(s). The CPSC voted 2-1 to approve the proposed rule without changes.  Commissioner Nord had proposed an amendment to the proposed rule to reduce the costs of recordkeeping, but Chairman Tenenbaum and Commissioner Adler voted against it. The rule lacks the detail that some commenters sought, covering briefly representative testing and recordkeeping.

Representative Testing: The testing must be conducted by a CPSC-accredited third party certifier, who must issue a certificate of compliance (either a separate certificate for each applicable rule or a combined certificate demonstrating compliance with all applicable rules). The representative sample of products must provide a basis for inferring the compliance of all products. The Commission noted that companies may draw such an inference from the testing of products or components manufactured using the same grade of material, provided that the production processes are controlled and the dimensions are the same, or from random or cluster sampling (i.e., probability-based sampling methods).

Recordkeeping: Manufacturers, importers, and private labelers must maintain records of the representative testing, including the number of samples selected and the procedure used to select the samples. The Commission recognized the costs associated with developing testing procedures, selecting samples, and recordkeeping, but did not estimate those costs.

Associate Katherine E. Riley contributed to this post. Ms. Riley is admitted only in Massachusetts. She is practicing under the supervision of principals of the firm who are members of the D.C. bar.

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On December 3, 2012, the Consumer Product Safety Commission ("CPSC") Chairman Inez Tenenbaum announced the hiring of former Georgetown University Vice President and General Counsel Stephanie Tsacoumis as new General Counsel for the Commission. The Office of the General Counsel advises and counsels the CPSC Chairman and Commissioners, coordinates rulemaking, and pursues administrative lawsuits and civil penalties in the enforcement of federal safety standards. Ms. Tsacoumis will begin at the CPSC on Monday, December 10.

Ms. Tsacoumis served as Vice President and General Counsel for Georgetown University from 2009 to 2012, where she was responsible for all of the University’s legal affairs, including general compliance, federal contracts and grants, intellectual property, and health and safety.  As a member of the adjunct faculty at the Georgetown University Law Center, she also taught classes on federal securities law disclosure.

Prior to joining Georgetown, Ms. Tsacoumis worked at Gibson, Dunn & Crutcher LLP. She served for six years as co-partner in charge of the D.C. office and worked on transactional and advisory matters for for-profit and not-for-profit organizations. Ms. Tsacoumis also managed the legal team for pro bono client Girl Scouts of the USA and currently serves on the Women’s Advisory Board of the D.C. Girl Scouts. She is also Secretary of Girls Inc. of the Washington, D.C. Metro Area – a non-profit organization dedicated to inspiring young girls.  She graduated from the University of Virginia School of Law and Phi Beta Kappa from The College of William & Mary with a degree in economics. She also completed executive programs at Harvard Business School and the Kellogg School of Management at Northwestern University.

Ms. Tsacoumis will likely have a full plate, including ongoing litigation regarding magnetic balls, consideration of potential policy changes for how information is released under Section 6(b) of the Consumer Product Safety Act, and continued implementation of the Consumer Product Safety Improvement Act.

Katie Riley assisted in the drafting of this post.  Ms. Riley is admitted only in Massachusetts. She is practicing under the supervision of principals of the firm who are members of the D.C. bar.
 

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As the CPSC staff begins to negotiate settlements under new authority granted through the Consumer Product Safety Improvement Act, companies can expect more aggressive positions from the CPSC. Recent consent agreements give insights for the road ahead and turns companies should avoid taking when navigating product safety issues. Manufacturers, importers and sellers of consumer products will be interested in a new article published by BNA Product Safety & Liability Reporter that reviews penalties recently imposed by CPSC and recommends steps companies can take to minimize civil penalty exposure. Access the article by clicking here.

