Planning for and Implementing a Product Recall

By: David G. Wix and

Peter J. Mone
The authors would like to thank Baker &
McKenzie LLP colleagues, John Leadley,
Michael Wagner, and Erin Maus for their
contributions to this article.

ITH THE unparalleled and continued

expansion of the global economy,
product manufacturers must develop a keen
awareness of the laws and regulations of the
jurisdictions in which their products are
distributed and sold. The importance of
foreseeing and planning for multijurisdiction product recalls cannot be
overemphasized. As distribution systems
become more efficient and legal systems
more sophisticated, the frequency, costs,
and global reach of such recalls will
continue to increase dramatically. The
development of an effective plan to deal
with the inevitable product recall is
therefore imperative.
Product recalls can present a major
crisis for a manufacturer, potentially
involving adverse media publicity, and in
the case of a public company, a negative
effect on stock price. A product recall that
is not handled properly, effectively, and
efficiently can result in permanent damage
to the product brand, reduced profits, and
loss of reputation and goodwill with
consumers.
Manufacturers, distributors,
and retailers must have a plan in place to
ensure that defective products are quickly
removed from the marketplace and
distribution chain in order to reduce those
risks. Manufacturers, often in conjunction
with outside counsel with product recall and
product liability experience, should also
establish a coordinated media response, an
appropriate litigation strategy, and ensure
that senior executives work together as they
make critical decisions.
In seeking to manage a product recall,
which can include the replacement,
retrofitting, and / or refurbishing of the

IADC member David

Wix is a partner with
Baker & McKenzie in
the firms Chicago office
and concentrates his
trial
practice
on
commercial and tort
litigation,
with
a
particular emphasis on
defending
product
liability lawsuits. His product liability
practice focuses on representing multinational
corporations in the consumer product, food,
pharmaceutical,
and
medical
device
industries. In addition to his trial practice,
Mr. Wix routinely advises corporations
confronting major crisis, such as product
recalls. He has coordinated and advised
clients on numerous national and global
product recalls and works with clients on
developing appropriate litigation strategies,
interacting with governmental and regulatory
agencies and responding to media inquiries.
Mr. Wix also assists clients in reducing
potential product liability exposure by
developing appropriate product recall plans
and protocols and reviewing the adequacy of
product warnings and labels. He regularly
publishes and speaks on product liability and
product recall issues. David is a 1994
graduate of the Chicago-Kent College of Law
and obtained his undergraduate degree from
Princeton University in 1989.
IADC member Peter
Mone is Senior Counsel
with Baker & McKenzie
in the firms Chicago
office. Mr. Mone focuses
on legal malpractice,
commercial litigation,
and products liability.
He has tried over
seventy-five cases to
verdict and has argued appeals in the Illinois
courts of review and in the Seventh Circuit
Court of Appeals. Mr. Mone has represented
numerous clients on product recalls and has
prepared reports for clients to the Consumer
Product Safety Commission. He has also
represented clients in appearances before the
Consumer Product Safety Commission in
Bethesda, Maryland. His practice includes
products liability litigation and counseling
and commercial litigation.
Mr. Mone
received his J.D. from the University of
Chicago Law School, and he obtained his
undergraduate degree from Bowdoin College
(cum laude) in 1962.

Planning for and Implementing a Product Recall

product, a manufacturer will have a number

of considerations in mind. First and
foremost is the need to protect consumers
from injury, as their interests must always
be paramount. Closely aligned with this
priority is the duty to comply with
regulatory requirements. Next is the natural
desire of the manufacturer to ensure that
any product recall or product safety
campaign should help to avoid or at least
mitigate potential product liability. Finally,
the manufacturer will wish to minimize or,
where possible, avoid altogether collateral
damage either to product goodwill, or to the
companys overall reputation. These
objectives should never be regarded as
conflicting; indeed, if the first two are
achieved, the second two frequently follow.
The immediate priority of every
product recall should be to bring the product
risk to the attention of affected consumers
and to enable them to adopt the companys
chosen corrective measures as quickly as
possible. Regulatory compliance is an
important component of every product
recall and many jurisdictions, particularly
the United States and the European Union,
have mandatory reporting requirements in
place. Moreover, in the United States, for
example, various governmental agencies are
involved in at least some aspects of a
companys product recall depending on the
product involved. Those agencies include
the Consumer Product Safety Commission,
the Food and Drug Administration, the
Environmental Protection Agency, the
Federal Aviation Administration, the
Department
of
Transportation,
the
Department of Agriculture, and the National
Highway Traffic and Safety Administration.
Each of those agencies has different
reporting requirements and has available
specific legal means to effectuate recalls if
the manufacturer is hesitant or fails to do so
when it otherwise should. This legislative
authority includes both criminal and civil
penalties and the ability to obtain
restraining orders and injunctions to remove
the product from the market and halt its
immediate distribution. Manufacturers

