1. Consumer Product Safety Commission (CPSC) only has jurisdiction over consumer products.
To define “consumer products” under the CPSC you start with everything and then subtract from everything the following.
- Medical devices
- Tobacco products
- Firearms and ammunition
- Motor vehicles
- Fixed site amusement rides
The classification is also identified as anything that is:
- For sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise;
- For the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation, or otherwise (15 U.S.C. § 2052).
The term in recreation then is an outdoor recreation, adventure travel and a cycling catch all. All outdoor products are considered consumer products and subject to the CPSC.
Bicycles are a special classification of the CPSC over which the CPSC has broad powers and greater authority and control.
2. Who Must Report if you are in the OR Industry?
Manufacturers, importers, distributors and retailers are all equally liable under the CPSA (Consumer Product Safety Act) and are all equally responsible to report defective products (15 U.S.C. § 2064(b)). The person who brings the product into the US if it is not manufactured in the US is responsible along with all other people in the chain of distribution.
A “distributor” is defined as “a person to whom a consumer product is delivered or sold for purposes of distribution in commerce, except that such term does not include a manufacturer or retailer of such a product (15 U.S.C. § 2052(a)(7)). Consequently, the definition of a distributor is very broad and covers any entity from the docks to the retailer.
A “retailer” is defined as “a person to whom a consumer product is delivered or sold for purposes of sale or distribution by such person to a consumer (15 U.S.C. § 2052(a)(7), 15 U.S.C. § 2052(a)(13)).
Consequently, everyone who touches a product once it is manufactured in the US or arrives in the US, other than someone doing so for transportation purposes only, is liable for a recall of the product. That liability extends to failing to report a defective product.
3. A reporting requirement is triggered when:
There is a duty to report a defective product by anyone in the chain of distribution when:
- a product fails to comply with a consumer product safety rule or a voluntary consumer product safety standard upon which the CPSC has relied, such as the voluntary standards.
- A product fails to comply with the CPSA or another Act, such as the Flammable Fabrics Act.
- A product contains a defect that could create a substantial product hazard.
- A product creates an unreasonable risk of serious injury or death (15 U.S.C. § 1193-1204, 15 U.S.C. § 2064(b)).
This creates a massive unknown black hole for the outdoor industry. The OR industry creates dozens of products may have a warranty issue, but do not violate any statute and do not create a substantial hazard or create a risk of injury or death to the user.
Examples of these are Avalanche Probes or Avalanche Beacons, and other rescue equipment. No matter what goes wrong with a probe or beacon, it will not cause injury or death to the consumer. The defective probe will not kill or injury anyone unless the searcher just stabs someone. Consequently, this creates a real issue for many.
However, the law says injury to the consumer. If there is no injury, the product may not work, but it is not the cause of the injury and thus not subject to a recall.
The CPSC takes a different view.
Your question has been forwarded to me for a response. We may find a product to be defective if it does not function as intended, and the problem can lead to a hazard. The hazard does not necessarily need to stem from direct contact with the product itself. If its failure to operate as expected can expose anyone to a hazard, then we may potentially find that product to be defective and creating a risk of injury. To use your Avalanche Beacon example, since its purpose is a life safety device intended to assist in the location of someone buried in an avalanche, if it does not function as designed, it could be determined to contain a defect which creates a risk of injury. Such an analysis is contingent on the facts of each particular case.
Blake G. Rose
Defect Investigations Division
Office of Compliance and Field Operations U.S. Consumer Product Safety Commission
I think this can require a lot of interpretations and leaves a real gap for because the explicit language of the law is different. The above statement is the CPSC interpretation of that language. You will need to look at what the problem is and will it lead to injury to a non-user. In many cases, it won’t, it is a warranty issue.
This issue is: How much are you will to risk and push the issue? If not, then recall your product no matter what the issue.
4. Voluntary Standards
If a product fails to meet standards that are voluntary such as those created by the ASTM, ANSI or such other agency or trade association, then the CPSC has interpreted their regulations to say that product is defective and must be recalled.
