[Federal Register: October 31, 2001 (Volume 66, Number 211)]
[Rules and Regulations]               
[Page 54923-54925]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc01-7]                         

=======================================================================
-----------------------------------------------------------------------

CONSUMER PRODUCT SAFETY COMMISSION

16 CFR Part 1115

 
Substantial Product Hazard Reports

AGENCY: Consumer Product Safety Commission.

ACTION: Final amendment to interpretative rule.

-----------------------------------------------------------------------

SUMMARY: Section 15(b) of the Consumer Product Safety Act, requires 
manufacturers, distributors, and retailers of consumer products to 
report possible substantial product hazards to the Commission. The 
Consumer Product Safety Commission publishes a final amendment to its 
interpretative rule advising manufacturers, distributors, and retailers 
how to comply with the requirements of section 15(b). The amendment 
points out that firms that obtain information concerning products 
manufactured or sold outside of the United States that may be relevant 
to the existence of potential defects and hazards associated with 
products distributed within the United States should evaluate that 
information and, if necessary, report under section 15(b).

EFFECTIVE DATE: This revision is effective November 30, 2001.

FOR FURTHER INFORMATION CONTACT: Marc Schoem, Director, Division of 
Recalls and Compliance, Consumer Product Safety Commission, Washington. 
D.C. 20207, telephone--(301) 504-0608, ext. 1365, fax.--(301) 504-0359, 
E-mail address--mschoem@cpsc.gov.

SUPPLEMENTARY INFORMATION: 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 possible ``substantial product 
hazards'' to the Commission. In 1978, the Commission published in the 
Federal Register ``Substantial Product Hazard Reports'', 16 CFR 1115, 
an interpretative rule that set forth the Commission's understanding of 
this requirement and established procedures for filing such reports and 
proffering remedial action to the Commission. That rule addresses the 
types of information a firm should evaluate in considering whether to 
report. It does not, however, specifically address information about 
experience with products manufactured or sold outside of the United 
States. The Commission has always expected that firms would report when 
they obtained reportable information, no matter where that information 
comes from. Neither the statute, nor the rule itself, suggests 
otherwise.
    Over the past several years, the Commission has received reports 
under section 15(b) that included information on experience with 
products abroad and technical data concerning such products. When 
appropriate, the Commission 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 to report under section 15(b), on January 3, 2001, the 
Commission solicited comments in the Federal Register on a proposed 
policy statement. The statement set forth the Commission's position 
that firms should evaluate and, if appropriate, report to the 
Commission information concerning products

[[Page 54924]]

