[Federal Register Volume 66, Number 110 (Thursday, June 7, 2001)]
[Notices]
[Pages 30715-30717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-14299]


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CONSUMER PRODUCT SAFETY COMMISSION


Issuance of Policy Statement

AGENCY: Consumer Product Safety Commission.

ACTION: Final policy statement.

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SUMMARY: Section 15(b) of the Consumer Product Safety Act, 15 U.S.C. 
2064(b), requires manufacturers, distributors, and retailers of 
consumer products to report potential product hazards to the 
Commission. After receiving public comments, the Commission issues a 
final policy statement that information concerning products 
manufactured or sold outside of the United States that may be relevant 
to evaluating defects and hazards associated with products distributed 
within the United States should be evaluated and may be reportable 
under section 15(b).

DATES: This policy becomes effective June 7, 2001.

FOR FURTHER INFORMATION CONTACT: Marc Schoem, Director, Division of 
Recalls and Compliance, Consumer Product Safety Commission, Washington, 
DC 20207, telephone--(301) 504-0608, ext. 1365, fax.--(301) 504-0359, 
E-mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

    Section 15(b) of the Consumer Product Safety Act (CPSA), 15 U.S.C. 
2064(b) requires manufacturers, distributors, and retailers of consumer 
products to report potential product hazards to the Commission. In 
1978, the Commission published an interpretative rule, 16 CFR 1115, 
that clarified the Commission's understanding of this requirement and 
that established policies and procedures for filing such reports and 
proffering remedial actions to the Commission. That rule talks 
generally about the types of information a firm should evaluate in 
considering whether to report, but does not specifically address 
information about experience with products manufactured or sold outside 
of the United States. Neither the statute, nor the rule itself, 
excludes such information from being evaluated or reported under 
section 15(b).
    Over the past several years, the Commission has received section 
15(b) reports that have included information on experience with 
products abroad. When appropriate, the agency has initiated recalls 
based in whole or in part on that experience. In addition, the 
Bridgestone/Firestone tire recall of 2000 focused public attention on 
the possible relevance of information generated abroad to safety issues 
in the United States. Accordingly, to assure that firms who obtain 
information generated abroad are aware that they should consider such 
information in deciding whether there is a need to report under section 
15(b), the staff recommended that the Commission issue a policy 
statement. On January 3, 2001 (66 FR 351), the Commission solicited 
comments on a proposed policy statement stating the Commission's 
position that information concerning products sold outside of the 
United States that may be relevant to defects and hazards associated 
with products distributed within the United States should be evaluated 
and may be reportable under section 15(b).

Discussion

    The Commission received seven comments in response to the proposed 
statement. Two supported the policy

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statement. One of these commentors recommended that the Commission 
codify the policy as a substantive rule with specific provisions to 
prevent firms from circumventing the reporting obligation. A total of 
five commentors opposed issuing the statement as drafted. Two of these 
joined with the CPSC Coalition of the National Association of 
Manufacturers (``NAM'') in requesting that the Commission withdraw the 
policy statement. They also requested that, concurrent with the 
withdrawal, the Commission issue a clarification that no new 
obligations or modifications to existing rules are established, or, in 
the alternative, that the Commission engage in a public dialogue to 
review the issues and objectives raised by the policy statement. One 
commentor supported withdrawing the statement because it contended that 
the Commission had not demonstrated the need for it. The last supported 
the underlying rationale for the policy, but proposed limiting the 
policy to requiring the reporting of foreign product safety issues only 
when reporting would be required under the Consumer Product Safety Act. 
A summary of the comments and our responses appear below.

a. Interpretative Rule

    In its 1978 Federal Register notice, the Commission specifically 
addressed whether the reporting regulations should be substantive or 
interpretative. The significance of this distinction is that, once a 
substantive rule goes into effect, it has the force and effect of law, 
and its provisions cannot be challenged in a subsequent proceeding, for 
example, an action to assess civil penalties. An interpretative rule, 
on the other hand, simply offers guidance as to what the Commission 
believes the law means or requires. A firm that disagrees with one or 
more of the provisions of an interpretative rule can, in an enforcement 
proceeding, challenge the reasonableness of the Commission's 
interpretation(s), and can prevail in the proceeding if its contention 
is upheld. In 1978, after seeking public comment, the Commission 
elected to publish the reporting rule as an interpretative rule.
    NAM contends that, in issuing the proposed policy statement, the 
Commission is, in effect, promulgating a substantive rule, and has 
failed to comply with the formal rulemaking procedures of the 
Administrative Procedure Act , 5 U.S.C. 553. Thus, NAM claims that the 
policy would be invalid, if issued.
    The Commission issued the policy statement because it considered it 
only fair that firms who might be unfamiliar with the reporting 
requirements be put on notice of the agency's view that information 
concerning foreign experience relevant to a product in the U.S. should 
be evaluated and may be reportable if it otherwise meets the criteria 
of section 15(b) and 16 CFR 1115. As the policy statement expressly 
acknowledges, this is a straight-forward interpretation of the 
requirements of section 15(b), and is consistent with the 
interpretative reporting regulation which, on its face, does not limit 
reporting to information derived solely from experience with products 
sold in the United States. Given the history of the interpretative 
regulation and the express acknowledgment in the policy statement that 
it too is interpretative, the NAM's attempt to characterize the 
statement as a substantive rule is misplaced.