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Yesterday the Consumer Product Safety Commission ("CPSC") announced a revised version of its Recall Handbook and new Guidelines for Retailers and Reverse Logistics Providers ("Reverse Logistics Guidelines").  Although much of the documents' content reflects existing law and Commission practice, the guidance confirms an increasing focus on new media and on tracking recalled products.  For example, the Recall Handbook contains the following new provisions:

• Companies should file Section 15(b) Reports through the CPSC's website (saferproducts.gov), rather than by mail or phone.  The staff repeated that preference at this week's annual meeting of the International Consumer Product Health and Safety Organization ("ICPHSO").
• When announcing a recall, companies should consider use of their social media presence, including Facebook, Google+, YouTube, Twitter, Pinterest, and company blogs.  Such posts should include a link to the company's recall website.
• Companies conducting a recall should modify their websites to accept e-mail requests to participate in the recall.
• Companies should consider the use of mobile scanners to obtain information on recalls from mobile devices.  The recall poster should include a QR code or other mobile scanning code to let consumers act on the recall immediately.
• Companies conducting a recall should develop a plan regarding disposition of the returned product and its parts and monitor any third parties hired to destroy or dispose of the product.
• The Commission will monitor product recalls, as described in a new section of the Handbook and in the Reverse Logistics Guidelines.

The updated Recall Handbook also elaborates on some of the previous guidance:

• When discussing how the Commission evaluates the timeliness of a company's Section 15(b) Report, the Handbook explains that the CPSC will consider knowledge obtainable upon the exercise of due care to ascertain the truth of representations.  In other words, a company should not bury its head in the sand while relying on statements from a third party.
• In addition to the factors previously identified for determining whether a risk of injury could make a product defective, the Commission will also consider whether the risk was obvious to the consumer; whether there were adequate warnings and instructions to mitigate the risk; and whether the risk of injury was the result of consumer misuse and, if so, whether the misuse was foreseeable.
• For the Fast Track Product Recall Program, if a corrective action plan is not approved within 20 working days, the staff typically will not make a preliminary hazard determination if the company has provided the required information, but the staff has not been able to review it  within the time period.
• The number of units stated in the press release or recall alert announcing the recall must include units manufactured, imported, and distributed, even if those units were recovered prior to reaching consumers.

The Recall Handbook and Reverse Logistics Guidelines can serve as helpful quick references to company personnel involved in product safety issues.

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Yesterday the Consumer Product Safety Commission ("CPSC") announced that Hewlett-Packard Company has agreed to pay a $425,000 civil penalty to settle allegations that the company failed to report safety issues with its lithium-ion battery pack to the CPSC in a timely manner.

Section 15(b) of the Consumer Product Safety Act requires companies to report immediately to the CPSC if they have information that a product could create a "substantial product hazard" or create an unreasonable risk of serious injury or death. The CPSC alleges that HP was aware of incidents of overheating, two of which allegedly involved injuries to consumers, 10 months before reporting to the CPSC. HP and CPSC recalled around 32,000 battery packs in October 2008.

According to a statement released by CPSC Chairman Inez Tenenbaum, the settlement with HP was negotiated under the pre-CPSIA enforcement scheme, which had much lower statutory limits on civil penalties. However, Tenenbaum indicated an expectation that the Commission’s future enforcement actions will “include civil penalty amounts that maximize the likelihood of deterring violations.”

Also yesterday, the Obama Administration announced the nomination of Marietta Robinson for CPSC Commissioner. Ms. Robinson is a trial attorney with 33 years experience and former trustee of the Dalkon Shield Trust.
 

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Yesterday the Consumer Product Safety Commission ("CPSC" or "Commission") announced provisional acceptance of a $600,000 civil penalty settlement with Build-a-Bear Workshop, Inc. The agreement resolves CPSC staff allegations that the company failed to report potential safety issues to the Commission in a timely manner pursuant to Section 15(b) of the Consumer Product Safety Act (“CPSA”). In addition to agreeing to pay the civil penalty, in a very unusual provision, Build-a-Bear agreed not to seek or accept indemnification, reimbursement, insurance, or any other form of compensation from any manufacturer, importer, or retail store in connection with the civil penalty payment.

