Fines, Imports and Retailer Reporting Are Among CPSC Issues to Watch

CPSC Chairman Elliot Kaye February 25 voiced support for pushing civil penalty payments higher. Many of those occurring in recent years are not reflective of the desire of Congress when it raised the cap to $15 million as part of the CPSIA, he told a luncheon crowd of most of the 707 registered attendees of the annual meeting of the International Consumer Product Health and Safety Organization (ICPHSO) in Orlando, Fla. Agency staff, he said, support pushing as hard as possible and as much as the law allows for higher penalties. He suggested that some companies seem to see the existing levels as costs of doing business rather than punitive.

He acknowledged that many penalties following the law’s passage were low because the dates of the alleged failures were before the higher ceiling’s effective date, which was in August 2009. However that dynamic is becoming less of an issue with time. He also referenced the role of the Justice Department in cases and the need for both agencies to speak as one in negotiations. It is believed among many CPSC stakeholders that there have been a few cases in which Justice tempered already-made CPSC penalty demands.

How high penalties might go is unclear. The current record is $4.5 million paid last November by Baja/One World Technologies (PSL, 11/3/14). The average of the five most recent settlements that topped $1 million is $3.1 million. Presumably, numbers near the $15 million ceiling would be reserved for large companies able to pay such amounts and involving especially egregious violations as well as court fights rather than settlements. However, even a quadrupling of the recent average would put fines well below the cap.

Some other issues from the ICPHSO sessions that bear watching in coming months include:

Import Surveillance: CPSC’s recently renewed budget request for authority to impose user fees aimed at expanding the RAM (risk assessment methodology) pilot (PSL, 2/9/15) is occurring amid a lack of confidence among companies about navigating import screens. Kaye promoted the RAM’s growth as needed to ensure safety. “The American consumer would be appalled” at the products the government cannot stop, he said. However, he also stressed the screening program’s targeted role of facilitating trade, explaining that the goal is twofold: confidence that officials are screening what they should be but also that they are expediting compliant goods. Because of the large number of products under CPSC jurisdiction, it is among 14 agencies identified in a government-wide initiative as key to such improvements. An executive order last year set that work in motion.

It became clear in a separate ICPHSO session dedicated to import surveillance that issues CPSC needs to address include helping companies better understand what is happening when shipments are delayed. This can be as basic as whether the problem is an actual detention as defined under the law or some other delay. A related source of frustration is not getting a clear answer about which agency – CPSC or Customs and Border Protection (CBP) – initiated a delay. As well, there is an educational element that involves growing checklist of pitfalls to avoid. Those range from ensuring that CPSC-required certificates are valid and available to strategic steps like diverting in-route shipments from U.S. entry if learning of problems with identical cargo.

Port shopping also is a concern of CPSC and CBP, but industry has a related concern about government agents being able to distinguish that tactic from benign changes in port use. Port shopping is not illegal but it can draw extra scrutiny.

In the end, it seems that regulators are looking at trends rather than single events as confirmed by their acknowledging, for example, that letters of advice should not be seen as being on a “blacklist” of companies meriting extra attention. That typically comes from a pattern not an event.

CPSC also is soliciting importers’ help in identifying problematic foreign manufacturers rather than simply cutting off business with them when discovering issues. That is because other companies might be using those suppliers.

Retailer Reporting: The program, begun as a pilot 10 years ago, is set to get scrutiny, Kaye confirmed, saying a “2.0” version is possible. However, CPSC needs to ensure it is getting a good return on the resources it invests.

Background includes a pause in accepting new entries prompted by Commissioner Robert Adler when he was acting chairman and a CPSC General Counsel letter sent last summer to participants saying they should not consider submission of data through the program as fulfilling section 15(b) duties. The first involved the ad hoc nature of agreements as opposed to a standardized set of criteria for acceptance and continued participation. The second involved assurances made by CPSC about compliance actions and whether the agency can interpret the data dumps as failing to meet the limited requirements of 15(b) in the context of the section’s discussion of CPSC being “adequately informed.”

In a later session on the program, both Adler and Commissioner Joseph Mohorovic agreed that a program going forward would need consistent criteria but that CPSC should stand by existing commitments. They did not agreed that decisions about the parameters of a continued program needed to be at the commission level.

From the audience, Gib Mullan – who was instrumental in setting the program in motion – explained that it developed outside normal commission channels during CPSC quorum problems due to a lack of seated commissioners a decade ago. Thus agency staffers were acting with delegated authority given to them as a quorum expired. Mullan is serving a second stint at CPSC as Commissioner Ann Marie Buerkle’s chief counsel, but a decade ago he held positions as General Counsel and then as head of Compliance.

As for value, some CPSCers find the data useful as it contains much product-identifying information that other data sets like NEISS or death certificates typically lack. Adler, however, pointed out that staff assessments are mixed, and he noted little indication of many resulting recalls. A potential home for a reworked program might be as more an epidemiological tool than a compliance one.

Panelist Kathleen McGuigan, legal and regulatory affairs VP at the Retail Industry Leader’s Association, emphasized that if CPSC wants to continue getting such data, there must be some benefit to participants. That need, however, bumps against CPSC’s concerns about giving safe harbors for reporting deficiencies. Mohorovic addressed that dilemma by contrasting “safe harbor” with such data deliveries at least being mitigating factors in decisions to seek penalties.

The program arose when Walmart began regularly giving CPSC large files of information from customer complaints. This was in response to its paying a 15(b) settlement penalty. The phrase retailer reporting is no longer accurate as two of the seven participants are not retailers.

1110 Certification: Kaye told the ICPHSO audience to “stay tuned and please jump in” regarding the coming development of a “consumer product advisory panel” under CBP’s commercial operations advisory committee (COAC).

Burden Reduction: Kaye asserted that CPSC has been seeking to go beyond congressional mandates to ease testing costs. “If there’s a viable lead, we’re following it,” he said. However, he also noted not every idea can work, pointing to disappointment so far in figuring out how certain rigid plastics can be deemed phthalate-free without testing (PSL, 6/16/14). He suggested the possibility of a burden-reduction development by late summer if work keeps on track.

CPSCers in other sessions, when responding to queries about burden reduction, typically reiterated the well-known focus on determinations involving materials that do not and cannot contain substances like heavy metals or phthalates.

Nanotechnology: CPSC wants to get in front of inevitable questions about risk and exposure. That is a big part of the recent request for a $5 million bump to its budget for the creation of a research center (PSL, 2/9/15), noted George Borlase, who heads the Hazard Identification office. Work could be different from what is typical for CPSC, he explained, as it will involve basic research rather than applied. CPSC’s contribution to federal nanotech efforts (which range from R&D to health/safety oversight) from a monetary perspective will be tiny, but many of the products types at issue put the research within its jurisdiction, Borlase said.