At the same time, a product can meet the voluntary standard such as those of the American National Standards Institute (ANSI) (16 C.F.R. § 1115.12(g)) and still need to be recalled because it is defective in a way that is not covered by the voluntary standard.
5. When do you have to report?
You must report any product that has a “a fault, flaw, or irregularity that causes weakness, failure, or inadequacy in form or function.” (16 C.F.R. § 1115.4) If the product has a defect, then the issue is whether the defect creates a substantial product hazard.
A “substantial product hazard” is:
- A failure to comply with an applicable consumer product safety rule, which failure creates a substantial risk of injury to the public,
- A product defect which (because of the pattern of defect, the number of defective products distributed in commerce, the severity of the risk, or otherwise) creates a substantial risk of injury to the public (16 C.F.R. § 1115.2(a)).
A “substantial product hazard” exists when a defect creates a “substantial risk of injury.” The focus is on the risk of injury, not on actual injury reports or the severity of injuries (16 C.F.R. § 1115.12(g). Although in my experience, the severity and actual injuries having already occurred ends any discussion by the CPSC.
6. Unreasonable Risk of Serious Injury or Death
“Serious injuries” are defined by the CPSC as “injuries necessitating hospitalization, which require actual medical or surgical treatment, fractures, lacerations requiring sutures, concussions, injuries to the eye, ear, or internal organs requiring medical treatment, and injuries necessitating absence from school or work of more than one day.’ (16 C. F. R. § 1115.6)
The requirements are not cumulative. Meaning a consumer can suffer serious injury if they receive sutures but don’t go to the hospital or miss work. The threshold has been met by just one issue.
The factors that are used to decide whether a risk of serious injury is “unreasonable” are the utility of the product, the level of exposure to consumers, the nature and severity of the hazard, whether the product is state of the art, the availability of alternative designs, and the feasibility of eliminating the risk without compromising utility (16 C. F. R. § 1115.6(b)).
I also think this clause affects the definition of defect. There is no unreasonable risk of series injury or death to any victim.
7. Burden is on the Chain of Distribution to watch.
Regardless of which category the report will come under, you must pay attention to product testing results as well as watch for warranty claims, consumer complaints, product liability lawsuits and other quality related complaints for any indication that reportable defects or reportable injuries exist.
8. When to Report
If a product contains a defect that has the actual or potential risk to cause injury, the CPSC will initiate a recall, generally with the manufacturer’s cooperation and input. However, the CPSC can imitate a recall even if the manufacturer opposes the recall.
9. Corrective Action Plan (CAP)
A CAP is a document that describes the remedial action that the company is voluntarily undertaking with the CPSC’s approval to protect the public from an allegedly defective product (16 C.F.R. 1115.20(a)). (The threat of a fine does not remove the concept of voluntary from the CPSC nomenclature.)
The CPSC can initiate an enforcement action if it cannot reach agreement with the company on the corrective action plan, or if it becomes aware of additional facts that were not disclosed by the company.
10. Components of the Corrective Action Plan
The CPSC can create the CAP it believes is necessary to solve the problem. Consequently, no CAP is the same as a prior one, in theory.
The corrective action plan may include:
- A description of the alleged hazard, including the alleged defect and any associated potential injuries
Details pertaining to the vehicle and method of public notification such as a
- Press Release
- Who a notice will be sent to
- The model number and description of the product
- Instructions for safe handling or use of the product pending the corrective action
- An explanation of the cause of the hazard if known
The corrective action being taken to eliminate the hazard such as
- Whether the products are to be returned a plan for their disposition
- Steps taken to prevent reoccurrence of the hazard in the future
- Action taken to correct products in the distribution chain.
- In addition to this information, a corrective action plan
- Must be signed by company representatives
- Must acknowledge and agree that the CPSC has the power to monitor the action
- That the CPSC publicize the terms of the corrective action plan
- May contain a statement that the submission of the corrective action plan does not constitute an admission by the company that either reportable information or a substantial product hazard exists.