Specifically, the staff alleged that, from March 2001 to October 2008, Build-a-Bear imported and sold approximately 260,000 folding wooden frame toy beach chairs through its website and stores and that those chairs were defective and presented a substantial product hazard or an unreasonable risk of serious injury or death to consumers. The chairs allegedly had sharp edges that could pinch, lacerate, or amputate a child’s fingertip. The company received its first report of injury in July 2007, then in October 2008 stopped sale and issued a notice to its stores to return all stores in inventory. The company allegedly learned of ten other injury reports between July 2007 and January 2009, but did not report to the CPSC until March 20, 2009. The CPSC claims that the company had obtained sufficient information to reasonably support the conclusion that a report under Section 15(b) of the CPSA was required, but failed to report immediately. Consistent with other civil penalty settlements, the staff’s allegations do not identify exactly when the company should have reported.

This settlement serves as a reminder that companies should continuously monitor consumer complaints from all sources and make determinations about their potential safety implications. Although some companies may not think that eleven injury reports indicate a pattern, the Commission in this case thought they did. Publicly-available information does not reveal why the Commission would have demanded that the company forego any indemnification or other payment from third parties, but we will watch future settlements to see if this is new boilerplate language.
 

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Yesterday the U.S. Consumer Product Safety Commission (“CPSC”) announced that Spin Master, Inc., agreed to pay a civil penalty of $1.3 million for selling and failing to report that Aqua Dots, a product Spin Master distributed, contained a substance that metabolizes into the “date rape drug” when ingested. Aqua Dots was a craft kit that consisted of multi-colored beads that stuck together when sprayed with water, allowing children to create various shapes and designs.

Spin Master allegedly received reports in mid-October 2007 of children becoming ill, receiving emergency medical attention, and falling into comas after swallowing Aqua Dots and that Aqua Dots contained 1,4-butylene glycol (“TMG”), which, upon ingestion, metabolizes into gamma hydroxybutyrate (“GHB”), also known as the “date rape drug.” The CPSC also alleges that the company received reports of children becoming ill after ingesting a similar product made by the same overseas factory using the same ingredients list. The company did not file a Section 15(b) Report with the CPSC at that time. After receiving two reports of children ingesting the product and becoming ill, on November 5, 2007, the CPSC notified Spin Master, and two days later the parties announced a voluntary recall of 4.2 million units.

The CPSC claims that Spin Master violated the Consumer Product Safety Act by failing to report in a timely manner and the Federal Hazardous Substances Act by importing and selling a banned hazardous substance. In an unusually detailed response to the Commission’s allegations, Spin Master denies all allegations that they knowingly violated the law. For example, Spin Master states that the product underwent all legally-required testing and that the company engaged an outside testing company to evaluate the toxicity of the product. A board-certified toxicologist conducted a Toxicological Risk Assessment stating that none of the ingredients was banned or restricted for use.

The recall has also triggered product liability lawsuits against Spin Master, including some class action litigation. In August, however, the Seventh Circuit affirmed the lower court’s denial of class certification in one of the cases.

Companies should take note that the CPSC continues aggressive enforcement its civil penalty authority. Even if a company does not participate in the design or manufacture of a product, it must ensure that the product meets applicable safety standards and is safe for use by the intended audience during reasonably foreseeable use and misuse. In addition, when evaluating whether a product presents a substantial product hazard or unreasonable risk of serious injury or death reportable to the CPSC, a company should consider potential product liability exposure.

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Today the Consumer Product Safety Commission ("CPSC") announced that Black & Decker (U.S.) Inc. has agreed to pay a $960,000 civil penalty to settle allegations that the company failed to report safety issues with its Grasshog XP grass trimmers/edgers to the CPSC in a timely manner.  The CPSC also alleges that Black & Decker withheld information requested by the CPSC staff.

Section 15(b) of the Consumer Product Safety Act requires companies to report immediately to the CPSC if they have information that a product could create a "substantial product hazard" or create an unreasonable risk of serious injury or death.  The CPSC alleges that Black & Decker had received a large number (at least 80) of safety complaints and "hundreds" of warranty claims before reporting to the CPSC.  There is also an implication that the company may have conducted a "silent recall" in January 2006 without the CPSC.  Although the CPSC staff requested information from Black & Decker in May 2006, Black & Decker allegedly failed to provide information about certain defects.  The staff closed its file based on the information it received, but the closing letter included boilerplate language reminding the company that it must notify the staff if there was a different risk or additional information.  At the time of the letter, Black & Decker allegedly had received 216 safety complaints and approximately 14 injury reports, but "silently acquiesced in the file closure without revealing this information."  The company then provided the additional information in October 2006 and recalled the product in July 2007.

