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Record Penalty for Failure to Notify CPSC of Product Hazards

Thursday, October 30, 2014
Sandler, Travis & Rosenberg Trade Report

A South Carolina firm has agreed to pay a $4.3 million civil penalty and take other measures to settle charges that it knowingly failed to timely notify the Consumer Product Safety Commission of hazards in 11 models of mini-bikes and go-carts imported into and sold in the U.S. According to press reports, this is the largest civil penalty ever assessed by the CPSC. Any interested person may ask the Commission not to accept this settlement agreement or otherwise comment on its contents no later than Nov. 14.

According to the CPSC, the mini-bikes and go-carts had gas caps that could leak or detach from the fuel tank, posing a fire and burn hazard to consumers, and throttles that could stick due to an improperly positioned fuel line and throttle cable. The firm received consumer reports of these problems and responded by implementing design changes but did not report the defects to the CPSC until well after the problems became apparent.

The firm currently has a written post-sale product safety compliance program, an established product hazard committee and a product safety education and training program designed to ensure compliance with the law and regulations enforced by the CPSC. The CPSC states that these programs contain, or will be modified to contain, the following elements.

- written standards and policies

- systematic procedures for (a) reviewing and assessing reports, claims and other information (including consumer and retailer incident reports and personal injury claims) for potential safety issues, including the potential existence of a substantial risk of injury or a defect, and (b) referring such reports, claims and other information to appropriate personnel responsible for complying with CPSC authority

- a mechanism for confidential employee reporting of compliance-related questions or concerns to a senior manager with authority to act as necessary

- effective communication of company compliance-related policies and procedures to all employees through training programs or otherwise

- senior manager responsibility for compliance and accountability for violations of the law and regulations enforced by the CPSC

- oversight of compliance by the firm’s governing body

- retention of all compliance-related records for at least five years and availability of such records to CPSC staff upon request

In addition, the firm has agreed to maintain and enforce a system of internal controls and procedures designed to ensure that (a) information required to be disclosed to the CPSC is recorded, processed and reported in accordance with applicable law; (b) all reporting made to the CPSC is timely, truthful, complete and accurate; and (c) prompt disclosure is made to the firm’s management of any significant deficiencies or material weaknesses in the design or operation of such internal controls that are reasonably likely to adversely affect in any material respect the firm’s ability to record, process and report to the CPSC in accordance with applicable law.

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