[Federal Register Volume 71, Number 142 (Tuesday, July 25, 2006)]
[Rules and Regulations]
[Pages 42028-42031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11758]


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CONSUMER PRODUCT SAFETY COMMISSION

16 CFR Part 1115


Substantial Product Hazard Reports

AGENCY: Consumer Product Safety Commission.

ACTION: Final interpretative rule.

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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

[[Page 42029]]

report potential product hazards to the Consumer Product Safety 
Commission. On May 26, 2006, the Commission solicited comments on 
proposed revisions to its interpretative rule advising manufacturers, 
distributors, and retailers how to comply with the requirements of 
section 15(b). The proposed revisions identified additional factors the 
Commission and staff consider when assessing whether a product is 
defective or not. The proposed revisions also clarified that compliance 
with voluntary or mandatory product safety standards may be considered 
by the Commission in making certain determinations under section 15. 
After considering public comments, the Commission issues the 
accompanying final rule.\1\
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    \1\ The Commission voted 2-1 to issue the final interpretative 
rule, Commissioner Thomas Moore dissenting. Chairman Stratton and 
Commissioner Nord filed statements which are available from the 
Office of the Secretary or on the Commission's Web site at http://www.cpsc.gov.

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DATES: This final rule becomes effective on July 25, 2006.

FOR FURTHER INFORMATION CONTACT: John Gibson Mullan, Assistant 
Executive Director, Compliance and Field Operations at (301) 504-7626.

SUPPLEMENTARY INFORMATION:

A. Background

    To provide further guidance, clarity and transparency on reporting 
obligations under section 15(b) of the Consumer Product Safety Act 
(CPSA), 15 U.S.C. 2064(b), the Commission, on May 26, 2006 (71 FR 
30350) proposed revisions to its interpretative rules regarding 
reporting of possible substantial product hazards. Section 15(b) of the 
CPSA requires that every manufacturer (including an importer), 
distributor or retailer of a consumer product who obtains information 
which reasonably supports the conclusion that its 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, or contains a defect which 
could create a substantial product hazard as defined in section 
15(a)(2) of the CPSA, or creates an unreasonable risk of serious injury 
or death, shall immediately inform the Commission of such failure to 
comply, of such defect, or of such risk, unless the manufacturer, 
distributor or retailer has actual knowledge that the Commission has 
been adequately informed. In 1978, the Commission first published an 
interpretative rule, 16 CFR part 1115, which explained the section 
15(b) reporting requirement and provided guidance on filing section 
15(b) reports.
    In this notice the Commission finalizes revisions to the 
interpretative rule to clarify factors relevant to section 15(b) 
reporting determinations. These revisions are not intended to reduce 
the number of reports to the Office of Compliance, to reduce or change 
the types of information reported, or to suggest a diminished need to 
report.
    The Commission received 14 comments in response to the proposed 
revisions. Joint comments were submitted by four ATV companies (Kawaski 
Motors Corp., USA; American Honda Motor Co., Inc.; Polaris Industries 
Inc., and Yamaha Motor Corporation, U.S.A.). Joint comments were also 
submitted by four consumer groups (Consumers Union, Consumer Federation 
of America, Kids In Danger, and U.S. Public Interest Research Group). 
Eight commenters supported the revisions; two of the eight suggested 
clarifications to certain provisions. Six commenters opposed the 
revisions; five of the six suggested that the Commission not adopt the 
revisions and one of the six suggested that the Commission keep the 
record open. The Commission received a number of comments in support of 
a regulation related to the assessment of civil penalties pursuant to 
section 20 of the CPSA, 15 U.S.C. 2069(b), (c). A separate Federal 
Register notice is being issued for public comment on this issue.
    The Commission received a number of comments that went beyond the 
scope of the proposed revisions. These included a suggestion for a new 
appeal process for preliminary determinations relating to substantial 
product hazards, issues concerning the hazards presented by counterfeit 
products, more widespread notice about the Fast Track recall process, 
General Counsel review of recommendations of proposed administrative 
complaints, and provisions in the adjudicative rules for joinder and 
intervention. The Commission is not incorporating any of these 
suggestions since they were not part of the proposed revisions.
    A summary of the comments on the proposed revisions and our 
responses appear below.