Although the CPSC now has authority to seek up to $15 million in penalties, this is one of the higher civil penalties the CPSC has obtained, particularly for a settlement involving only one product, no children's products, and no filing of a lawsuit.  This could signal a more aggressive CPSC, particularly if it thinks that the company has withheld information, received large numbers of incident reports, or conducted a silent recall.

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Who says the Federal Government is in a state of gridlock? While all eyes were focused yesterday on the vote in the U.S. House of Representatives on the debt ceiling deal, the House and Senate both passed a bipartisan bill (H.R. 2715, “A Bill to Provide the Consumer Product Safety Commission with Greater Authority and Discretion in Enforcing the Consumer Product Safety Laws, and for Other Purposes”) to amend the Consumer Product Safety Improvement Act (“CPSIA”). Although the new legislation does not address all of the concerns with the CPSIA, it attempts to provide some needed relief before the looming August 14th deadline regarding lead content. In just one day, H.R. 2715 was introduced, passed the House under suspension of the rules (421 yeas, 2 nays), and was sent to the Senate where it was passed by Unanimous Consent. President Obama is expected to sign the bill.

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The Consumer Product Safety Commission ("CPSC") has hired Andrew Kameros as Assistant Executive Director of Compliance and Field Operation, the office that oversees product safety recalls and plays a significant role in rulemaking and enforcement proceedings.  Prior to joining the CPSC, Mr. Kameros was General Counsel and Director of Compliance at the lobbying firm Cassidy and Associates.  He helped clients develop ethics, disclosure and compliance programs and systems regarding lobbying activities.

Mr. Kameros joined Cassidy after nineteen years as a federal prosecutor with the U.S. Department of Justice, dealing with a range of cases including financial fraud, tax issues, and white collar crimes.  During his last four years at Justice he served as an assistant chief, supervising a staff of twenty prosecutors.  He obtained his undergraduate degree from Colgate University in 1982 and his law degree from American University in 1985.  Jay Howell had been the acting head of Compliance and will continue as the head of CPSC's Hazard Identification and Reduction.

Companies that regularly appear before the CPSC should watch carefully as Mr. Kameros begins to leave his mark on the agency.

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On June 20, 2011, the Canada Consumer Product Safety Act (“CCPSA”) became effective, imposing incident reporting, testing, recall, and recordkeeping requirements on entities that manufacture, import, or sell consumer products in Canada. As previously noted, many of Canada’s new requirements may be more stringent than current U.S. consumer product safety laws, especially with regard to reporting and recordkeeping requirements.

Entities that manufacture, import, or sell products in Canada should ensure that they have created policies and procedures for detecting, reporting, and maintaining records for consumer product safety issues that comply with Canadian laws. The implementation of new requirements since January 2011 under U.S., Canadian, and other countries’ (e.g., Australia) consumer product safety laws makes it critical for entities to implement systems that will help them comply with the various new requirements and quickly implement corrective action plans.

Click here for more detail regarding Canada's broad consumer reporting and recordkeeping requirements.

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Last Thursday, Republican and Democrat members of the U.S. House of Representatives expressed some desire to modify the Consumer Product Safety Improvement Act ("CPSIA"). The House Committee on Energy and Commerce, Subcommittee on Commerce, Manufacturing, and Trade, which is now chaired by Rep. Mary Bono Mack (R-CA), held its first hearing and heard from CPSC Chairman Inez Tenenbaum and Commissioner Anne Northup. Our Government Relations and Public Policy group covered the hearing.

Chairman Bono Mack opened the hearing by describing her plan to focus on getting the economy back on track and bringing jobs back to America, starting with looking at problematic provisions of the CPSIA. Even Rep. John Dingell (D-MI), who has a long history of involvement in product safety laws, suggested that CPSC regulations requiring third-party safety testing of all children's products were too broad and should be revised.