manufactured or sold outside of the United States that may be relevant 
to defects and hazards associated with products distributed within the 
United States
    On June 7, 2001, after considering the comments, the Commission 
published in the Federal Register a final policy statement 
memorializing this position. Simultaneously, the Commission proposed 
for comment an amendment to codify this policy guidance as part of the 
Substantial Product Hazard Reports interpretative rule, 16 CFR 1115. 
The proposed amendment notes in substance that information about 
product experience, performance, design or manufacture outside the 
United States may be relevant to products sold or distributed in the 
United States. It further notes that firms should study and evaluate 
such information under section 15(b).
    Discussion: The Commission received four comments in response to 
the proposed amendment. One of these commentors, the CPSC Coalition of 
the National Association of Manufacturers (``NAM''), resubmitted 
comments that it had presented in response to the Commission's January 
proposed policy statement. NAM's resubmission contended that the 
Commission's response to its comments to that proposal did not take the 
Coalition's concerns into account. However, NAM did not point to any 
specific inadequacy in the Commission's response, nor did it otherwise 
elaborate on its contention. The Commission, on the other hand, 
believes that its response to the NAM comments in the June 7 Federal 
Register notice was more than adequate. The NAM comments largely voiced 
the same hypothetical concerns that commentors on the original 1977 
proposed interpretative rule on reporting raised. As the June 7 Federal 
Register notice points out, the Commission addressed the substance of 
those comments in the preamble to and text of the final rule in 1978. 
43 FR 34988. The Commission believes, therefore, that the NAM comments 
require no further response.
    a. Imputing Knowledge: The three commentors other than NAM 
expressed concern that the proposed amendment treated information 
generated abroad in the same manner that the Commission views 
domestically obtained data. In the commentors' view, the amendment 
should have, but did not, take into account differences in data-
gathering capabilities abroad from those within the United States, as 
well as perceptions of the significance of data that becomes available. 
The commentors requested that the final rule or its preamble recognize 
these differences. These commentors also noted that U.S. subsidiaries 
of foreign companies are often not in a position to require corporate 
parents to collect and/or forward safety-related information to those 
subsidiaries. They further indicated that U.S. subsidiaries will not 
necessarily be aware of, or be able to obtain, information that other 
independent subsidiaries of a common foreign parent acquire. Again, the 
commentors suggested that the Commission recognize in the final rule or 
its preamble these possible impediments to the acquisition of 
information.
    The issue of obtaining and evaluating information from abroad is 
pertinent to two aspects of reporting--timely reporting and corrective 
action. With respect to the first aspect--failing to report in a timely 
manner or not at all, the Commission believes that the commentors may 
have misconstrued the intent and scope of the proposed amendment. The 
Commission recognizes that a number of factors may affect the ability 
of a firm located in the United States to obtain information from 
abroad, including limitations on the availability of and access to 
information. The Commission also appreciates that the nature of 
corporate business relationships and affiliations may impact the 
ability of a firm to obtain such information. The Commission further 
understands that training, experience, and corporate position, and 
differences in product design, use and operating environment from 
standard practices in the United States may affect the ability of 
recipients abroad to appreciate the significance of information that 
may relate to products to be sold in the United States.
    As commentors acknowledged in their written comments and in 
discussions with the Commission staff, the evaluation of compliance 
with the reporting obligations requires a case-by-case assessment of 
relevant facts, including those relating to the considerations 
identified above. The Consumer Product Safety Act provides the standard 
for this evaluation. In the context of reporting, section 20, 15 U.S.C. 
2069, only permits the assessment of civil penalties against a party 
who ``knowingly'' commits a prohibited act by failing to furnish 
information required by section 15(b). Section 20(d) of the act defines 
``knowingly'' as ``* * *'' (2) the presumed having of knowledge deemed 
to be possessed by a reasonable man who acts in the circumstances, 
including knowledge obtainable upon the exercise of due care to 
ascertain the truth of representations.''
    The existing interpretative rule also provides guidance, consistent 
with section 20, on how the Commission will analyze the facts of each 
case. In its discussion of the imputation of knowledge to a firm, 16 
CFR 1115.11 notes that ``the Commission will deem a subject firm to 
know what a reasonable person acting in the circumstances in which the 
firm finds itself would know.'' The section goes on to explain that 
this imputation extends to knowledge that a firm could have obtained, 
had it exercised due care to ascertain the truth of complaints or other 
representations or conducted a reasonably expeditious investigation to 
evaluate the reportability of a death, grievous bodily injury, or other 
information.
    Under section 115.11, the ``reasonable person'' standard applies to 
a firm's accountability for failure to obtain information that exists 
abroad. Considerations, such as those described above that may have 
affected the firm's ability to obtain or appreciate the significance of 
such information are certainly relevant to whether a firm acted 
reasonably in the circumstances. In view of the strictures in the 
statute and the existing interpretative regulation, the Commission 
believes that the commentors' fears that the Commission would not take 
such factors into account when assessing a firm's compliance with the 
reporting obligations are unfounded.
    With respect to the second aspect of reporting--corrective action, 
as the June 7, 2001 final policy statement points out, information from 
abroad may be relevant to the core issue of whether some form of 
remedial action is necessary to protect American consumers from 
defective products that present a substantial risk of death or injury. 
The Commission hopes that all of the commentors to the proposed 
amendment accept that, in evaluating potential hazards, firms should 
attempt to obtain all reasonably available information, including that 
from abroad, in a timely manner to assure that they can reach reasoned 
decisions. Indeed, one of the three commentors expressly stated its 
agreement with this proposition. The Commission believes that this 
perspective is appropriate, since the welfare of their domestic 
customers should be of paramount concern to U.S. companies.
    b. Two commentors believed that the proposed amendment differed 
materially from the final policy statement because, unlike the policy 
statement, the amendment did not