B. Section 1115.4 Defect

    The first revision clarifies the Commission's discussion of 
``defect'' by adding additional criteria Commission staff use to 
evaluate whether a risk of injury is the type of risk that will render 
a product defective, thus possibly triggering a reporting obligation 
under section 15(b). The rule currently states that in determining 
whether the risk of injury associated with a product is the type of 
risk which will render a product defective, the Commission and staff 
consider, as appropriate: the utility of the product involved; the 
nature of the risk of injury which the product presents; the necessity 
for the product; the population exposed to the product and its risk of 
injury; the Commission's own experience and expertise; the case law 
interpreting Federal and State public health and safety statutes; the 
case law in the area of products liability; and other factors relevant 
to the determination. The Commission proposed to add the following 
factors as considerations: the obviousness of such risk; the adequacy 
of warnings and instructions to mitigate such risk; the role of 
consumer misuse of the product, and the foreseeability of such misuse.
    The commenters who opposed the revisions suggested that inclusion 
of these additional factors does not clarify a firm's reporting 
obligations but weakens the intent of the original regulation by giving 
firms additional factors upon which to argue that a particular product 
is not defective and thereby avoid reporting. Several commenters also 
suggested that a firm could rely on just one of the factors--like 
consumer misuse--to negate a reporting obligation.
    The Commission's intent in adopting this revision is to give 
further guidance to firms about reporting defects in their products. 
The determination of whether a product is defective is a threshold 
issue in evaluating reporting obligations under section 15(b) of the 
CPSA and is one of the most critical determinations a company is 
required to make under the CPSA. 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 a 
substantial product hazard. 15 U.S.C. 2064(b)(2). The regulatory 
criteria for evaluating whether a product presents a risk of injury 
that may render it defective have been in effect since 1978. In the 
nearly 30 years since then, the Commission and staff have evaluated 
thousands of products using many criteria, including, as appropriate, 
the criteria now being adopted. The Commission has concluded, based on 
experience and practice in applying the criteria, that the additional 
factors--the obviousness of such risk; the adequacy of warning and 
instructions to mitigate such risk; the role of consumer misuse of the 
product and the foreseeability of such misuse--help clarify the 
existing factors in the regulation and enable a better analysis of 
whether the risk of injury associated with a product is the

[[Page 42030]]

type of risk which will render it defective. This regulation 
contemplates consideration of a number of appropriate factors in making 
such a determination. Reliance on one factor alone cannot negate a 
reporting obligation if other factors, as applied, reasonably support 
the conclusion that a defect exists.
    The Commission staff already considers the proposed factors in 
making decisions about potential defects. The current defect regulation 
specifies that the Commission and staff will, as appropriate, consider 
the case law in the area of product liability. Two commenters pointed 
out that the case law in the product liability area, as reflected in 
the Restatement of Torts, uses all of the additional criteria proposed. 
Thus, the regulation only makes explicit what was already implicit in 
the Commission's regulation.

C. Section 1115.12(g)(1)(ii) Number of Defective Products Distributed 
In Commerce

    The Commission proposed adding the following statement to an 
evaluation of the number of defective products distributed in commerce 
when making a substantial product hazard determination: ``The 
Commission also recognizes that the risk of injury from a product may 
decline over time as the number of products being used by consumers 
decreases.''
    Three commenters objected to this provision. One commenter 
contended that the proposed regulatory change is untrue because the 
individual risk to a user from a defective product bears no 
relationship to the number of products in use. Commenters opposed to 
the provision also stated that the proposal gave manufacturers an 
incentive to wait to report and to hide problems until a product is 
older.
    The Commission has clarified the language of this provision in 
response to comments. By this provision, the Commission is merely 
recognizing that the number of products remaining in consumers hands at 
any given time is relevant to a substantial product hazard 
determination and that determination can be influenced by a decline 
over time in the number of products remaining in use. The current 
regulation can be misleading because it suggests that the number of 
products originally distributed is the only relevant number in deciding 
whether a defective product presents a substantial risk of injury. When 
a potential hazard first appears long after a product was sold, 
however, the more relevant number is not the number of products 
originally sold but the number still with consumers. A firm may still 
have a reporting obligation in such circumstances. The Commission 
stresses that firms should never delay reporting in anticipation of, or 
because of, a decrease in the number of products in use. Firms that 
delay reporting for such reasons will be subject to civil penalties. 
The final regulation is reworded to avoid use of the term ``risk'' 
which generated some confusion.

