[Federal Register Volume 83, Number 229 (Wednesday, November 28, 2018)]
[Notices]
[Pages 61146-61149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25928]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 19-C0002]


EKO Development, Ltd. and EKO USA, LLC, Provisional Acceptance of 
a Settlement Agreement and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Notice.

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SUMMARY: It is the policy of the Commission to publish settlements 
which it provisionally accepts under the Consumer Product Safety Act in 
the Federal Register in accordance with the terms of the Consumer 
Product Safety Commission's regulations. Published below is a 
provisionally-accepted Settlement Agreement with EKO Development, Ltd. 
and EKO USA, LLC, containing a civil penalty in the amount of one 
million dollars ($1,000,000), subject to the terms and conditions of 
the Settlement Agreement.\1\
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    \1\ The Commission voted 3-2 to provisionally accept the 
proposed Settlement Agreement and Order regarding EKO Development, 
Ltd. and EKO USA, LLC. Acting Chairman Buerkle, Commissioner Baiocco 
and Commissioner Feldman voted to provisionally accept the 
Settlement Agreement and Order. Commissioner Adler and Commissioner 
Kaye voted to take other action. Commissioner Adler and Commissioner 
Kaye submitted a joint dissenting opinion regarding the matter. The 
dissenting opinion is available on the CPSC website, www.cpsc.gov.

DATES: Any interested person may ask the Commission not to accept this 
agreement or otherwise comment on its contents by filing a written 
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request with the Office of the Secretary by December 13, 2018.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to Comment 19-C0002, Office of the 
Secretary, Consumer Product Safety Commission, 4330 East West Highway, 
Room 820, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT: Michele Melnick, Trial Attorney, 
Division of Compliance, Office of the General Counsel, Consumer Product 
Safety Commission, 4330 East West Highway, Bethesda, Maryland 20814-
4408; telephone (301) 504-7592.

SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears 
below.

    Dated: November 23, 2018.
Alberta E. Mills,
Secretary.

UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION

In the Matter of: EKO DEVELOPMENT, LTD. and EKO USA, LLC
CPSC Docket No.: 19-C0002

SETTLEMENT AGREEMENT

    1. In accordance with the Consumer Product Safety Act, 15 U.S.C. 
Sec. Sec.  2051- 2089 (``CPSA'') and 16 C.F.R. Sec.  1118.20, EKO 
Development, Ltd. and EKO USA, LLC (collectively, ``EKO'') and the 
United States Consumer Product Safety Commission (``Commission''), 
through its staff, hereby enter into this Settlement Agreement 
(``Agreement''). The Agreement and the incorporated attached Order 
resolve staff's charges set forth below.

THE PARTIES

    2. The Commission is an independent federal regulatory agency, 
established pursuant to, and responsible for, the enforcement of the 
CPSA, 15 U.S.C. Sec. Sec.  2051-2089. By executing the Agreement, staff 
is acting on behalf of the Commission, pursuant to 16 C.F.R. Sec.  
1118.20(b). The Commission issues the Order under the provisions of the 
CPSA.
    3. EKO Development, Ltd. (``EKO Development'') is a corporation, 
organized and existing under the laws of China, with its principal 
place of business in China. EKO USA, LLC (``EKO USA'') is a 
corporation, organized and existing under the laws of the state of 
Nevada, with its principal place of business in Stuart, Florida.