Some factors that are considered when the CPSC is determining whether to accept the corrective action plan are.
- The promptness of the company’s reporting
- Any remedial actions taken
- And the likelihood that the company will fully comply with the plan based upon any prior corrective actions.
Consequently, maintaining a good relationship with the CPSC pays off. This is not an agency that aggressiveness works in achieving your goals. Employees of the CPSC regularly deal with the largest companies in the world, and threats are a joke.
In that same vein, I work hard to maintain my reputation with the CPSC and want to conform to the three steps identified above.
The CPSC can approve the plan, reject the plan and issue a complaint against the company which begins an administrative or judicial action, or take other action to ensure the plan is adequate, such as suggesting revisions to the plan (16 C.F.R. 1115.20(a)(2)).
11. Recall Notice
The CPSC views a direct recall notice, or one that is sent directly to specifically identified consumers, as the most effective form of a recall notice. In any recall, at least two of the following forms of notice must be used:
- Letters, web site postings, e-mail, text message
- Computer, radio or television transmission
- Video news release, press release, recall alert or web stream.
- Newspaper, magazine, catalog or other publication
- Advertisement, newsletter or service bulletin (16 C.F.R. 1115.26).
In most cases, the CPSC will require a combination of notices and requires the manufacturer to monitor and report the effectiveness of the notices.
If a recall notice is posted on a web site, a link to the relevant information must be placed prominently on the home page (16 C.F.R. 1115.26). Because this is the first thing, most consumers will respond to in the eyes of the CPSC, the larger the notice and more prominent the notice the better.
The notice on the home page, and link to information on how to respond to the recall must be left on the page until the CPSC has released the manufacturer from the recall.
Penalties that can be levied by the CPSC increased in 2008. A fine of up to $100,000 for a single violation of the CPSA, and up to a maximum of $15 million for a series of violations can be levied by the CPSC (15 U.S.C. § 2069).
This increased in the amount and ability to fine, has changed the approach of many companies in dealing with the CPSC. Before the fine increase, the fines were nominal and a lot of companies would ignore the CPSC and hope they would not be discovered. Now, the fines are so substantial that you ignore the CPSC at your own peril.
13. Failure to report
A failure to report a defective product or having the report created from the anonymous webpage or 800 number is the easiest way to incur the wrath of the CPSC. A failure to timely respond to the CPSC, and the completeness of the response increases the severity of any penalty for failure to report. The CPSC will also look at:
- Whether a company had a reasonable safety and compliance program, in effect, at the time of the violation, including a system of collecting and analyzing information relating to safety issues such as incident reports and warranty claims;
- Whether a company has a history of noncompliance with the CPSC that is deserving of a higher penalty for repeated noncompliance.
- Whether a company has benefited economically from a delay in complying with the requirements;
- Whether a company has failed to respond to the CPSC in a timely and complete fashion in response to requests for information or for remedial action (16C.F.R.1l19).
CPSC also examines the severity of the risk of injury, the occurrence or absence of injury, and the number of defective products or the amount of substance distributed.
The CPSC must also consider the nature, circumstances, extent and gravity of the violation, including the nature of the product defect or the substance; the appropriateness of the penalty in relation to the size of the business or of the person charged, including how to mitigate undue adverse economic impacts on small businesses; and other factors as appropriate.
14. Preparing for a Recall
The best way to prepare for a recall is to read. If at any time you believe you may need to recall a product you should do two things.
- Assign someone to be the sole person responsible for dealing with the CPSC and with the recall. This person is going to spend 90% of their time the first two to three weeks dealing with the recall. After the CPSC approves the CAP then the responsible person only needs to track the responses to the recall and report every month.
Read the following:
- If you understand and are prepared the CPSC recall is not the nightmare that it has been labeled. It is not an easy and smooth process either. It will also cost the company thousands of dollars in time, fees and expenses apart from the cost of the actual recall.
And you are working with Federal Bureaucrats. A couple of hints:
- Make sure you understand their terminology.