D. Section 1115.8 Compliance With Product Safety Standards

    The proposed revisions also add a new section Sec.  1115.8, 
``Compliance with Product Safety Standards.'' This section is intended 
to further explain how the Commission views compliance with applicable 
voluntary or mandatory standards, particularly in the context of 
decisions under section 15 of the CPSA. Three of the commenters raised 
the objection that this new provision creates a safe harbor for 
companies by negating a reporting obligation when a product complies 
with a voluntary or mandatory standard.
    Voluntary Standards. The opposing commenters mistake the scope and 
intent of this provision. It provides no safe harbor from a reporting 
obligation. The text of the rule states that compliance with voluntary 
standards ``may be relevant'' to preliminary determinations. This 
language clearly does not foreclose the possibility that the staff may 
make a preliminary determination that a product presents a substantial 
product hazard notwithstanding compliance with all applicable voluntary 
standards. Although the Commission strongly supports voluntary 
standards, such standards are not always adequate. In some cases, a 
defect may involve a product characteristic or aspect of performance 
not addressed by a standard that is adequate in other respects, or a 
product that meets voluntary standards by design may be taken out of 
compliance by a manufacturing defect. In short, if a voluntary standard 
exists and addresses a product hazard, and the product complies with 
such a standard, then that compliance may be relevant to considering 
whether a product preliminarily presents a substantial product hazard. 
Compliance with a voluntary standard does not preclude a determination 
that a substantial product hazard exists, nor will it relieve a firm of 
the requirement to report when a substantial product hazard may exist. 
Firms must not treat compliance with standards as an excuse not to 
report. They should report if a substantial product hazard may exist 
and allow the staff to consider the significance of the standard. In 
the past, the Commission has sought recalls for products that have 
complied with voluntary standards as well as products that did not 
comply. Compliance with an applicable voluntary standard, as stated in 
the final regulation, is merely one factor in this evaluation.
    Mandatory Standards. For reasons similar to those stated above, the 
Commission's provision for mandatory standards does not negate a 
reporting obligation nor provide safe harbor for the failure to report. 
There have been a number of occasions in the experience of the 
Commission staff when a product is determined to contain a defect that 
could create a substantial product hazard even though such product 
complies with a mandatory standard. The statute and regulations 
contemplate a report in such a circumstance. In fact, reports are 
especially important in such cases because they may be the Commission's 
only indication that the mandatory standards are in need of revision. 
At the same time, the Commission appreciates that it is generally 
inappropriate to hold firms to a higher standard for products 
retroactively. As stated in the regulation, which is slightly reworded 
in the final text, compliance with a mandatory standard should play a 
role in the staff's determination as to whether a corrective action is 
necessary.

List of Subjects in 16 CFR Part 1115

    Administrative practice and procedure, Business and Industry, 
Consumer protection, Reporting and recordkeeping requirements.


0
Accordingly, 16 CFR part 1115 is amended as follows:

PART 1115--SUBSTANTIAL PRODUCT HAZARD REPORTS

0
1. The authority citation for part 1115 continues to read as follows:

    Authority: 15 U.S.C. 2061, 2064, 2065, 2066(a), 2068, 2070, 
2071, 2073, 2076, 2079 and 2084.


0
2. In Sec.  1115.4, amend the concluding text by adding a new phrase 
after the phrase, ``the population exposed to the product and its risk 
of injury;'' to read as follows:


Sec.  1115.4  Defect.

* * * the obviousness of such risk; the adequacy of warnings and 
instructions to mitigate such risk; the role of consumer misuse of the 
product and the foreseeability of such misuse;'' * * *
0
3. Section 1115.8 is added to read as follows:

[[Page 42031]]

Sec.  1115.8  Compliance with product safety standards.

    (a) Voluntary standards. The CPSA and other federal statutes 
administered by the Commission generally encourage the private sector 
development of, and compliance with voluntary consumer product safety 
standards to help protect the public from unreasonable risks of injury 
associated with consumer products. To support the development of such 
consensus standards, Commission staff participates in many voluntary 
standards committees and other activities. The Commission also strongly 
encourages all firms to comply with voluntary consumer product safety 
standards and considers, where appropriate, compliance or non-
compliance with such standards in exercising its authorities under the 
CPSA and other federal statutes, including when making determinations 
under section 15 of the CPSA. Thus, for example, whether a product is 
in compliance with applicable voluntary safety standards may be 
relevant to the Commission staff's preliminary determination of whether 
that product presents a substantial product hazard under section 15 of 
the CPSA.
    (b) Mandatory standards. The CPSA requires that firms comply with 
all applicable mandatory consumer product safety standards and to 
report to the Commission any products which do not comply with either 
mandatory standards or voluntary standards upon which the Commission 
has relied. As is the case with voluntary consumer product safety 
standards, compliance or non-compliance with applicable mandatory 
safety standards may be considered by the Commission and staff in 
making relevant determinations and exercising relevant authorities 
under the CPSA and other federal statutes. Thus, for example, while 
compliance with a relevant mandatory product safety standard does not, 
of itself, relieve a firm from the need to report to the Commission a 
product defect that creates a substantial product hazard under section 
15 of the CPSA, it will be considered by staff in making the 
determination of whether and what type of corrective action may be 
required.

0
4. Section 1115.12 is amended by adding a new sentence at the end of 
paragraph (g)(1)(ii) to read as follows:


Sec.  1115.12  Information which should be reported; evaluating 
substantial product hazard.

* * * * *
    (g) * * *
    (1) * * *
    (ii) * * * The Commission also recognizes that the number of 
products remaining with consumers is a relevant consideration.
* * * * *

    Dated: July 18, 2006.
Todd A. Stevenson,
Secretary, Consumer Product Safety Commission.
 [FR Doc. E6-11758 Filed 7-24-06; 8:45 am]
BILLING CODE 6355-01-P