[[Page 54925]]

expressly note that firms had to have first obtained information from 
abroad for the obligation to evaluate the information to arise. The 
commentors feared that the omission signaled a possibility that, in 
evaluating a firm's compliance with the reporting requirements, the 
Commission might hold a firm responsible for not exercising due 
diligence to search for and obtain information that was available 
abroad, but that had not come to the firm's attention. The commentors 
therefore requested that the final amendment expressly state that a 
firm only needs to review information that it obtains.
    The Commission believes that the amendment as proposed implicitly 
recognized that, in order to have an obligation to study and evaluate 
information, a firm must first obtain the information, or be reasonably 
expected to have obtained it because, for example, of the firm's 
relationship with or access to a firm or individual who possesses it. 
To alleviate the apparent confusion, however, the Commission has 
included in the final amendment an express statement that the 
information that should be evaluated includes information that a firm 
``has obtained, or reasonably should have obtained in accordance with 
section 1115.11'' relating to product experience, etc. The Commission 
has not, however, limited this revision to cover only information that 
a firm has ``actually'' obtained, as one commentor requested. As is 
discussed infra, both the CPSA and the interpretative rule recognize 
that a firm need not have actually obtained information for obligations 
under section 15(b) to arise, if a reasonable person acting in the 
circumstances in which the firm finds itself would have obtained the 
information. Accordingly, the Commission believes that these provisions 
that address the imputation of knowledge to a firm dictate against 
further limiting the revision to the amendment. Adopting the 
restriction suggested by the commentor, on the other hand, could 
encourage firms to avoid seeking reasonably available information that 
could ultimately support the need for those firms to take corrective 
action.
    c. Recipients of Information: One commentor stated that the rule 
should reflect that a firm ``obtains'' information only when an 
employee of the firm capable of appreciating the significance of the 
information actually receives it. Section 1115.11 of the interpretative 
rule already states that `` the Commission will deem a firm to have 
obtained reportable information when the information has been received 
by an official or employee who may reasonably be expected to be capable 
of appreciating the significance of the information.'' Because this 
provision already addresses the commentor's request, no additional 
revision to the final amendment is necessary.
    d. Products Imported into the United States: Section 3(a)(4) of the 
CPSA, 15 U.S.C. 2051(a)(4) classifies importers as ``manufacturers'' 
under the act, while section 15(b) itself imposes reporting obligations 
on manufacturers, distributors, and retailers of consumer products. The 
Commission notes that foreign manufacturers export many products into 
the United States directly to importers, distributors, and retailers. 
In these circumstances, the Commission reminds importers, distributors, 
and retailers that they also have obligations under section 15 to 
conduct reasonable and diligent investigations, and to evaluate and 
report information about possible safety defects based on information 
they obtain or should reasonably obtain, including information from 
outside the United States. Retailers and distributors should refer to 
section 1115.13(b) of the interpretative rule for procedures for 
reporting.
    Effective Date: This revision becomes effective 30 days after the 
date of publication of the revised final interpretative rule in the 
Federal Register.

List of Subjects in 16 CFR Part 1115

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

    In accordance with the procedures of 5 U.S.C. 553 and under the 
authority of the Consumer Product Safety Act, 15 U.S.C. 2051 et seq., 
the Commission amends part 1115 of title 16, Chapter II, of the Code of 
Federal Regulations as follows:

PART 1115--SUBSTANTIAL PRODUCT HAZARD REPORTS

    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.


    2. Section 1115.12(f) introductory text is revised to read as 
follows:


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

* * * * *
    * * * (f) Information which should be studied and evaluated. 
Paragraphs (f)(1) through (7) of this section are examples of 
information which a subject firm should study and evaluate in order to 
determine whether it is obligated to report under section 15(b) of the 
CPSA. Such information may include information that a firm has 
obtained, or reasonably should have obtained in accordance with 
Sec. 1115.11, about product use, experience, performance, design, or 
manufacture outside the United States that is relevant to products sold 
or distributed in the United States. All information should be 
evaluated to determine whether it suggests the existence of a 
noncompliance, a defect, or an unreasonable risk of serious injury or 
death:
* * * * *

    Dated: October 24, 2001.
Todd Stevenson,
Acting Secretary, Consumer Product Safety Commission.
[FR Doc. 01-27316 Filed 10-30-01; 8:45 am]
BILLING CODE 6355-01-P