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Compliance Program Seminar - Panel 1 - Develop a Compliance Program


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CPSC Compliance Program Seminar panel 1 presentation on developing a compliance program for your business.

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Compliance Program Seminar - Panel 1 - Develop a Compliance Program

  1. 1. This presentation has not been reviewed or approved by the Commission and may not reflect their views.
  2. 2. Develop a Program by Understanding What the Law Requires
  3. 3.  Promotes robust design and testing of products during development and in the manufacturing/assembly process  Promotes early detection of potentially unsafe products  Facilitates efficient and effective implementation of CPSC reporting obligations and Corrective Action Plans, including recalls and reverse logistics  Avoid civil penalties:  “Reasonable and effective program or system for collecting and analyzing information related to safety issues.” 16 C.F.R. §1119.4(b).  History of non-compliance. 16 C.F.R. §1119.4(b)(2).  Protect consumers
  4. 4. Reporting requirements of Section 15(b) of CPSA (15 U.S.C. §2064) A Firm is required to immediately report when it obtains information which reasonably supports the conclusion that a consumer product:  Fails to comply with an applicable consumer product safety rule or a voluntary standard which is relied on under Section 9 (of the CPSA),  Fails to comply with any other rule, regulation, standard or ban under the CPSA or other acts enforced by the CPSC,  Contains a defect which could create a substantial product hazard, or  Creates an unreasonable risk of serious injury or death.
  5. 5.  Knowing violations: (1) actual knowledge, or (2) presumed knowledge If the firm receives relevant information from various sources, but does not have a process to organize it, analyze it and elevate issues within the organization, it may constitute a knowing violation of 15(b).  Important to develop a compliance program that ensures the right people at your firm are informed of safety information and have the authority to file a report.  Important for a Firm to know WHO, WHAT, and WHEN
  6. 6.  Not just people to whom reports are made; includes individuals in the reporting chain  The Firm is deemed to have obtained reportable information when [safety related information] has been received by an official or employee who may reasonably be expected to be capable of appreciating the significance of the information. 16 C.F.R. §1115.11(a).  Expected that the information will reach the CEO or the official responsible for 15(b) compliance within 5 days. 16 C.F.R § 1115.14(b).  Review your Firm’s organizational structure, roles and responsibilities. Members could include Safety or Quality staff, Customer Service Personnel, Risk Management staff, Engineers, General Counsel…
  7. 7.  Engineering, quality control or production data  Information about safety-related production or design changes  Product liability suits and/or claims for personal injury and damage  Information from an independent testing laboratory  Incident complaints from consumers or consumer groups  Information received from the commission (360 reports) or other governmental agencies  Requests to return a product or for replacement or credit; by distributors/retailers to the manufacturer and requests from the manufacturer that the product be returned  Warranty claims  Product repairs or returns  Premarket and production testing  Compliance with applicable mandatory and voluntary safety standards 16 C.F.R. § 1115.12(f). 16 C.F.R. §1119.4(b).
  8. 8.  Death or grievous bodily injuries: Defect, noncompliance caused, may have caused, contributed to the causing, or could cause mutilation, amputation/dismemberment, disfigurement, loss of important bodily functions, debilitating internal disorders, severe burns, severe electrical shocks, and injuries likely to require extended hospitalization. 16 C.F.R. § 1115.12(d).  Marbles, small balls, balloons or small parts in a toy or game on which a child choked and died, suffered serious injury, ceased breathing, or was treated by a medical professional; 16 C.F.R. § 1117.3 (MDRI)  Section 37: Manufacturers: Three civil actions filed in federal or state court for death or grievous bodily injury within a 24 months resulting in settlement or plaintiff’s judgment. Report: 30 days.  The CPSC “would expect to receive 15b reports long before the obligation to report under Rule 37 arises since Firms frequently obtain reportable information before settlements or judgments in their product liability lawsuits.” 16 C.F.R. § 1115.7.  Think Globally: If the product is sold outside the U.S., information about its use, experience, performance, design, or manufacture should be considered. 16 C.F.R. §1115.12(f).
  9. 9.  What is information that “reasonably suggests the existence of a defect”?  Dictionary definition  Regulation broadly defines:  Defect resulting from manufacturing or production errors  Defects from contents, materials, construction, finish, packaging, warnings, and/or instructions  Design defect that presents a risk of injury: Examine utility, nature of the risk of injury, necessity, population exposed, obviousness of the risk, adequacy of warnings and instructions to mitigate the risk, role of consumer misuse and foreseeability of misuse; commission’s expertise; case law interpreting federal health and safety statutes; case law in products liability, other relevant factors  16 C.F.R. § 1115.4