Page 221

should have an established plan or protocol

to deal with a recall situation and to
cooperate fully with the appropriate
governmental agency.
Because time is usually of the essence,
it is important to ensure that manufacturers
(with the assistance of others in the supply
chain) are in a position to implement
corrective measures as quickly and
effectively as possible. None of this is
attainable without preparation and proper
protocols. The following guidelines outline
some suggested best practices:
I. Before a Safety Issue Arises
A. Plan for a Global Product Recall
In Advance
Most companies that manufacture and
sell products to consumers will have to
institute a product recall or similar
corrective action at some point in time. A
product recall campaign typically is
implemented quickly, and notification to the
relevant authorities is required when a
significant safety issue becomes known.
Since the key to any successful recall
campaign is preparation, all manufacturers
should have a standard product recall plan
or protocol, with checklists of what to do,
whom to contact, and where to locate
relevant information so that the protocol can
be implemented swiftly. A manufacturer
should consider conducting mock recalls
before an actual crisis occurs to ensure that
the recall plan operates effectively and
efficiently. In addition, many companies
have established product safety committees
to whom any safety related complaints from
customers will be directed committees
whose members will assess not only
whether a recall is necessary but, if so, how
to implement it. To be effective, any recall
plan developed by a manufacturer must be a
cooperative venture among legal counsel,
finance, sales and marketing, product safety,
engineering, and quality assurance team
members.

Page 222

An effective product recall protocol

should focus on:
the establishment and training
of a multi-disciplinary product
recall team;
the availability of technical
expertise;
the adoption of a plan designed
to trace, account for and, where
appropriate, retrieve the products;
the steps to be taken to notify
distributors, dealers, retailers and
consumers;
the
requirements
for
notification or disclosure to all
applicable
government
or
regulatory agencies;
the importance of clear,
concise
communications
both
internally and externally to
consumers, regulatory authorities,
customers, employees, the media
(in appropriate cases), and other
stakeholders; and
the retention and preservation
of relevant documents, including
electronic documents, related to the
recall and/or the products at issue.
Any recall plan also should delineate
the central roles to be served by both inhouse and outside counsel. For example,
once a decision has been made to initiate a
recall, it is often advisable that all
communications with the governmental
agency representative assigned to the recall
be conducted by outside legal counsel rather
than directly by the company. Many reasons
support this recommendation. One of the
most important is to serve as the contact
person for any governmental agency
inquiries and protect company personnel
from receiving and having to respond

DEFENSE COUNSEL JOURNALJuly 2007

directly to inquiries from the investigatory

staff of the agency. Although some
governmental agencies require company
representatives to remain involved in
discussions with it regarding the recall,
outside counsel can serve as the conduit for
those discussions, which ensures that the
companys responses are not only
coordinated and consistent, but also
minimizes the risk of contradictory or
inappropriate responses by company
employees. Outside counsel can also ensure
that all formal reports comply with
applicable governmental requirements.
Finally, outside counsel experienced in
product recalls and product liability issues
can help minimize potential liability in any
subsequently filed lawsuits stemming from
the recall by reviewing all written materials
and public announcements to make sure the
company is not making statements that will
be detrimental to its anticipated defenses.
In addition to preparing for a recall by
having a plan in place, to the extent
available, a company should also consider
obtaining product recall, or, where relevant,
product contamination insurance, to protect
against the significant expenses and
business interruption costs associated with
conducting a product recall. Insurance
coverage for product recall related costs and
expenses often is excluded from
Commercial General Liability (CGL) or
Product Liability policies that most
companies have in place. Therefore, a
company must obtain separate product
recall and/or product contamination
insurance to cover the costs typically
associated with a recall, including, among
others,
recall
expenses,
product
replacement, lost profits, public relations
expenses, and consultant costs.
Finally, companies that either use
component parts provided by third-party
suppliers
or
that
outsource
the
manufacturing of their products to a thirdparty face additional risks that should be
addressed prior to an actual recall. The
company will want to include appropriate
provisions in the supply contracts requiring

