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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 pro-
gram shouldn’t already be doing.
New Requirements For Safety
Compliance Programs
Recently, however, new requirements for
safety compliance programs have been insert-
ed 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 prod-
uct 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 that said, in part:
“The safety/compliance program factor takes into
account the extent to which a person (including
an importer of goods) has sound, effective pro-
grams/systems in place to ensure that the prod-
ucts 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 com-
panies 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 man-
agement 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 spe-
cific 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 agree-
ments 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 com-
pliance-related policies and procedures to
all employees through training programs or
otherwise;
d) senior manager responsibility for compli-
ance;
e) board oversight of compliance (if applica-
ble); 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 pro-
gram 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 com-
pliance requirements. Based on this history, it
is virtually certain that future settlement
agreements will contain some type of require-
ment for the establishment of more robust
safety compliance programs. It is still an open
question as to how compliance will be audit-
ed and monitored and when the CPSC will
require that additional processes and proce-
dures be established. In addition, it is
unknown what the CPSC would do if the
firm never fully complies with these require-
ments after they have agreed to them.
Safety Requirements In Corrective
Action Plans
The last CPSC action concerning com-
pliance programs is contained in a notice of
62 • PPB • MAY 2015 THINK
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for suppliers, distributors and con-
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