STAFF CHARGES

    4. Between November 2013 and May 2015, EKO manufactured 
approximately 367,000 EKO Sensible Eco Living Trash Cans (``Subject 
Products'' or ``Trash Cans''). The Trash Cans are 80 liter stainless 
steel, metal-cylinder Trash Cans with a black plastic protective collar 
in the opening on the back of the Trash Can.
    5. The Trash Cans were sold exclusively at Costco Wholesale 
Corporation at its warehouse stores throughout the United States from 
December 2013 through May 2015.
    6. The Trash Cans are a ``consumer product,'' ``distribut[ed] in 
commerce,'' as those terms are defined or used in sections 3(a)(5) and 
(8) of the CPSA, 15 U.S.C. Sec.  2052(a)(5) and (8). EKO is a 
``manufacturer'' as such term is defined in section 3(a)(11) of the 
CPSA, 15 U.S.C. Sec.  2052(a)(11).
    7. The Trash Cans contain a defect which could create a substantial 
product hazard or create an unreasonable risk of serious injury because 
the black plastic protective collar in the opening on the back of the 
Trash Can can detach from the sharp metal handle, posing a laceration 
hazard to consumers.
    8. Beginning in April 2014, EKO received complaints from consumers 
who received laceration injuries, including some serious injuries as 
defined in 16 C.F.R. Sec.  1115.6(c), from the sharp metal handle of 
the Trash Cans.
    9. In August 2014, EKO approved a design change to the Trash Cans 
to add a two-piece plastic handle cover to address the laceration 
hazard. The design change was implemented on the Trash Cans that were 
produced in August 2014 and shipped to Costco in September 2014.
    10. Despite having information that reasonably supported the 
conclusion that the Trash Cans contained a defect or created an 
unreasonable risk of serious injury or death, EKO did not notify the 
Commission immediately of such defect or risk, as required by sections 
15(b)(3) and (4) of the CPSA, 15 U.S.C. Sec. Sec.  2064(b)(3) and (4).
    11. EKO and the CPSC jointly announced a recall of 367,000 Trash 
Cans on July 17, 2015, because the Trash Cans posed a laceration risk 
to consumers.
    12. In failing to immediately inform the Commission about the 
defect or unreasonable risk associated with the Trash Cans, EKO 
knowingly violated section 19(a)(4) of the CPSA, 15 U.S.C. Sec.  
2068(a)(4), as the term ``knowingly'' is defined in section 20(d) of 
the CPSA, 15 U.S.C. Sec.  2069(d).
    13. Pursuant to Section 20 of the CPSA, 15 U.S.C. Sec.  2069, EKO 
is subject to civil penalties for its knowing violation of section 
19(a)(4) of the CPSA, 15 U.S.C. Sec.  2068(a)(4).

RESPONSE OF EKO

    14. EKO's settlement of this matter does not constitute an 
admission of staff's charges as set forth in paragraphs 4 through 13 
above.
    15. EKO Development, Ltd. is a small Chinese company based in 
Guangzhou, China. EKO was completely unaware of the CPSC reporting 
requirements. EKO relied upon its third party insurance administrator 
to handle the claims received from consumers and was never advised of 
the potential obligation to report under sections 15(b)(3) and (4) of 
the CPSA, 15 U.S.C. Sec.  2064(b)(3) and (4).

[[Page 61147]]

Upon learning about the claims from the sharp edge, EKO immediately re-
designed the Trash Can so that all new products would have a two-piece 
black plastic collar, permanently covering the sharp edge. Upon 
learning of the potential obligation to report from its retailer 
customer in May 2015, EKO immediately hired legal counsel in the U.S., 
reported the issue and conducted a recall of the Trash Can.