b. Specificity of the Policy Statement

    NAM posed a number of hypothetical questions that it claims the 
policy statement should, but does not address. In doing so, it treats 
the reporting rule as a substantive rule that firms must follow, even 
though it acknowledges in a footnote that the rule is interpretative. 
The short response to the NAM queries is, of course, that, as an 
interpretative rule, the reporting rule imposes no binding obligation 
on any firm. Moreover, the concerns that NAM raises--for example, 
whether a firm is responsible for reporting if an employee has 
knowledge of a reportable problem, and the extent to which a firm must 
investigate incidents--are not unique to multi-national business 
operations. They have equal applicability to domestic operations. In 
fact, many of those concerns are substantially the same as those that 
commentors on the proposed interpretative rule on reporting raised in 
1977, and that the Commission addressed in the preamble to and text of 
the final rule in 1978. 43 FR 34988. Thus, for example, section J of 
the preamble discusses imputing knowledge of safety-related information 
to a firm only when an employee capable of appreciating the 
significance of the information receives it. Section L points out the 
Commission's views on the need for firms to exercise reasonable 
diligence in investigating possible product defects. It further notes 
that the Commission will take into account the reasonableness of a 
firm's behavior in the circumstances when it considers the firm's 
compliance with the reporting regulations. Section 1115.14 of the rule 
and section J of the preamble acknowledge that the time frames 
recommended for investigation of possible defects and the imputation of 
knowledge have flexibility, depending on the circumstances of a 
particular case.
    While there may be a difference in degree in what it is reasonable 
to expect from reporting firms with respect to the content of and time 
for collecting foreign, as opposed to domestic, information, the 
Commission believes that the basic principles and procedures embodied 
in the 1978 rule and discussed in the preamble have always been and 
continue to be applicable to both domestic and multi-national business 
operations. Those principles and procedures have withstood almost a 
quarter of a century of experience--experience that has often involved 
firms obtaining and analyzing information from foreign sources, 
especially in cases involving products imported into the U.S. Moreover, 
over that period, the Commission has consistently recognized that what 
information it is reasonable to expect a firm to provide in a specific 
case depends on a number of factors. These include the size of the 
firm, the nature of its business, the method in which it conducts its 
operations, the age of the product involved, and the availability of 
relevant information. The location from which such information may be 
obtained and the difficulty in obtaining that information are simply 
additional factors to take into account.
    The Commission notes that the process of business globalization and 
improvements in communication have substantially reduced the 
impediments to obtaining information from abroad that might have 
existed twenty years ago. Firms frequently communicate in seconds via 
the computer, telephone, and fax machine with their overseas customers, 
suppliers, and corporate relatives. Thus, the Commission sees no sound 
justification for accepting NAM's implicit premise that obtaining 
foreign information is so much more difficult than obtaining the same 
types of information generated domestically that different policies and 
procedures should apply. In fact, the Commission's experience 
demonstrates otherwise in that firms that have reported foreign 
information to the Commission, either on their own initiative or upon 
request of the staff, have been able to obtain the necessary 
information in a timely manner. Accordingly, for the reasons discussed 
above, the Commission does not believe that the concerns NAM has 
expressed warrant withdrawing or revising the policy statement.

c. Need for the Policy Statement

    The Consumer Specialty Products Association (CSPA) suggested that 
the policy places an undue burden on

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companies to implement monitoring programs abroad, comparable to those 
in the United States. The Association therefore took the position that 
the Commission must demonstrate the need for such a policy before 
establishing it.
    Section 15(b) contemplates that manufacturers, distributors and 
retailers must consider all information relevant to the determination 
of whether a specific product contains a defect which could create a 
substantial product hazard or an unreasonable risk of serious injury or 
death. As the policy statement points out, neither the law nor the 
interpretative regulation excludes information from evaluation because 
of its geographic source. Accordingly, to the extent that CSPA implies 
that the statement imposes a burden on firms that did not previously 
exist, it is mistaken.
    As an example of the need for the policy, the Commission recently 
accepted a substantial penalty to settle allegations that a company 
failed to report information relating to a defective water distiller in 
a timely manner. That information included analyses of incidents of 
product failure in Asia which the firm had learned about substantially 
before it finally reported to the Commission. Had the firm reported 
that information to the Commission in a timely manner, it could have 
expedited the subsequent recall, thus protecting consumers from the 
risk of fire at a much earlier date. Fires that later occurred in the 
U.S. could have been prevented. Examples of other cases in which 
information generated abroad has been relevant include corrective 
actions involving oil-filled radiators, stacking toys, strollers, and 
swimming vests, and civil penalty cases involving children's products, 
burners for boilers, and pacifiers. Moreover, in terms of need for the 
policy statement, with the volume of imported products entering the 
United States, information which is only available abroad, such as that 
related to product design, manufacturing changes, and quality assurance 
is essential to the evaluation of potential defects. The statement 
helps firms that may be unfamiliar with or unaware of this aspect of 
reporting to comply with their obligations under the law.