Much of the discussion focused on the consumer incident database, which is scheduled to launch in March. CPSC Chairman Tenenbaum and Commissioner Northup had differing views on several aspects of the database, including its cost, whether a cost-benefit analysis is appropriate, and whether the database collects sufficient information for a manufacturer to conduct a meaningful review.

Opponents of the database made some progress early Saturday morning as the House passed an amendment to an appropriations bill that would strip financing for the database. Manufacturers and importers should continue to watch closely as this dialogue continues.

This post was written by Christie L. Grymes and Michael P. McGinn.

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The Consumer Product Safety Commission (“CPSC” or "Commission") has voted 4-1 to extend the stay of enforcement for third-party, lead-content testing on certain children’s products until December 31, 2011. Section 102 of the Consumer Product Safety Improvement Act (“CPSIA”) requires manufacturers, importers, and private labelers of children’s products to have a third party test and certify that the product complies with the CPSIA’s lead-content limits. The stay extension does not excuse entities from complying with the underlying lead-limit regulations; rather, it gives entities more time to comply with the third-party testing requirements.

The extension will also give the CPSC more time to promulgate rules, which were proposed in May 2010, regarding component part testing and general testing and certification requirements. The proposed component part testing rule would set forth conditions under which the Commission would accept the test results of component parts instead of the entire consumer product, while the proposed general testing and certification rule would promulgate specific requirements for third-party testing and certification, as well as create product labeling standards to indicate that a consumer product meets the applicable certification requirements.
 

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In preparation for the Consumer Product Safety Commission’s (“CPSC”) launch of the Publicly-Available Consumer Product Safety Information Database (“Database”), the CPSC held two conferences, on January 11 and 20, 2011, to demonstrate specific aspects of the Database. The conferences provided information regarding how to submit reports of harm, how manufacturers and private labelers may register on the Database, how entities may submit comments regarding reports of harm, and general information about the Database’s structure and search capabilities.

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The Consumer Product Safety Commission ("CPSC") will hold two conferences in January 2011, regarding the Publicly Available Consumer Product Safety Information Database ("Database"). At the conferences, the CPSC will demonstrate key database features, such as the incident reporting form, industry registration and comment features, and search functions of the Database. Interested parties may participate in the conferences in person or over the Internet.

The conferences will be held:

January 11, 2011, 10:30 am to 12:30 pm--Consumer Focus: This conference will demonstrate how to file a report and search the Database. Interested parties must register at https://www3.gotomeeting.com/register/757140102.

January 20, 2011, 10:30 am to 12:30 pm--Industry Focus: This conference will focus on report filing, search functions of the database, and the manufacturer registration and comment features. Manufacturer and private labeler representatives will be able to register for an account with the Database during this conference. Interested parties must register to attend the conference at https://www3.gotomeeting.com/register/396775014.

More information regarding the CPSC's conferences is available at http://www.cpsc.gov/calendar.html.  Key aspects of the CPSC's Database were covered in our December 10, 2010 post.  
 

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Entities that manufacture, import, or sell products in the U.S., Canada, and Australia should be aware of new product safety laws that become effective in 2011. Many of the new requirements are more stringent than current U.S. consumer product safety laws and will directly impact the procedures U.S. companies apply to coordinate their reporting obligations.

• Both the Canadian and Australian laws include broad mandatory incident reporting requirements for incidents involving consumer products. For example, the Canadian law’s requirements, in conjunction with regulations proposed by Canadian consumer protection agencies, may require reporting of all incidents involving consumer products, not just incidents that indicate that the product has a defect which presents a substantial product hazard—the standard under U.S. consumer product safety laws.
• The Canadian and Australian laws also provide consumer protection agencies in those countries the authority to conduct mandatory recalls.
• The new laws include strong penalty provisions for noncompliance, including civil penalties and, in Canada, criminal penalties for violations.
• Additionally, Canada’s law contains provisions banning products that pose an unreasonable danger to human health or safety from manufacture, import, and sale; allowing Canadian consumer protection authorities to order testing or studies demonstrating compliance with consumer product safety laws; and setting forth significant recordkeeping requirements that are not consistent with U.S. and Australian law.