Planning for and Implementing a Product Recall

the third-party to indemnify it for expenses

related to recalls necessitated by defective
component parts and/or products. In
addition, before selecting a third-party
supplier or manufacturer, a company should
conduct appropriate due diligence, which
should include, among other things, an
analysis of financial data and an in-depth
inspection of the third-partys production
facility to determine the third partys
financial viability, professional quality, and
competence. Companies that do not take
these steps at the front end increase the risk
of receiving inferior quality component
parts and bearing the financial responsibility
for recalls necessitated by defective parts
and/or
products
purchased
from
unscrupulous or financially unstable thirdparties.
B. Learn and Improve From Past
Recalls
The converse to advance planning is
also true. Once a company has carried out a
recall or corrective actions, dealing with any
future actions should be much more
straightforward. A copy of the relevant and
important documentation generated as a
result of the recall should be kept and
reviewed, and a discussion should be
facilitated among all of those involved to
discuss the lessons learned, what worked
well, and what did not.
C. Know Your Products: How They
Are Made and Where They Are
Distributed
The more a company knows about its
manufacturing processes and distribution
channels, the easier it will be to conduct a
product recall. A great deal of product and
process-related information is required to
complete the standard notification forms
required by many countries, including, but
not limited to, details of manufacturers
identification, distributors, locations of
customers, and shipment dates. This
information needs to be at the fingertips of

Page 223

the persons who will be tasked with

managing the recall, or at least should be
easily accessible through other identified
individuals.
Examples of some of the information
typically required to comply with regulatory
reporting requirements are:
details of the company making
the notification and contact details
of a representative who can be
contacted (address, telephone/fax
number, website and email
address);
full details of the affected
product (including a description,
brand
name,
model/serial
number/bar
code
and
a
photograph);
total number of products
involved, broken down by their
likely location (i.e., country into
which they were sold);
details (address, telephone/fax
number and email address if
possible) of the company that
manufactured the products at issue
and, if relevant, the various
components concerned;
dates when the affected
products
were
manufactured,
distributed, or sold to customers, as
well as the quantities of any
products that remain in the supply
chain;
contact details of all of the
relevant
distributors/dealers/retailers/import
ers;
a description of the nature of
the potential defect and possible
injuries to persons and property it
might cause;

Page 224

details of any incidents that have

already occurred;
measures taken to address the
potential defect; and
specific steps taken (or to be taken)
both to ensure customer awareness and
to implement product replacement plan.
II. Once a Safety Issue Arises
A. Take Action As Soon As You
Learn of a Potential Safety Issue
Speed is one of the keys to removing
defective products effectively from the
marketplace, and removing products
quickly and effectively can go a long way
toward satisfying the authorities that your
proposed voluntary recall action is
appropriate and should be approved. In
most countries, particularly the United
States and the EU, the requirement to notify
is immediate once the company becomes
aware of or, on the basis of the information
available, should be aware of, the fact that a
product poses a potential safety risk to
consumers. Consequently, if a company
delays in the hope that an incident or
information suggesting a potential safety
risk is an unique or isolated episode, it may
be in breach of its duty to notify and could
face fines or, in some countries, could
expose its personnel to criminal sanctions.
Upon learning of a potential safety
issue and investigating it, a company should
implement its product recall plan. Because
product liability lawsuits often follow the
announcement of a product recall, the
product recall plan should include the duty
to preserve all relevant documents related to
the recall and/or the products. One
individual, department, or team should have
overall responsibility for maintaining these
records because they are often sought and
utilized in subsequent litigation.

DEFENSE COUNSEL JOURNALJuly 2007

B. Understand the Risk And Be

Prepared To Defend Your
Decision Whether To Recall
Factors that any company should
consider in deciding whether to initiate a
product recall include:

the nature of the potential defect;

the level of risk to the health and

safety of consumers;
the percentage of the total product
affected by the potential defects;
the decision whether the product
can be retrofitted and the area of
product concern addressed; or
in the alternative, if the product
must be recalled, how to dispose of the
product safely so it does not reach the
hands of the public again.
A proper risk assessment must be
carried out to assess whether the product
presents a genuine safety issue, triggering
reporting and recall requirements, or
whether it is a one-off problem. In some
cases, it may not be at all clear whether a
notification and full product recall are
necessary or required. For example, a recall
may not be appropriate, let alone necessary,
where there is only a slight risk that an
identified hazard will materialize, or where
the product is ordinarily used by only
professional or industrial users but there is a
possibility that it might be used by
consumers. When evaluating borderline
cases, companies should assess not only the
potential risk to consumers, which is of
paramount importance, but also the
potential damage to the brand or to the
companys reputation if no recall is
initiated. During the deliberative process,
companies should, of course, consider the
potential likelihood of regulatory action or
even of government prosecution if the
relevant authority decides, with the benefit

