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Sandler, Travis & Rosenberg

CPSC Proposes Controversial Changes to Product Safety Recalls and Corrective Action Plans
Melissa Miller Proctor, Esq., Sandler, Travis & Rosenberg, P.A.

On November 22, 2013, the Consumer Product Safety Commission ("CPSC") published its proposed rule, which was to provide interpretative guidance for voluntary recalls per Section 15 of the Consumer Product Safety Act ("CPSC").1 Specifically, the CPSC intended to issue guidelines for the recommended form and content of voluntary recall notices in order to provide greater transparency and predictability for U.S. companies as well as to expedite the dissemination of recall information to the public. However, significant amendments were added to the rule that would require companies commencing a voluntary recall to: (1) enter into legally binding agreements with the CPSC and (2) implement compliance programs as part of their corrective action plans. See 78 Fed. Reg. 69 (November 2013). These proposed revisions reflect a marked departure from the current voluntary recall process and have already drawn sharp and swift criticism.

Under the current rules, U.S. companies commencing a voluntary recall are required to propose and roll out formal corrective action plans. Section 1115.20(a) of the CPSA describes a corrective action plan as -

[A] document, signed by a subject firm, which sets forth the remedial action which the firm will voluntarily undertake to protect the public, but which has no legally binding effect.


In order to encourage companies to commence voluntary recalls and to promptly address defective merchandise that poses risks to U.S. consumers, the CPSC is expressly prohibited from seeking legal enforcement of corrective action plans. However, the CPSC is not without other effective enforcement tools. The CPSC has at its disposal the authority to seek a consent order that would make a corrective action plan legally binding upon a company. Consent orders may be pursued if, based on prior experience with the company, the CPSC does not have full confidence that the company will actually comply with a non-binding corrective action plan. As noted above, the non-binding corrective action plan process was specifically created as a means for quickly notifying the public about a substantial product hazard - this process avoids the delays associated with obtaining a consent order against a company. Thus, the CPSC currently has the authority under the CPSA either to enter into non-binding voluntary agreement with a company or to seek a legally binding consent order as the situation so warrants. Under the proposed rule, the CPSC seeks to revise Section 1115.20(a) by stating that, once a company voluntarily agrees to a corrective action plan, the company will be legally bound to fulfill the terms of the agreement. The CPSA argues that this provision would give the agency the power to compel a noncompliant or dilatory firm to carry out the terms of its voluntary corrective action plan.

The proposed rule would also require compliance program requirements to be incorporated into companies' corrective action plans in situations where there have been multiple previous recalls, a failure to timely report under Section 15(b) in the past and/or actual evidence of insufficient or ineffectual procedures and controls. However, only vague and broadly defined examples of compliance program requirements are provided by the CPSC, such as:

  • Maintaining and enforcing internal controls and procedures for reporting required product information to the CPSC
  • Establishing processes for complying with product safety laws and regulations
  • Disseminating documented policies and procedures to company employees
  • Providing product safety compliance training
  • Implementing a mechanism for employees to report compliance-related issues confidentially
  • Establishing an issue escalation process for promptly notifying senior management of product safety issues
  • Providing the CPSC with information about the company's reporting improvements, processes, and controls
  • Making available all information, materials, and personnel to allow the CPSC to evaluate the firm's compliance with the terms of the agreement

Violations of a voluntary compliance program agreement may lead to injunctions, specific performance of the agreement and/or additional sanctions (including civil penalties) under the CPSA.

The CPSC's proposed rule has garnered significant criticism and reflects a marked departure from the agency's current policies and practices. By virtue of the current product safety enforcement environment, the CPSC has not demonstrated a substantial need for the proposed amendments to the CPSA. First, virtually all product safety recalls are voluntary with most firms fully complying with voluntary corrective action plans. Couple that with the fact that, in 2010, the CPSA was amended to allow the CPSC to compel mandatory recalls of defective or violative products. Despite this recently expanded enforcement authority, the CPSC has, to date, not pursued a single mandatory recall. Making corrective action plans legally binding in voluntary recalls would essentially allow the agency to secure a consent order against a company without first having to satisfy established protocols and procedural safeguards. The proposed rule also fails to acknowledge that many companies have already established product safety policies and procedures and that the previous voluntary recalls do not necessarily indicate a lack of an effective compliance program - a company's established compliance program may have been what triggered the discovery of a product safety issue and the resulting remedial action. The rule also fails to identify the statutory authority upon which these controversial amendments are based and the rule arguably exceeds the authority granted to the CPSC by Congress.

Of greatest concern, however, is the fact that these proposed revisions may effectively deter companies from taking prompt action and commencing voluntary recalls as soon as product safety issues are identified. At the very least, the proposed rule will likely delay the prompt dissemination of product safety hazard information to the public as companies weigh the pros and cons of taking voluntary remedial action, escalate the issue within the organization for more rigorous internal review, and even enlist the assistance of outside legal counsel for guidance. The CPSC is seeking public comments on the proposed rule on or before February 5, 2014.

[1] The Consumer Product Safety Improvement Act of 2008, Public Law 110-314, 122 Stat. 3016 (2008) (CPSIA), amended the CPSA to strengthen the CPSC's authority to recall products and to notify the public effectively about the scope of a recall and available remedies.

Melissa Miller Proctor is a Member of Sandler, Travis and Rosenberg, P.A. and the Firm's Export Practice Leader, resident in the Scottsdale, Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 305-2110 or via e-mail at