Australia’s law became effective on January 1, 2011 and Canada’s law is expected to become effective in the second quarter of 2011. More information regarding the new requirements can be found in Kelley Drye and Warren’s January 5, 2011 client advisory.
 

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After much anticipation, the Canada Consumer Product Safety Act (“CCPSA”) has finally been passed by the Canadian Parliament and could become effective within the next few months. Upon Royal Assent and Proclamation, which have been accelerated, the legislation will come into force, although an exact time frame has not yet been disclosed.

• The new legislation will replace the Hazardous Products Act and includes numerous new provisions, such as:
• Ability for the government to order a recall rather than just request one;
• Requirement that industry report serious incidents or deaths related to consumer products and provide timely information about important product safety issues;
• Requirement that manufacturers or importers provide test results on products when requested;
• Increased civil penalties for non-compliance; and
• Extensive recordkeeping requirements.

Although the legislation was intended to be fairly consistent with U.S. law, companies will inevitably face different approaches as the legislation gets implemented. Consumer product companies doing business in Canada should consider how they may need to revise existing safety review procedures to ensure compliance with Canadian law.
 

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As discussed in the November 28, 2010 blog post, the CPSC recently approved the structure for a consumer incident database mandated by the 2008 Consumer Product Safety Improvement Act. The database will allow consumers to submit reports regarding harm or potential harm caused by consumer products, allow consumers to search for complaints and recall information about consumer products, and permit manufacturers to comment on complaint information found in the database. The new database will be available on the CPSC's website in March 2011. More information about the CPSC's final rule and structure of the database is available in Kelley Drye and Warren's December 9, 2010 client advisory.

The CPSC's final rule will become effective 30 days after its publication in the Federal Register. In the meantime, manufacturers and private labelers of consumer products should develop internal procedures for handling reports and the related potential product liability consequences.
 

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After intense debate, the day before Thanksgiving the Consumer Product Safety Commission ("CPSC") approved by a vote of 3-2 the structure for the consumer incident database mandated by the 2008 Consumer Product Safety Improvement Act.  Two of the most controversial provisions include (1) defining "consumers" and "public safety entities" who can post reports of harm or potential harm and (2) handling reports that the manufacturer has challenged as inaccurate.

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Further to our post earlier in the week, the Consumer Product Safety Commission's new final interpretative rule defining "children's product" is published in today's Federal Register, making the new rule effective immediately.

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The Consumer Product Safety Commission (“CPSC” or “Commission”) recently voted 3 to 2 to approve a final interpretive rule for the term “children’s products,” as that term is used in the Consumer Product Safety Improvement Act of 2008 (“CPSIA”). Given the wide range of products that could be covered by that term and the significant consequences if they are covered, manufacturers, distributors, and retailers had been anxiously awaiting guidance from the Commission. Many of those entities, however, may not have received the specific, bright line guidance they were seeking. The final rule is available on the CPSC’s website and becomes effective immediately upon its publication in the Federal Register.

For more details on the definition of "children's product" and an overview of the new interpretive rule, see the Kelley Drye client advisory.

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As children's product manufacturers and retailers have wondered whether the Consumer Product Safety Commission would take action specific to cadmium, California's Gov. Schwarzenegger has signed legislation that restricts cadmium levels in children's jewelry, following similar legislation in Connecticut, Illinois, and Minnesota.  The new California law prohibits manufacturing, shipping, or selling jewelry or jewelry components that contains more than 0.03 percent cadmium by weight starting January 1, 2012.  Cadmium can harm kidneys and bones and cause cancer.

With California now on the list, the ban could effectively become nationwide for manufacturers, distributors, and retailers of children’s jewelry that do not have (or do not want) state-specific distribution systems.  Such companies should review current practices to ensure compliance.