Planning for and Implementing a Product Recall

of hindsight, that notification was required

but wrongfully withheld. While the agesold maxim that it is better to be safe than
sorry usually holds true in the product
recall context, whatever decision is reached,
a thorough risk assessment is always
advisable, preferably drawing on the
experience of in-house and outside counsel
familiar with product recall and product
liability issues.
During this decision-making period, a
company should consider early notification
to its insurer and adhere to the cooperation
clause of its product liability, product recall,
or CGL insurance policy, preferably before
the initiation of a product recall.
III. Implementing a Product Recall
A. Select the Most Appropriate
Communication Methods
Once the recall decision has been made,
one of the key features of any product recall
is the method by which the company will
communicate the product risk and proposed
responsive or remedial action to its
customers. This choice will depend on the
type of product, the volume of products
involved, their likely location, and how the
company sells the product to end customers.
For example, if the recall involves a high
value or technical product registered with
the company through a guarantee/warranty
program or that has been sold directly to the
customer by the company, the best method
is likely to be direct mail and emails to the
registered customers, as well as point of sale
notices and website notices. However, at
the other extreme, where the product is sold
through numerous retailers to hundreds of
thousands of customers, it may be necessary
to issue newspaper advertisements or
advertisements in other media outlets, in
addition to point of sale notices and a
website notice. The key consideration is
that, whichever method is chosen, the
communication must be effective and clear.

Page 225

B. Make the Recall Easy for

Customers
In addition to selecting the most
appropriate method of communicating with
consumers or customers, the company must
also decide on the method for actually
recalling, retrieving, and replacing the
products. In many cases, the best option
will be to set up a dedicated, interactive
section of the companys website into
which customers can enter their contact
details to order a replacement product, and
to arrange for them to return the recalled
product in packaging sent with the
replacement. There may be instances in
which a company prefers issuing a cash
refund, rebate coupon, or credit, and these
options should be offered when the
consumer no longer wants a replacement
product or wants a different product
altogether. For larger products, however,
product return by the consumer is unlikely
to be practical, so an alternative will have to
be found, such as asking customers to
contact their local dealer, retailer, or the
company directly to arrange a repair or
replacement.
C. Get the Notification Right the
First Time
If notification to a government agency
is required, it is important to ensure the
notification satisfies applicable legal
requirements. Typically, the relevant
authorities are much more likely to view a
notification favorably if it is complete,
comes with an explanatory cover letter and
is followed-up with a telephone call. This
ensures that the lines of communication are
open for any questions the authority may
have, and that the authority has all the
information it requires to make a decision
whether the companys proposed course of
action is satisfactory. However, if a
company is certain that it needs to make a
notification, but is missing some of the
important information, it is likely still
worthwhile to make a preliminary

Page 226

notification, by way of a letter or telephone

call, to start a dialogue with the relevant
authority and to preempt any suggestion
that the notification was not made quickly
enough. It is advisable in this instance to
request that the government agency
acknowledge receipt of the notification to
avoid any disagreement concerning when
the company first notified the agency.
D. Coordinate Across Jurisdictions
Because so many companies sell their
products throughout the world and so many
countries now have legislation or
regulations governing product recalls, it is
important to understand the requirements in
all jurisdictions where products are being
recalled and to coordinate notification
efforts and commencement of the recall
campaign in each of these jurisdictions.
The importance of having a coordinated
approach across jurisdictions is highlighted
by the increased sharing of information
among the governmental and regulatory
agencies of different jurisdictions. For
instance, the Consumer Product Safety
Commission in the United States has
entered into a number of information
sharing agreements with its counterparts in
other jurisdictions, including China, the
European Union, and Canada. In addition,
it may be possible, if the risk is not deemed
to be serious and if the authority agrees to
notify other countries, to make only one
notification in the EU and to ask that
authority to notify the other relevant EU
countries.
E. Monitor Progress
Although getting the product recall
campaign underway and making the
required notifications is crucial, it is also
important to monitor the progress of the
recall (e.g., how many replacements have
been requested).
Frequent monitoring
enables the company, in consultation with
the relevant authority, to determine whether

