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$1 Million Fine, Corporate Compliance Requirements for Imports of Defective Hammock Stands

Thursday, May 09, 2013
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission has provisionally accepted an agreement under which a California company will pay a civil penalty of $987,500 and take other actions to settle charges that it imported defective wooden hammock stands.

The CPSC states that although the hammock stands are marketed for outdoor use, water and moisture can become trapped in the metal brackets that hold them together, causing the wooden support beams to rot inside the brackets. The CPSC further asserts that the company had received eight incident reports involving these hammock stands by October 2006 but did not file a full report until September 2008. The company was therefore charged with knowingly violating the Consumer Product Safety Act, which requires companies to immediately notify the CPSC of defects or possible defects that could create a substantial product hazard or create an unreasonable risk of serious injury or death.

As part of this agreement, the company will be required to implement and maintain a program designed to ensure compliance with the safety statutes and regulations enforced by the CPSC that, at a minimum, contains the following elements: (i) written standards and policies, (ii) a mechanism for confidential employee reporting of compliance-related questions or concerns to either a compliance officer or another senior manager with authority to act as necessary, (iii) effective communication of company compliance-related policies and procedures to all employees through training programs or otherwise, (iv) senior manager responsibility for compliance, (v) board oversight of compliance (if applicable), and (vi) retention of all compliance-related records for at least five years and availability of such records to CPSC staff upon request.

The company will also be required to maintain and enforce a system of internal controls and procedures designed to ensure that (i) information required to be disclosed to the CPSC is recorded, processed and reported in accordance with applicable law; (ii) all reporting made to the CPSC is timely, truthful, complete and accurate; and (iii) prompt disclosure is made to the company’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 company’s ability to record, process and report to the CPSC in accordance with applicable law.

Any interested person may ask the CPSC not to accept this agreement or otherwise comment on its contents by filing a written request no later than May 23.

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