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Since the Consumer Product Safety Commission ("CPSC") began issuing its own import detention notices in June, some companies have struggled to obtain the release of detained products, particularly to determine the process the CPSC would follow and minimize the detention period.  The CPSC has now issued frequently asked questions ("FAQs") to help companies navigate the process.  Historically, Customs and Border Protection ("CBP") had issued notices for potential CPSC violations, so CPSC hopes to eliminate CBP as the middleman.

CPSC will send a detention notice to the importer of record, broker, and CBP, typically by e-mail.  If CBP has also detained the product, those issues will be resolved first.  CPSC will only detain products described in the notice, so the importer or broker should contact CBP to obtain the release of other products in the shipment.  Conditional release or exportation of products is also possible on a case-by-case basis.  Detention notices are not subject to protest, but companies will have five days to submit information supporting admissibility of the product and can request an administrative hearing.  CPSC will try to make admissibility decisions within 30 days of detention.

Given these new procedures, importers of consumer products should be in close contact with their brokers and respond quickly to detention notices.  Companies may also take a proactive approach by working with the CPSC compliance officer at CPSC headquarters to facilitate communications with the CPSC representative at the relevant port.

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The Consumer Product Safety Commission has announced proposed rules regarding the requirements for a “reasonable testing program” and other certification testing and the requirements for component part testing pursuant to the Consumer Product Safety Improvement Act. Domestic manufacturers and importers of children’s products and other products subject to a CPSC regulation or ban should track the development of the proposed rules and may consider incorporating some of the provisions now, in anticipation of a final rule.

Please view the Kelley Drye client advisory for more details regarding the "15 Month Rule" and component parts testing.

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This post was written by Megan L. Olsen and Christie L. Grymes.

On March 31, 2010, the U.S. Consumer Product Safety Commission (CPSC) announced a Final Rule that identifies and interprets factors the CPSC will consider when seeking civil penalties for knowing violations of the Consumer Product Safety Act (CPSA), Federal Hazardous Substances Act (FHSA), and Flammable Fabrics Act (FFA). As required by section 217(b)(2) of the U.S. Consumer Product Safety Improvement Act (CPSIA), this rule “provides the Commission’s interpretation of the civil penalty factors found in” section 20(b) of the CPSA, section 5(c)(3) of the FHSA, and section 5(e)(2) of the FFA. The Commission voted 4-1 to approve the Final Rule as amended. Chairman Tenenbaum and Commissioners Nord, Adler, and Moore voted to approve the Final Rule as amended, and Commissioner Northup voted not to approve the Final Rule.

This Final Rule has particular significance because the CPSIA expanded the actions subject to civil penalties, and increased the maximum civil penalty amounts from $8,000 to $100,000 for each “knowing” violation and from $1.825 million to $15 million for any related series of violations. The statutory factors the Commission must consider include: the nature, circumstances, extent and gravity of the violation, including the nature of the product defect or of the substance; the severity of the risk of injury; the occurrence or absence of injury; the number of defective products distributed or the amount of substance distributed; the appropriateness of the penalty in relation to the size of the business, including how to mitigate undue adverse economic impacts on small businesses; and such other factors as appropriate. The Final Rule provides the Commission’s interpretation of those statutory factors and identifies four additional factors: (1) safety/compliance program and/or system relating to a violation; (2) history of noncompliance; (3) economic gain from noncompliance; and (4) failure to respond in a timely and complete fashion to the Commission’s requests for information or remedial action. The Commission declined to consider the relative complexity of identifying and confirming the presence of a defect in a product.

In light of this Final Rule and the new civil penalty cap of $15 million, a company should take the opportunity now to review all aspects of its current product safety practices, including product development, vendor requirements, compliance with the conformity certificate and other technical requirements of the CPSIA, and how the company interfaces with the Commission. Such proactive steps now could drastically improve the company’s position in the event of a civil penalty investigation later. More information on the Final Rule and civil penalty factors can be found in Kelley Drye & Warren’s April 1, 2010 client advisory.

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This post was written by Megan L. Olsen and Christie L. Grymes.