DEFENSE COUNSEL JOURNALJuly 2007

further action is needed to increase the

product recovery rate.
IV. Conclusion
Most manufacturers, despite their best
efforts to ensure product quality control and
assurance, will, at some point, face the need
to conduct a product recall. By ensuring
that an effective and tested product recall
plan is in place before a product recall is
necessary, and quickly and efficiently
implementing that plan when the need
arises, a manufacturer can minimize the
potentially devastating effects a product
recall can have on the companys profits,
the products brand name, and the
companys goodwill and reputation with its
consumers.
APPENDIX
The most frequent product recalls in the
United States involve consumer products, as
that term is defined by the Consumer
Product Safety Act (CPSA), which fall
under the jurisdiction of the Consumer
Product Safety Commission (CPSC).
This Appendix provides a general overview
of the CPSA and the requirements of the
CPSC with respect to consumer product
recalls.
Consumer Product Safety Act
1. Definition of a Consumer Product
The CPSA defines a consumer product
as any article or component part thereof
produced or distributed: (1) for sale to a
consumer for use in and around a permanent
or temporary household or residence, a
school, in recreation, or otherwise; or (2) for
the personal use, consumption or enjoyment
of a consumer in and around a permanent or
temporary household or residence or school
for recreation or otherwise.1 The CPSC has

15 U.S.C. 2052(a)(1).

Planning for and Implementing a Product Recall

also announced that in determining whether

the product is a consumer product, the
manufacturer of the product has the
responsibility to determine distribution and
use patterns and any doubts should be
resolved in favor of considering the product
to be a consumer product. Products used by
employees exclusively in industrial or
business settings as part of their
employment would not be considered
consumer products under the CPSA.
2. Reporting Requirements and Recall
Procedures
CPSA Section 15(b) Reports
The CPSA establishes reporting
requirements for manufacturers, importers,
distributors and retailers of consumer
products. Pursuant to Section 15(b) of the
CPSA, each entity must notify the CPSC
immediately if it obtains information that
reasonably supports the conclusion that a
product distributed in commerce:
fails to meet a consumer product
safety standard or banning regulation
adopted by the CPSC;
contains a defect that could create a
substantial
product
hazard
to
consumers;
creates an unreasonable risk of
serious injury or death; or
fails to comply with voluntary
industry safety standards.2
Pursuant to federal regulations, a
manufacturer should report to the CPSC
within twenty-four hours of receiving
information that reasonably supports the
conclusion that its product fails to comply
with any applicable safety rules or
standards, contains a defect that could
create a substantial product hazard, or
2

15 U.S.C. 2064(b).

Page 227

creates an unreasonable risk of serious

injury or death.3 Information giving rise to
a reporting obligation may include, but is
not limited to, complaints, injury reports,
quality control, and engineering data.4 The
CPSC considers manufacturers to have
knowledge of product safety information
when such information is received by an
employee or official of the company who
may reasonably be expected to be capable
of appreciating the significance of that
information. Under ordinary circumstances,
five days is the maximum reasonable time
for that information to reach the
individual(s) responsible for complying
with CPSC reporting requirements.5
If information received by a
manufacturer regarding the product is not
clearly reportable, the manufacturer is
permitted to conduct a reasonably
expeditious investigation to evaluate the
reportability of the information received.6
This investigation and evaluation should not
exceed ten days, unless the manufacturer
can demonstrate that a longer period is
reasonable. The CPSC will deem that, at the
end of ten days, the manufacturer has
received and considered all information that
would have been available to it had a
reasonable, expeditious and diligent
investigation been undertaken.
If the
manufacturer elects to conduct an
investigation, the twenty-four hour period
begins when the company has information
that reasonably supports reportability.7 It is
also important to note that in evaluating
whether or when a company should have
reported, the manufacturer shall be deemed
to know what it would have known if it had
exercised due care to ascertain the truth of