AGREEMENT OF THE PARTIES

    16. Under the CPSA, the Commission has jurisdiction over the matter 
involving the Trash Cans and over EKO.
    17. The parties enter into the Agreement for settlement purposes 
only. The Agreement does not constitute an admission by EKO or a 
determination by the Commission that EKO violated the CPSA's reporting 
requirements.
    18. In settlement of staff's charges, and to avoid the cost, 
distraction, delay, uncertainty, and inconvenience of protracted 
litigation, EKO shall pay a civil penalty in the amount of one million 
dollars (US $1,000,000). EKO shall pay the one million dollar (US 
$1,000,000) civil penalty in installments, with $250,000 to be paid 
within thirty (30) calendar days after the Firm receives service of the 
Commission's final Order accepting the Agreement (``Final 
Acceptance''); $250,000 to be paid ninety (90) days after Final 
Acceptance; $250,000 to be paid one hundred eighty (180) days after 
Final Acceptance; and $250,000 to be paid one (1) year after Final 
Acceptance. EKO shall also provide a written affirmation to CPSC's 
Office of the General Counsel within sixty (60) days after Final 
Acceptance declaring that EKO has implemented and will enforce a 
written comprehensive compliance program pursuant to paragraph 27, 
below.
    19. EKO, through its Principal or Chief Executive Officer, shall 
notify CPSC's General Counsel in writing at least ten (10) calendar 
days after any reorganization, consolidation, merger, acquisition, 
dissolution, assignment, sale, transfer, or similar transaction or 
series of transactions resulting in a successor entity to EKO, the 
transfer or disposition of substantially all of the assets of EKO, or 
any other changes in corporate structure that may affect EKO's 
obligations arising out of this Agreement.
    20. All payments to be made under the Agreement shall constitute 
debts owing to the United States and shall be made by electronic wire 
transfer to the United States via: http://www.pay.gov for allocation 
to, and credit against, the payment obligations of EKO under this 
Agreement.
    21. This Agreement has been compromised by the Commission pursuant 
to its statutory authority under Section 20(c), which requires the 
Commission to consider, among other things, the appropriateness of the 
penalty to the size of the business of the person charged, including 
how to mitigate undue adverse economic impacts on small businesses. EKO 
represents and warrants that the financial statements of the Firm 
provided to the Commission and written representations in connection 
with the matters addressed in this Agreement are complete, accurate, 
and current, have been prepared on a consistent basis throughout the 
periods indicated and fairly present the financial condition and 
results of operations and cash flow of the Firm as of the dates, and 
for the periods, indicated therein. EKO shall notify the Commission in 
writing if any information supplied in connection with this Agreement 
is discovered to be inaccurate or untrue, and shall provide the 
Commission with documents or information that contain information that 
accurately conveys such financial information.
    22. The parties agree that immediately upon the occurrence of an 
``Event of Default,'' the entire penalty amount ($1,000,000), plus any 
accrued and unpaid interest, minus any payments by EKO, shall be come 
due and payable, and the Commission may take further action as 
warranted without notice or further action by any party. An ``Event of 
Default'' means:
    a. a failure of the Firm to pay the $1,000,000 (or any portion 
thereof) when due and payable, as set forth in paragraph 18 above;
    b. a breach of any representation or warranty of the Firm made in 
this Agreement or in connection with this Agreement as it pertains to 
the Firm's financial status;
    c. a failure by the Firm to observe or perform any of its 
obligations or agreements as set forth in the Agreement, including the 
agreement to implement and enforce a compliance program designed to 
ensure compliance with the CPSA, including section 19(a), as set forth 
in paragraph 27 below; or
    d. a failure by the Firm to comply with CPSA sections 15(b) and 
19(a) for three years after the effective date of this Agreement.
    23. All unpaid amounts, if any, due and owing under the Agreement 
shall constitute a debt due and immediately owing by EKO to the United 
States, and interest shall accrue and be paid by EKO at the federal 
legal rate of interest set forth at 28 U.S.C. Sec.  1961(a) and (b) 
from the date of Default, until all amounts due have been paid in full 
(hereinafter ``Default Payment Amount'' and ``Default Interest 
Balance''). EKO shall consent to a Consent Judgment in the amount of 
the Default Payment Amount and Default Interest Balance, and the United 
States, at its sole option, may collect the entire Default Payment 
Amount and Default Interest Balance, or exercise any other rights 
granted by law or in equity, including, but not limited to, referring 
such matters for private collection; and EKO agrees not to contest, and 
hereby waives and discharges any defenses, to any collection action 
undertaken by the United States, or its agents or contractors, pursuant 
to this paragraph. EKO shall pay the United States all reasonable costs 
of collection and enforcement under this paragraph, respectively, 
including reasonable attorney's fees and expenses.
    24. After staff receives this Agreement executed on behalf of EKO, 
staff shall promptly submit the Agreement to the Commission for 
provisional acceptance. Promptly following provisional acceptance of 
the Agreement by the Commission, the Agreement shall be placed on the 
public record and published in the Federal Register, in accordance with 
the procedures set forth in 16 C.F.R. Sec.  1118.20(e). If the 
Commission does not receive any written request not to accept the 
Agreement within fifteen (15) calendar days, the Agreement shall be 
deemed finally accepted on the 16th calendar day after the date the 
Agreement is published in the Federal Register, in accordance with 16 
C.F.R. Sec.  1118.20(f).
    25. This Agreement is conditioned upon, and subject to, the 
Commission's final acceptance, as set forth above, and it is subject to 
the provisions of 16 C.F.R. Sec.  1118.20(h). Upon the later of: (i) 
the Commission's final acceptance of this Agreement and service of the 
accepted Agreement upon EKO, and (ii) the date of the issuance of the 
final Order, this Agreement shall be in full force and effect and shall 
be binding upon the parties.
    26. Effective upon the later of: (i) the Commission's final 
acceptance of this Agreement and service of the accepted Agreement upon 
EKO, and (ii) the date of the issuance of the final Order, for good and 
valuable consideration, EKO hereby expressly and irrevocably waives and 
agrees not to assert any past, present or future rights to the 
following, in connection with the matter described in this Agreement: 
(i) an administrative or judicial hearing; (ii) judicial review or 
other challenge or contest of the