d. Additional Comments

    One commenter feared that the policy statement would require firms 
to report products that violate safety standards issued by other 
countries, even if those products were in full compliance with U.S. 
requirements. The commenter requested that the Commission adopt a 
policy that would require the reporting of foreign product safety 
issues only when reporting would otherwise be required under section 
15(b). The Commission believes that the commentor may have misconstrued 
the scope of the policy statement, since the commentor's suggested 
alternative is in effect what the policy statement contemplates.

Conclusion

    The Commission does not believe that any of the comments submitted 
warrant withdrawing or revising the statement. Accordingly, the 
Commission is issuing the policy statement. The Commission has, on its 
own initiative, made one revision to the statement to make it clear 
that the policy applies to information concerning products manufactured 
outside of the United States, as well as to information about products 
distributed abroad. The text of the policy statement is as follows:

Guidance Document on Reporting Information Under 15 U.S.C. 2064(b) 
about Potentially Hazardous Products Manufactured or Distributed 
Outside the United States

    Section 15(b) of the Consumer Product Safety Act (CPSA), 15 U.S.C. 
2064(b), imposes specific reporting obligations on manufacturers, 
importers, distributors and retailers of consumer products distributed 
in commerce. A firm that obtains information that reasonably supports 
the conclusion that such a product:
 Fails to comply with an applicable consumer product safety 
rule or with a voluntary consumer product safety standard upon which 
the Commission has relied under section 9 of the CPSA,
 Contains a defect that could create a substantial product 
hazard as defined in section 15(a)(2) of the CPSA, 15 U.S.C. 
Sec. 2064(a)(2), or
 Creates an unreasonable risk of serious injury or death
must immediately inform the Commission unless the firm has actual 
knowledge that the Commission has been adequately informed of the 
failure to comply, defect, or risk.
    The purpose of reporting is to provide the Commission with the 
information it needs to determine whether remedial action is necessary 
to protect the public. To accomplish this purpose, section 15(b) 
contemplates that the Commission receive, at the earliest time 
possible, all available information that can assist it in evaluating 
potential product hazards. For example, in deciding whether to report a 
potential product defect, the law does not limit the obligation to 
report to those cases in which a firm has finally determined that a 
product in fact contains a defect that creates a substantial product 
hazard or has pinpointed the exact cause of such a defect. Rather, a 
firm must report if it obtains information which reasonably supports 
the conclusion that a product it manufactures and/or distributes 
contains a defect which could create such a hazard or that the product 
creates an unreasonable risk of serious injury or death. 15 U.S.C. 
2064(b)(2) and (3); 16 CFR 1115.4 and 6. Nothing in the reporting 
requirements of the CPSA or the Commission's interpretive regulation at 
16 CFR Part 1115 limits reporting to information derived solely from 
experience with products sold in the United States. The Commission's 
interpretative rule enumerates, at 16 CFR 1115.12(f), examples of the 
different types of information that a firm should consider in 
determining whether to report. The regulation does not exclude 
information from evaluation because of its geographic source. The 
Commission interprets the statutory reporting requirements to mean 
that, if a firm obtains information that meets the criteria for 
reporting listed above and that is relevant to a product it sells or 
distributes in the U.S., it must report that information to the CPSC, 
no matter where the information came from. Such information could 
include incidents or experience with the same or a substantially 
similar product, or a component thereof, sold in a foreign country.
    Over the past several years, the Commission has received reports 
under section 15(b) that have included information on experience with 
products abroad, and, when appropriate, has initiated recalls based in 
whole or in part on that experience. Thus, a number of companies 
already view the statutory language as the Commission does. However, 
with the expanding global market, more firms are obtaining this type of 
information, but many may be unfamiliar with this aspect of reporting. 
Therefore, the Commission issues this policy statement to assist those 
firms in complying with the requirements of section 15(b) of the 
Consumer Product Safety Act.

    Dated: June 1, 2001.
Sadye E. Dunn,
Secretary, Consumer Product Safety Commission.
[FR Doc. 01-14299 Filed 6-6-01; 8:45 am]
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