16 C.F.R. 1115.14(e).
Id. at 115.14(c).
5
Id. at 1115.14(b).
6
Id. at 1115.14(d).
7
Id.
4

Page 228

complaints or other representations.8 After

obtaining
potentially
reportable
information, the manufacturer should
immediately submit an initial report to the
Subsequently, the manufacturer
CPSC.9
must also file a full report.10
The purpose of the United States
Congress in enacting the reporting
requirements under Section 15(b) of the
CPSA was to encourage the widespread
reporting of potential product hazards. The
CPSC often uses sources other than
company reports to identify potentially
hazardous products, but reporting by
companies under Section 15(b) provides the
most timely and effective source of
information about such products. This is
because the reporting firm often learns of
potential product safety problems at an early
stage. For this reason, companies involved
in
the
manufacture,
importation,
distribution, or sale of consumer products
should develop a system for maintaining
and reviewing information about their
products that might suggest a product defect
and unreasonable risk of serious injury or
death. Such information includes consumer
complaints, warranty returns, insurance
claims or payments, product liability
lawsuits, reports of production problems,
product testing or other critical analyses of
products and the like.11
In determining whether a product
creates a substantial product hazard or
unreasonable risk of serious injury, the
CPSC considers the following factors:
information about engineering,
quality control, or production data;

Id. at 1115.11.
See 16 C.F.R. 1115.13(c) for information to be
included in the initial report.
10
See 16 C.F.R. 1115.13(d) for information to be
included in the full report.
11
OFFICE OF COMPLIANCE, CONSUMER PRODUCT
SAFETY COMMN, RECALL HANDBOOK, at 4-5 (May
1999).
9

DEFENSE COUNSEL JOURNALJuly 2007

information about safety-related

production or design change(s);
product liability suits and/or claims
for personal injury or damage;
information from an independent
testing laboratory;
complaints from a consumer or
consumer group;
information received from the
Commission or other governmental
agency; and
information received from other
firms, including requests to return a
product or for replacement or credit.
This includes both requests made by
distributors and retailers to the
manufacturer and requests from the
manufacturer
that
products
be
returned.12
In addition to these factors, on July 13,
2006, the CPSC voted in favor of issuing a
final interpretative rule revising the
agencys
product
hazard
reporting
guidelines, which the agency says are
intended to clarify when companies should
report suspected product hazards to the
CPSC. The rule changes the CPSCs
definition of defect by adding four
additional criteria CPSC staff will use to
evaluate whether a risk of injury is the type
that will render a product defective, thus
triggering the reporting obligation. The
new factors include: the obviousness of
such risk; the adequacy of warnings and
instruction to mitigate such risk; the role of
consumer misuse of the product; and the
foreseeability of such misuse.
Finally, [i]n determining whether a
product presents an unreasonable risk, a
manufacturer should examine the utility of
the product, or the utility of the aspect of the
product that causes the risk, the level of
12

16 C.F.R. 1115.12(f) (2004).

Planning for and Implementing a Product Recall

exposure of consumers to the risk, the

nature and severity of the hazard presented,
and the likelihood of resulting serious injury
or death.13 The CPSC also suggests that
companies evaluate the state of
manufacturing or scientific art, the
availability of alternative designs or
products, and the feasibility of eliminating
the risk.14 That is, the CPSC expects
companies to report if a reasonable person
could conclude, given the available
information, that a product creates an
unreasonable risk of serious injury or
death.15
The CPSC has also indicated that the
mere reporting of a product to the CPSC
under Section 15(b) does not automatically
mean that it will conclude that the product
creates a substantial product hazard or that
corrective action is necessary. The staff of
the CPSC works with the company to
determine if a corrective action plan is
appropriate. Many of the reports received
by the CPSC require no corrective action
because the staff concludes that the reported
product defect does not create a substantial
product hazard or require a recall. For these
reasons, a company should err on the side of
caution and consider reporting to the CPSC
whenever a potential safety issue arises.
When a manufacturer makes a Section
15(b) report to the CPSC, the staff of the
Division of Recalls and Compliance
undertakes a product hazard analysis similar
to that requested of the reporting firms.
Once the staff identifies a defect, it then
assesses the substantiality of the risk
presented to the public using the criteria
listed in Section 15(b). The staff applies
hazard priority criteria to classify the
severity of the problem to make a
preliminary determination whether the
product does or does not contain a defect
that creates a substantial product hazard. If