[[Page 61148]]

Commission's actions; (iii) a determination by the Commission of 
whether EKO failed to comply with the CPSA and the underlying 
regulations; (iv) a statement of findings of fact and conclusions of 
law; and (v) any claims under the Equal Access to Justice Act.
    27. EKO shall create, maintain and enforce a compliance program 
designed to ensure compliance with the CPSA, including section 19(a), 
of the CPSA with respect to any consumer product imported, 
manufactured, distributed or sold by EKO, and which shall contain the 
following elements: (i) written standards, policies and procedures, 
including those designed to ensure that information that may relate to 
or impact CPSA compliance (including information obtained by quality 
control personnel) is conveyed effectively to personnel responsible for 
CPSA compliance, whether or not an injury is referenced; (ii) a 
mechanism for confidential employee reporting of compliance-related 
questions or concerns to either a compliance officer or to another 
senior manager with authority to act as necessary; (iii) effective 
communication of company compliance-related policies and procedures 
regarding the CPSA to all applicable employees through training 
programs or otherwise; (iv) EKO's senior management participation in a 
compliance committee responsible for the review and oversight of 
compliance matters related to the CPSA; (v) retention of all CPSA 
compliance-related records, and availability of such records to staff 
upon request; and (vi) procedures designed to ensure that: information 
required to be disclosed by EKO to the Commission is recorded, 
processed and reported in accordance with applicable law; that all 
reporting made to the Commission is timely, truthful, complete, 
accurate and in accordance with applicable law; and that prompt 
disclosure is made to EKO's management of any significant deficiencies 
or material weaknesses in the design or operation of such internal 
controls that are reasonably likely to affect adversely, in any 
material respect, EKO's ability to record, process and report to the 
Commission in accordance with applicable law.
    28. Upon reasonable request of staff, EKO shall provide written 
documentation of its internal controls and procedures, including, but 
not limited to, the effective dates of the procedures and improvements 
thereto. EKO shall cooperate fully and truthfully with staff and shall 
make available all non-privileged information and materials, and 
personnel deemed necessary by staff to evaluate EKO's compliance with 
the terms of the Agreement.
    29. The parties acknowledge and agree that the Commission may 
publicize the terms of the Agreement and Order including disclosing the 
name of the Subject Products in this or other public announcements.
    30. EKO represents that the Agreement: (i) is entered into freely 
and voluntarily, without any degree of duress or compulsion whatsoever; 
(ii) has been duly authorized; and (iii) constitutes the valid and 
binding obligation of EKO, enforceable against EKO in accordance with 
its terms. EKO will not directly or indirectly receive any 
reimbursement, indemnification, insurance-related payment or other 
payment in connection with the civil penalty to be paid by EKO pursuant 
to the Agreement and Order.
    31. The signatories represent that they are duly authorized to 
execute this Agreement.
    32. The Agreement is governed by the law of the United States.
    33. The Agreement and Order shall apply to, and be binding upon, 
EKO and each of its parents, successors, subsidiaries, divisions, 
agents, foreign or domestic corporate affiliates, transferees, and 
assigns, and a violation of the Agreement or Order may subject EKO, and 
each of its parents, successors, subsidiaries, divisions, agents, 
foreign or domestic corporate affiliates, transferees, and assigns, to 
appropriate legal action.
    34. The Agreement and the Order constitute the complete agreement 
between the parties on the subject matter contained therein. The 
Agreement may be used in interpreting the Order. Understandings, 
agreements, representations, or interpretations apart from those 
contained in the Agreement and the Order may not be used to vary or 
contradict their terms. For purposes of construction, the Agreement 
shall be deemed to have been drafted by both of the parties and shall 
not, therefore, be construed against any party, for that reason, in any 
subsequent dispute.
    35. The Agreement may not be waived, amended, modified or otherwise 
altered, except as in accordance with the provisions of 16 C.F.R. Sec.  
1118.20(h). The Agreement may be executed in counterparts.
    36. If any provision of the Agreement or the Order is held to be 
illegal, invalid, or unenforceable under present or future laws 
effective during the terms of the Agreement and Order, such provision 
shall be fully severable. The balance of the Agreement and the Order 
shall remain in full force and effect, unless the Commission and EKO 
agree in writing that severing the provision materially affects the 
purpose of the Agreement and the Order.