- Get clear deadlines and dates
Follow up with every report or response you file to make sure it was.
- Correct or met the requirements/needs of the CPSC.
- Do not be afraid to ask for clarification, help or knowledge until you fully understand what the issue is.
- Do not be afraid to point out issues that are not clear, confusing, or you don’t understand or agree with.
- Ask your compliance officer after the CAP has been filed and approved what the CPSC expected goal is in response to your recall. That will determine when you can end the recall.
- Make sure you understand their terminology.
Once I was asking when we no longer had to file monthly reports. The contact I was working with at the CPSC, pulled up the reports and said, wow, you are done. After the reports start rolling in on time and correct, they can get lost in the system or ignored. You will have to stay on top of the reports and the CPSC to make sure they help you succeed and get off the program.
If you don’t ask you will be filing reports for years.
There is no way to plan for a recall. It is much better to plan to make sure you don’t have a recall. Quality control is the most important department in making sure a recall does not happen. If it does, you can quickly get up to speed. Working with your attorney and PR agency (yes, the CPSC wants you to have a PR firm or person) you can get through the first couple of weeks and then concentrate on running the business.
15. Starting a recall can take a month before the CPSC responds, what do I do.
If you want to get the word out because there is a real issue and people’s lives or well-being is at stake, the CPSC recall process is slow. After filing the initial notice, the CPSC will get back to you with questions and requirements for a plan in a couple of days. You will have twenty days to respond. The CPSC can take another week or two to finalize the recall information, notices and press releases.
That can be too long in our industry.
Nothing in the regulations says you cannot notify people of the recall on your own. The CPSC will tell you that you may have to do it again, if they do not like the way, you did it, the press release or notices you used, etc. You will do it again because the CPSC will want it done again. However, that is a small price to pay if you save one of your user’s life or limb.
Get the world to your retailers, distribution change, major media outlets and social media immediately. Whatever users you have contact information for contact them immediately. Do the same for user groups, associations and any professionals using your equipment.
Include what you do in any communication with the CPSC. You can upload these documents when you file the report, or as you send them out. The CPSC is going to respond that you did it wrong. However, I have to believe that if they understand your issues, the risk, and your efforts, they must believe and appreciate what you did, in an attempt to save lives.
The CPSC is a federal regulatory body, and no matter the urgency is going to respond, their way and only their way. You must follow their rules. However, nothing prevents you from jumping the gun and notifying people any way you can to save people.
What do you think? Leave a comment.
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An Overview of the legal relationship created between manufactures and US consumers.
This is a quick memo to simply outline the legal issues encountered by foreign corporations selling in the US Market. This memo will touch on the following issues:
- Warranty Disclaimers and Issues
- State Consumer Protection Laws
- European Union certifications & the US
- Jurisdiction and Venue
An agent legally represents the manufacture. From a legal standpoint the agent stands in the shoes of the manufacture. An agent speaks and acts for the principal, the manufacture. As such the manufacture is liable for anything the agent says or does while representing the manufacture until the agency is terminated and that termination is communicated to interested third party consumers.
An agency relationship exists when a principal (in this case the manufacture or distributor) creates a legal relationship with a third party for the third party to represent the principal. In this case the third party is a retailer of products or an independent contractor sales representative. This relationship can be by contract (oral or written) or by actions on the part of either party (I’ll pay you if you do that).
An agency can be created without a legal relationship. Agency by Estoppel is created when third parties or consumers believe that one party has vested rights or an agency in another based on the actions of the principal. If a sales rep says he works for a manufacture and the manufacture does nothing to terminate the relationship or refine the relationship in the minds of the consumer or the shop then the agency does in fact exist. The parameters of the relationship are as defined by the consumer as reasonably interpreted from the actions of the agent. Failure to stop or disclaim the agency confirms the agency.
This places a tremendous burden on manufactures to create a relationship with agents that is within the parameters and/or restrictions the manufacture wants and then to insist the agent work within those parameters. However, if the manufacture does nothing to enforce the parameters or knows the agent is working outside of the parameters the manufacture will be held liable for the acts of the agent.