13
14
15

Page 229

a substantial product hazard exists, a recall

is required.
Fast Track Recall Program
In July 1997, the CPSC adopted an
alternative procedure for reports filed
pursuant to Section 15(b) of the CPSA for
firms that initiated acceptable corrective
action within twenty working days of the
date of their report. That program is called
the Fast Track Product Recall Program.
The program was so successful that in 1998,
the Fast Track Product Recall Program was
one of three federal winners of the
prestigious Innovations in American
Government Award, an honor and award
funded by the Ford Foundation and
administered by the John F. Kennedy
School of Government at Harvard
University in partnership with the Council
for Excellence in Government.
Under the Fast Track Product Recall
Program, if the company reports a potential
product defect and, within twenty working
days of the filing of the report, implements
with the CPSC a consumer-level voluntary
recall that is satisfactory to the staff, the
CPSC staff will not make a preliminary
determination that the product contains a
defect that creates a substantial product
hazard. The purpose of the program is to
allow the staff and the company to work
together on an immediate corrective action
plan rather than wasting the time and
resources necessary to investigate a reported
defect further to determine whether it rises
to the level of a substantial product hazard.
In order to participate in the program,
the reporting company must do the
following:
provide all of the information
required for a full report;16
request to participate in the
program; and

Id.
Id.
Id.
16

16 C.F.R. 1115.13(d) (2003).

Page 230

submit a proposed corrective action

plan (CAP) with sufficient time for the
CPSC staff to analyze any proposed
repair, replacement, or refund offer and
to evaluate all noticed materials before
the implementation (announcement) of
the CAP, which is to occur within
twenty working days of the report.
Once the CPSC staff and the reporting
organization agree on a remedy to correct a
product defect, they work together to
compile an effective plan for public
notification and implementation of the
recall. The plan includes the companys
agreement that the CPSC may publicize the
terms of the plan to the extent necessary to
inform the public of the nature of the
alleged substantial product hazard and the
actions being undertaken to correct the
hazard. The goals of the Fast Track Recall
Program are:
to locate all defective products as
quickly as possible;
to remove the defective products
from the distribution chain and the
possession of the consumers; and
to communicate accurate and
understandable information in a timely
manner to the public about the product
defect, the hazard and the corrective
action.
Under the Fast Track Recall Program,
the CPSC participates in a joint CPSC news
release with the company, approves all
notices to consumers, distributors, dealers,
sales representatives, retailers, service
personnel, installers, and other persons who
may have handled or been involved with the
product, and reviews proposed newspaper
advertisements and television and/or radio
notices. It also approves the point of
purchase posters and other notifications to
the consuming public. It specifically works
with a company to ensure that the goals of
the product recall to retrieve, repair, or

DEFENSE COUNSEL JOURNALJuly 2007

replace the products already in consumers

hands as well as those in the distribution
chain are realized. The CPSC monitors
the efficacy of the program by requiring that
the reporting company provide a monthly
progress report for the corrective action
plan, which obligates the company to
identify the products corrected and captured
by the company, the notification measures
used during the reporting period, the
consumers feedback as to how they learned
of the corrective action plan, and a listing of
the number of calls to toll-free numbers,
emails, written requests, and website visits
regarding the recall.
Section 37 Reports
In addition to reporting potential
defects, a manufacturer is also obligated to
report to the CPSC under Section 37 of the
CPSA if: (1) a particular model of a
consumer product is the subject of at least
three civil actions in federal or state court;
(2) each suit alleges the involvement of that
model in death or grievous bodily injury;
and (3) at least three of the actions resulted
in a final settlement involving the
manufacturer or in a judgment for the
plaintiff within specified two year periods.
A manufacturer must file a report within 30
days after the settlement or judgment in the
third civil action to which the Section 37
reporting requirement applies.17
Additional Reports
Manufacturers also might have
reporting requirements under other laws that
the CPSC administers, such as the
Flammable Fabrics Act, the Federal
Hazardous Substances Act, the Poison
Prevention Packaging Act, and the
Refrigerator Safety Act. A manufacturer
that distributes products covered by these
Acts must report violations of the Acts
which constitute product defects that could

17

15 U.S.C. 2084.

Planning for and Implementing a Product Recall

create a substantial risk of injury to the

public or may create an unreasonable risk of
serious injury or death.
The CPSC has a publication available
on its website (www.cpsc.gov) entitled
Recall Handbook. The subtitle explains that
it is a guide for manufacturers, importers,
distributors and retailers on reporting under
Sections 15 and 37 of the CPSA and
Section 102 of the Child Safety Protection
Act in preparing for, initiating and
implementing product safety recalls.
Included in the Recall Handbook, in
addition to the reporting requirements and
regulations, are the following:
monthly progress
corrective action plan;

reports

for

recall checklist;