EKO DEVELOPMENT LTD.

    Dated: October 31, 2018

By:--------------------------------------------------------------------
James Chen
Principal, EKO Development Ltd.
Flat 1013-1015, R & F Profit Plaza, No. 76
Guangzhou Avenue West, Guangzhou, China

EKO USA, LLC

    Dated: October 31, 2018

By:--------------------------------------------------------------------
James Chen
Principal, EKO USA LLC
2672 SE Willoughby Blvd.
Stuart, Florida 34994

    Dated: October 31, 2018
By:--------------------------------------------------------------------
David H. Baker
1701 Pennsylvania Avenue, N.W.,
Suite 200
Washington, D.C. 20006
Counsel to EKO Development Ltd.

U.S. CONSUMER PRODUCT SAFETY COMMISSION

4330 East West Highway
Bethesda, Maryland 20814

Patricia M. Hanz
General Counsel

Mary B. Murphy
Assistant General Counsel

    Dated: November 1, 2018

By:--------------------------------------------------------------------
Michele Melnick
Trial Attorney
Division of Compliance
Office of the General Counsel

United States of America Consumer Product Safety Commission

In the Matter of: EKO Development, Ltd. and EKO USA, LLC

CPSC Docket No.: 19-C0002

ORDER

    Upon consideration of the Settlement Agreement entered into between 
EKO Development, Ltd. and EKO USA, LLC (collectively, ``EKO'') and the 
U.S. Consumer Product Safety Commission (``Commission''), and the 
Commission having jurisdiction over the subject matter and over EKO, 
and it appearing that the Settlement Agreement and the Order are in the 
public interest, it is:
    Ordered that the Settlement Agreement be, and is, hereby, accepted; 
and it is
    Further Ordered that EKO shall comply with the terms of the 
Settlement Agreement and shall pay a civil penalty in the amount of one 
million dollars ($1,000,000), subject to the terms and conditions of 
the Settlement Agreement. Upon the occurrence of an Event of Default, 
as defined in the Settlement Agreement, the entire penalty amount of

[[Page 61149]]

$1,000,000, plus any accrued and unpaid interest, minus any penalty 
amounts paid by EKO, shall immediately become due and payable and the 
Commission may take further action as warranted.
    Provisionally accepted and provisional Order issued on the 20th day 
of November, 2018.

    By Order of the Commission:
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Alberta Mills,
Secretary, U.S. Consumer Product Safety Commission.

[FR Doc. 2018-25928 Filed 11-27-18; 8:45 am]
 BILLING CODE 6355-01-P