A good contract outlining the relationship is necessary for most independent contractor’s representative and required by seventeen (17) states.
Agency by law is another type of agency that is created. These are actions that the courts have interpreted over time to be agency relationships. A specific example in this case is again the manufacture and the distributor or the manufacture and the rep. Courts have determined that for the distributor or rep to do their jobs there is an agency relationship for the agent to act for the manufacture. Agency by law then is interpreted to mean the agent has the basic responsibility to act on behalf of the manufacture.
This places a burden on manufactures to do two things. (1) Hire agents who will understand and respect the agency relationship as defined by the manufacture. That then requires a well written contract that gives the agent freedom to do their job and at the same time reserves the rights and powers that the manufacture wishes to retain. (2) To act quickly when the manufacture sees someone acting outside of the defined relationship or a third party who is acting like an agent.
These place tremendous burdens on the manufacture. However the burdens were created to prevent the consumer, who has little or no way of checking on the relationship from getting ripped off.
Specifically a sales rep is the same as a bike shop, both are selling for the manufacture and the public can rely on both in the same way.
A warranty is created every time there is a sale. Most warranties in the US are defined in the Uniform Commercial Code (UCC) and in a few cases state and federal laws. Specific Federal laws may affect the sale of certain items such as the Magnuson-Moss Warranty Act which covers warranties on automobiles.
In every sale the UCC states that there is a Warranty of Fitness and a Warranty for a Particular Purpose (UCC – ARTICLE 2 -§2-314 & 315).
§ 2-314. Implied Warranty: Merchantability; Usage of Trade.
(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible goods, are of fair average quality within the description; and
(c) are fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged, and labeled as the agreement may require; and
(f) conform to the promise or affirmations of fact made on the container or label if any.
§ 2-315. Implied Warranty: Fitness for Particular Purpose.
Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
As innocent as these warranties appear, they are the basis for product liability lawsuits and can be used to void more limiting warranties. However both of these warranties can be voided.
An example of the problem would be a camming device. The salesman states the camming device will work “no matter what.” The user drags the device through the mud so it is just caked and won’t work properly. The consumer uses the device, it fails because of the mud and the consumer is injured. The consumer could sue for their injuries under a breach of warranty theory because the device did not live up to the reason why it was purchased. This is a breach of the fitness for a particular purpose warranty.
Another example of the problem would be selling a bicycle. The salesman states the bicycle will be easy to ride. The new owner has never used a derailleur shifted gears on a bicycle and constantly has trouble shifting the gears. During one attempt to change gears the consumer hits a sewer grate suffering serious injuries. The consumer could sue for their injuries under a breach of warranty theory because the device did not live up to the reason why it was purchased. This is a breach of the fitness for a particular purpose warranty.
There is an out in the law that allows a manufacture to argue that the statements were salesman’s “puffing.” That means the statements that a salesman makes to sell a product that may be over the top. However because the warranty was not properly disclaimed the salesman’s puffing is not a valid defense. This may be in addition to any claim for basic product liability issues.
State Consumer Protection Laws
Each state has enacted a serious of Consumer Protection Laws. These laws are designed to “level the playing field” between consumers and large manufactures. Although the specifics may vary for each state in general the laws lower the threshold needed to prove a case against the manufacture and increase the damages for the consumer. In some cases damages are trebled, with interest costs and attorney fees being added to the damages.
Another disadvantage for manufactures is the manufacture can be forced to defend the action in the consumer’s state if products are sold in that state.
Colorado’s Consumer Protection Act, C.R.S. §§ 6-1-105 et seq has the following sections that would be of interest.