CPSC video news release goals and

guidelines;
CPSC video news releases to
potential vendors;
CPSC
guidelines;

website

notification

sample safety recall posters; and

sample recall letters and press

releases.
In the closing paragraph of its Recall
Handbook, the CPSC states:
Consumers no longer view product
recalls in a negative light. Millions of
products have been recalled over the
years. Today, consumers believe they
enjoy a safer, better product as a result
of a recall conducted responsibly by
companies. How well a company
conducts a timely reasonable recall of a
product can have a strong influence on
consumers attitude about the firm.
Successful product recalls in the past
have
rewarded
companies
with

Page 231

continuing consumer support

demand for the firms products.18

and

It should be noted that at the conclusion

of a recall program, the head of the
companys product recall team and in-house
counsel should be responsible for sending
all original records to corporate record
management. The file should be labeled
with the date of the conclusion of the recall
program and the name of the product
involved. Those records must be filed
chronologically and maintained by records
management for a period of fifteen years.
3. Legal Consequences of NonCompliance
Under Section 20 of the CPSA, the
CPSC can impose civil penalties on
manufacturers for failing to report in a
timely fashion as required by the CPSA.
The civil penalties can be up to $8,000 for
each violation, except that the maximum
civil penalty shall not exceed $1.825
million. Recent case law has held that the
failure to report constitutes a separate
offense with respect to each individual
product unit.19 In addition, a manufacturer
can be fined for failure to report potential
defects regardless of whether the product
has been found to be actually defective.20
Additionally, on July 12, 2006, the
CPSC published for comment a proposed
interpretative rule that identifies and
explains factors that the CPSC may
consider in evaluating the appropriateness
and amount of a civil penalty. The proposed
regulation would allow the CPSC to
consider one or more of the following
factors:
a firms previous record of
compliance with CPSA requirements;
18

RECALL HANDBOOK, supra note 11, at 4-5.

United States of America v. Mirama Enterprises,
387 F.3d 983 (9th Cir. 2004).
20
Id.
19

Page 232

economic gain from any delay or

non-compliance with CPSC safety or
reporting requirements; and

court to prohibit the continued sale of the

product and to impose both civil and
criminal penalties upon those individuals
and corporations who defy the CPSCs
orders and reporting requirements. The
CPSC also has the authority to petition a
court ex parte for the execution of a
subpoena duces tecum to gather information
from a manufacturer or distributor who is
suspected of marketing a product hazardous
to the consuming public.

4. Conclusion

timeliness of a firms response to

relevant information;

safety and compliance monitoring;

cooperation and good faith;

a products failure rate.

In addition to civil penalties for the

failure to timely report, the CPSA grants to
the CPSC relatively broad powers to
enforce the mandate to ensure that
consumer products are made safe for the
public. For instance, under Section 8 and
Section 9,21 whenever the CPSC finds that a
consumer product presents an unreasonable
risk of injury and that no feasible consumer
product safety standard would adequately
protect the public from the unreasonable
risk of injury associated with the product,
the CPSC may promulgate a rule declaring
such product a banned hazardous product.
The CPSC has banned products such as a
backyard game called lawn darts that
were sharp, pointed dart-like objects, which
could cause puncture wound injuries. The
CPSC has also conducted studies and
promulgated standards for lawnmowers,
bicycle helmets, and automatic garage door
openers based upon statistics it gathered
regarding injuries associated with those
products.
Moreover, the CPSC has the authority
under the CPSA to embargo and prevent the
distribution of consumer products within the
United States if the CPSC determines that a
product has a substantial risk of injury to
the consuming public. If a manufacturer
continues to market a product that the CPSC
has determined is hazardous to the
consuming public, the CPSC has the
authority to obtain orders from a federal
21

DEFENSE COUNSEL JOURNALJuly 2007

15 U.S.C. 2057.

The
Consumer
Product
Safety
Commissions web site is very user friendly
and promotes and encourages the type of
cooperation between manufacturer and the
CPSC which is essential to the successful
recall of a product.22 Clients should be
advised that once a decision has been made
to report to the CPSC a product to be
recalled, counsel, client and the compliance
officer assigned to the matter by the CPSC
should work closely together to ensure that
the product is removed from the market
quickly and that the replacement, retrofit or
repair is also done promptly. The CPSC is
well staffed but has the unenviable task of
regulating literally tens of thousands of
consumer products in the United States. To
be effective in fulfilling their mission of
providing for consumer safety, the CPSC
has fostered an attitude of cooperation and
one must not make the mistake of
characterizing the CPSC as an adversary.

22

Consumer Product Safety Commission, 4330

East West Highway, Bethesda, MD 20814;
Telephone (301.504.7923); Website: www.spsc.
gov