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$1.8 Million Penalty for Failure to Notify CPSC of Product Hazards

Friday, July 24, 2015
Sandler, Travis & Rosenberg Trade Report

A Chinese and a Delaware company have agreed to pay a $1,825,000 civil penalty and take other measures to settle charges that they knowingly failed to timely notify the Consumer Product Safety Commission of a defect and an unreasonable risk of serious injury associated with several models of dehumidifiers imported into and sold in the U.S. Any interested person may ask the Commission not to accept this settlement agreement or otherwise comment on its contents no later than Aug. 10.

According to the CPSC, the dehumidifiers overheated, smoked, melted or caught fire due to a defective fan, posing fire and burn hazards to consumers. Between 2003 and 2009 the firms received dozens of reports of these problems but did not report the defects to the CPSC until well after the problems became apparent. The dehumidifiers were finally recalled in 2012 and the recall was re-announced in July 2013.

In addition to paying a civil penalty, the firms have agreed to maintain a compliance program designed to ensure compliance with the Consumer Product Safety Act as well as a related series of internal controls and procedures. The compliance program requires written standards, policies and procedures, including those designed to ensure that information that may relate to or impact CPSC compliance is conveyed effectively to personnel responsible for such compliance. The compliance program also must address:

- confidential employee reporting of compliance concerns to a senior manager with authority to act;

- effective communication of compliance policies and procedures, including training;

- senior management and responsibility for, and general board oversight of, compliance; and

- requirements for record retention.

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