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Update on Recent CPSC Developments

Date: 1/27/12

This article discusses recent activities that may be of interest to manufacturers and suppliers of consumer products:

Testing and Certification Requirements

The CPSC's stay of enforcement for testing and certification requirements expired on December 31, 2011. As a result, consumer product importers and domestic manufacturers must now issue a General Conformity Certificate affirming that their product complies with CPSC regulations. This General Conformity Certificate must be based on a test of each product or a reasonable testing program.Children's product importers and domestic manufacturers must now issue a Children's Product Certificate certifying conformity. The Children's Product Certificate must be based on testing conducted by a CPSC accredited third-party lab.

Children's products are defined broadly as those consumer products designed or intended primarily for use by children twelve years of age or younger. The CPSC will take into account various factors in determining whether a consumer product also constitutes a children's product. The primary factors are: 1) the manufacturer's representations regarding the product's intended use; 2) whether the product is packaged, displayed, promoted, or advertised as appropriate for use by a child 12 years of age or younger; and 3) whether consumers commonly recognize the product as being intended for use by a child 12 years of age or younger.

Sporting goods and recreational equipment are not considered children's products to the extent they are sized for adults, even though children 12 years of age or younger may use them. However, if such a product is specifically marketed for or has extra features that make it more suitable for children 12 years of age or younger, or if it is too small or inappropriate for older children to use, then that product will likely be considered a children's product and require third-party testing.

The CPSC is providing temporary relief from certain third-party testing requirements to approved "Small Batch Manufacturers." Approved Small Batch Manufacturers will not be required to third-party test for certain children's product safety rules until the CPSC has provided either an alternative testing requirement or an exemption. To be approved as a Small Batch Manufacturer, the applicant must register with the CPSC at SaferProducts.gov and must attest that it satisfies two threshold requirements: 1) its total gross revenue in the previous calendar year from the sales of consumer products is less than $1 million; and 2) it manufactured no more than 7,500 units of the product for which it seeks exemption from testing. Even if approved, Small Batch Manufacturers must still issue a General Conformity Certificate.

New Features on SaferProducts.gov

Since SaferProducts.gov launched in March 2011, the CPSC has added new features to the website's Business Portal. These features are designed to make it easier and more efficient for businesses to work with the CPSC and also to increase the CPSC's ability to communicate with registered businesses. For example, manufacturers will now receive electronic notification of all product incident reports in which they are named. Previously, only those reports that were eligible for posting on SaferProducts.gov were available electronically. However, a business must be registered on SaferProducts.gov in order to receive electronic communications.

Also, on November 8, 2011, the CPSC announced that it launched a new comprehensive online reporting form that is designed to streamline the reporting process. However, manufacturers may be well advised to consider the implications associated with using the new online form before changing their reporting methods. For example, some criticize the new form as being too restrictive in that it limits the "Defect/Problem Description" to approximately 70 characters, which may inhibit the manufacturer's ability to fully describe the issue. Also, in order to submit the online form, the reporting party must provide the exact date upon which it discovered the defect or problem. Since investigating field incidents and determining if/when one has a reporting obligation is a dynamic process, it may difficult to accurately provide a specific date on which one "discovered the defect or problem". It is unclear if the reported date will be used by the CPSC in assessing the timeliness of reporting, but reporting entities should be mindful of these potentially serious implications.

Challenges to the Publicly Available Consumer Product Safety Information Database

Reports of harm associated with consumer products may now be submitted for publication on SaferProducts.gov. However, various groups have raised concerns regarding the information required by the CPSC to publish a report. For example, manufacturers have pointed out that the information required is insufficient to properly identify the product, and thus creates the risk of publishing reports that incorrectly identify the manufacturer.

In October 2011, an anonymous manufacturer filed suit in the United States District Court for the District of Maryland seeking to prevent the CPSC from publishing a report of harm on the grounds that the report provided insufficient information to properly associate the harm suffered with the use of the identified product. The manufacturer moved the Court to keep all documents related to that case sealed so as not to reveal the manufacturer's identity, which the manufacturer pointed out would be equivalent to publishing the report itself.

The Government Accountability Office ("GAO") has monitored SaferProducts.gov in order to analyze agency data and report on various positive and negative aspects of the database. Regarding the information used to identify products and manufacturers, the GAO recommended the CPSC strengthen the analytical methods it uses to identify product manufacturers and review manufacturers' reports of material inaccuracy. Legislation was passed in August 2011 requiring the CPSC to attempt to obtain the model or serial number or a photograph of the product from submitters who did not provide this information in a report of harm.

Regulatory Enforcement

The CPSC vigorously enforced consumer product regulations in 2011. Fourteen companies were issued civil penalties for failing to comply with consumer product regulations. Penalties in 2011 ranged from $40,000 to $1.3 million. The trends over the past couple of years indicate that the CPSC will continue to aggressively enforce consumer product regulations and assess penalties for failure to adhere to those regulations.

The CPSC may also seek criminal penalties under certain circumstances. It did so on one occasion in 2011, when it charged four individuals with falsifying data related to testing of child-resistant lighters. All four were convicted; the sentences included prison time, probation, and house arrest.

In addition to testing and certification requirements, consumer product manufacturers, distributors, and retailers are also charged with a duty to notify the CPSC immediately if it receives information that reasonably supports the conclusion that a product: 1) fails to comply with any applicable consumer product rule or regulation enforced by the commission; 2) contains a defect that could create a substantial product hazard; or (3) creates an unreasonable risk of serious injury or death to consumers. It is the failure to timely meet this obligation that resulted in many of the civil penalties imposed over the past year.

Even after a company recalls the subject product, the CPSC will investigate and review the information available to the company prior to the recall. If the CPSC determines the company had knowledge of the hazard prior to the recall, but did not notify the CPSC, then it is likely to penalize that company accordingly.


Article By:
John Kuppens, Partner
Nelson Mullins Riley & Scarborough, LLP
john.kuppens@nelsonmullins.com

William Harter, Associate
Nelson Mullins Riley & Scarborough, LLP
will.harter@nelsonmullins.com

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