On March 2, 2010, the Consumer Product Safety Commission (“CPSC” or “Commission”) announced a settlement agreement with Daiso Holding USA Inc., Daiso Seattle LLC, Daiso California LLC, and one of the companies’ officers (collectively, “Daiso”). The consent decree, filed by the Department of Justice on behalf of the CPSC, requires Daiso to pay a $2.05 million civil penalty and prohibits the company from importing, selling, or distributing children’s products and toys in the United States unless Daiso satisfies numerous requirements regarding product evaluation and incident review. The CPSC alleges that Daiso violated the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”), and the Consumer Product Safety Improvement Act (“CPSIA”) by importing, distributing, and selling toys with illegal levels of lead, lead paint, and phthalates, toys that had small parts intended for children younger than three years old, and products that lacked required warning labels.

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Late Friday the Consumer Product Safety Commission ("Commission" or  "CPSC") sent to Congress a report with recommendations for improving the Consumer Product Safety Improvement Act ("CPSIA"):

• Provide greater flexibility in granting exclusions from Section 101(a) of the CPSIA.  The CPSA has already tried to reduce any unduly burdensome effects of Section 101(a) where Congress may not have intended to include certain products within the scope of the lead content limits, but needs additional flexibility to grant exclusions for certain products, inicluding youth ATVs and bicycles, sporting equipment, and ordinary books.
• Exclude ordinary children's books and other children's paper-based printed materials.  Although the Commission has provided some relief for newer ordinary children's books, the staff has determined that some books printed before 1985 contain highly illustrated pages with lead content above the strict lead ban.  Congress may not have intended for the CPSIA to cover those books.
• Apply the 100 ppm Lead Content Limits Prospectively Only, Not Retroactively.  Based on the CPSC's experience implementing the lead content limits retroactively, market disruption may occur if the 100 ppm lead content limits are applied retroactively.  The new tracking label requirements will help to ensure that products manufactured after the 100 ppm deadline becomes effective are compliant.
• Address Concerns of Low-Volume Manufacturers.  The Commission will continue to consider the concerns of small manufacturers and crafters as it develops the mandatory rule on testing and certification.  The Commission stated that it remains committed to working with Congress to explore other ways to reduce the burdens on those entities, but offered no specific recommendation to Congress.

Chairman Tenenbaum and Commissioners Nord, Adler, and Northup issued individual statements in connection with the report.  The Commission prepared the report in response to a request from the House and Senate Appropriates Committees, the House Energy and Commerce Committee, and the Senate Commerce, Science, and Transportation Committee.

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On December 28, 2009, the Consumer Product Safety Commission (“CPSC” or “Commission”) issued a notice extending the stay of enforcement on lead-content testing and certification of certain children’s products pursuant to Section 102 of the Consumer Product Safety Improvement Act (“CPSIA”). The stay is for an additional year, to February 10, 2011^[1]. Chairman Inez Tenenbaum said in a statement, “The extension of the stay was needed in order to give the agency more time to promulgate rules important to the continued implementation of the CPSIA and for the agency to educate our stakeholders on the requirements of those new rules.” Although the Commission approved an extended stay on testing and certification for certain products, all products must continue to comply with applicable standards and bans.

Section 102 of the CPSIA and the CPSC’s related rule require every domestic manufacturer or importer of consumer products subject to any product safety rule under the CPSIA or similar rule, ban, standard, or regulation under any act enforced by the CPSC – and (1) imported for consumption and warehousing or (2) distributed in commerce – to issue certificates of conformity with the applicable standards. Those certificates must accompany all shipments of such products and be furnished to each distributor and retailer of the product. On February 9, 2009, the Commission announced a stay of enforcement for certain products that would remain in effect until February 10, 2010, when the Commission would vote on whether to terminate the stay. The stay only applied to the testing and certification requirements – the applicable mandatory safety requirements, such as the reduction in lead content and phthalates, continued to apply.

Since issuance of the stay, the Commission issued more than 20 Federal Register notices, statements of policy, guidance documents, proposed rules, interim final rules, and final rules pertaining to the CPSIA, and most of those documents related to testing and certification issues. Given that flurry of activity and the need for additional rulemaking and lab accreditation, the Commission in December announced the following phased-in approach of the testing and certification requirements.

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