(1) A person engages in a deceptive trade practice when, in the course of such person’s business, vocation, or occupation, such person:
(d) Uses deceptive representations or designations of geographic origin in connection with goods or services;
(r) Advertises or otherwise represents that goods or services are guaranteed without clearly and conspicuously disclosing the nature and extent of the guarantee, any material conditions or limitations in the guarantee which are imposed by the guarantor, the manner in which the guarantor will perform, and the identity of such guarantor. Any representation that goods or services are “guaranteed for life” or have a “lifetime guarantee” shall contain, in addition to the other requirements of this paragraph (r), a conspicuous disclosure of the meaning of “life” or “lifetime” as used in such representation (whether that of the purchaser, the goods or services, or otherwise). Guarantees shall not be used which under normal conditions could not be practically fulfilled or which are for such a period of time or are otherwise of such a nature as to have the capacity and tendency of misleading purchasers or prospective purchasers into believing that the goods or services so guaranteed have a greater degree of serviceability, durability, or performance capability in actual use than is true in fact. The provisions of this paragraph (r) apply not only to guarantees but also to warranties, to disclaimer of warranties, to purported guarantees and warranties, and to any promise or representation in the nature of a guarantee or warranty; however, such provisions do not apply to any reference to a guarantee in a slogan or advertisement so long as there is no guarantee or warranty of specific merchandise or other property.
(3) The deceptive trade practices listed in this section are in addition to and do not limit the types of unfair trade practices actionable at common law or under other statutes of this state.
Colorado’s statute allows the judge to award treble damages, interest and attorney fees if the consumer is successful in the suit. C.R.S. 6-1-113. §§ Damages
Here again the warranties come into play. If the consumer can prove the warranties are not disclaimed and the claim falls within the deceptive trade practices act or a common claim for deceptive trade practices, the damages for the warranty claim are increased.
European Union certifications & the US
Many manufactures from Europe or Asia believe that meeting standards for manufacturing products in Europe is all that is needed to sell in the US. That is correct. However those standards provide no defense in a US Court against product liability claims.
Product liability lawsuits are lawsuits against the manufacture and all entities in the chain of the sale. A product liability action can be brought against the bicycle shop, the distributor and the manufacture of a product. There are three basic product liability claims.
- Defective manufacture
- Defective Design
- Failure to warn
Defective manufacture claims are usually brought when only one product fails because there was a flaw in the manufacturing process for that product. The flaw caused an injury to the consumer using the product.
Defective design is usually the claim made when all of a type of product fails causing injury. A defective design claim can be brought at any time during the useful life of a product. This claim is brought when all of the products of a design fail for the same reason. The design flaw can either be based on the product breaking causing injury or the design preventing the product from working as advertised or as used by consumers.
The most difficult claim to defend is a failure to warn. This claim has two parts. Failure to warn at the time of the purchase and failure to warn of new issues the manufacture learns about. Failure to warn claims are the basics for information and warning labels that are not written in a manner to adequately inform the consumer of the risks of using the product.
Failure to warn claims that arise after time are usually a result of several Defective manufacture claims. Once a manufacture knows of problems in the way a product is being used OR that a product is being used incorrectly, the manufacture MUST warn all users of the problem. This type of claim in practice is similar to a product recall. However a product recall is done before an injury occurs. A failure to warn claim is the lawsuit brought after a recall.
The running of a warranty period does not end product liability claims.
Jurisdiction and Venue
Foreign manufacture believe that by setting up a US distributor, any lawsuit can only be brought against the US distributor and not the parent company in Europe. That is not true. US law allows a lawsuit against the end manufacture, wherever that manufacture is located if the manufacture entered the product in the stream of commerce in the state where the injury occurred or where the consumer lives. Proof of entering into the stream of commerce is a combination of factors: employees or agents living or working in the state; advertising in the state; contracting with retailers to sell the product in the state; advertising at events in the state are a few examples used to prove the manufacture entered the stream of commerce in a particular state.
In some cases, a manufacture can limit suits to just a few states with proper venue and jurisdiction clauses in their information to the consumer; however this is not always successful and will not work in all states. Either way, a foreign manufacture will be brought into the US to defend a product liability claim.
What do you think? Leave a comment.
Copyright 2010 Recreation Law (720) Edit Law, Recreaton.Law@Gmail.com
© 2010 James H. Moss
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