  10. 10. Does defect/noncompliance, because of the:  Pattern of Defect, or  Number of Defective Products Distributed, or Even one defective product can present a substantial risk of injury if the injury which might occur is serious and/or if the injury is likely to occur.  Severity of the Risk, or A risk is severe if the injury which might occur is serious and/or likely to occur. In considering likelihood of injury, consider the number of injuries reported, intended[ use] or reasonably foreseeable use or misuse of the product, and population exposed (children, elderly, handicapped).  other relevant factors create a substantial risk of injury to the public. 16 C.F.R. §1115.12.(g).
  11. 11.  No  Still need to evaluate whether the information reasonably supports a conclusion that the product could create an unreasonable risk of serious injury or death—if it is possible, report. 16 C.F.R. § 1115.6(a).  Do not wait for a serious injury or death to actually occur before reporting. 16 C.F.R. §1115.6(a).
  12. 12.  Reports from experts  Test reports  Product liability lawsuits or claims  Consumer or customer complaints  Quality control data  Scientific or epidemiological studies  Reports of injury  Information from other firms or governmental entities  Other relevant information  Judgment: “The CPSC will attach considerable significance if a firm learns that a court or jury has determined that one of its products has caused a serious injury or death and a reasonable person could conclude . . . that the product creates an unreasonable risk of serious injury or death.” 16 C.F.R. §1115.6(a)
  13. 13.  A grievous bodily injury 16 C.F.R. §1115.12(d)  Injury necessitating hospitalization requiring actual medical or surgical treatment  Fractures, lacerations requiring sutures, concussions, injuries to the eye/ ear/internal organs requiring medical treatment, and injuries necessitating absence from school or work of more than one day  Evaluate chronic or long term health effects as well as immediate injuries  Assess the RISK of serious injury, not just actual injuries 16 C.F.R. §1115.6(c)
  14. 14. Always monitor to ensure compliance with standards.  Mandatory Standard:  If violate, report.  If comply, still may need to report a defect: Compliance does not relieve a firm from the need to report a defect that creates a sph, but will be considered by staff in the determination of whether/what type of corrective action is required. 16 C.F.R. §1115.8(b).  Voluntary Standards: Compliance with a voluntary standard may be relevant to the CPSC staff’s preliminary determination of whether the product presents a substantial product hazard.
  15. 15.  Immediately: 24 hours (weekends, holidays excluded). 16 C.F.R. §1115.14(e)  Don’t wait to accumulate incident or injury reports: may arise upon receipt of first information regarding a potential hazard, noncompliance or risk. 16 C.F.R. §1115.14(c).  10 days for investigation. 16 C.F.R. 1115.14(d)  A firm is assumed to have received and considered all information which would have been available to it had it conducted a reasonable, expeditious and diligent investigation regardless of the information it actually has in its possession. 16 C.F.R. §1115.14(d)
  16. 16. Noah AnStraus and Lauren Kleinman Trial Attorneys Office of General Counsel Division of Compliance This presentation has not been reviewed or approved by the Commission and may not reflect their views.
  17. 17. Create a system to collect, consolidate and ensure information is properly analyzed.
  18. 18.  Training – Don’t just talk about it, do it!  New employee training  Bi-annual or annual refresher training  Practice and Audit; Incorporate Lessons Learned  Allows for review and evaluation of the compliance program to facilitate its continuous improvement  Ensures that training is effective and not just a box to check
  19. 19.  Tailor the program to your firm’s specific needs  Make sure all employees and other relevant parties (e.g. suppliers, distributors) are aware of and understand the program  The program is not a static document – it needs to grow and evolve with your firm
  20. 20. Have a recall plan in place to enable quick action. The ISO standards below may provide additional guidance:  ISO 10377 Consumer Product Safety Guidelines  ISO 10393 Consumer Product Recall Guidelines  ISO 19600 Compliance Management Systems Guidelines  ISO 31000 Risk Management: Principles and Guidelines
  21. 21.  Make safety a priority at the design stage; consult CPSC’s Handbook for Manufacturing Safer Consumer Products for guidance and best practices and conduct usability testing as part of the development process  Conduct adequate and relevant premarket and production testing to ensure products meet or exceed safety requirements in relevant mandatory and voluntary safety standards  Exercise due care when relying on a supplier by taking affirmative steps, such as:  Including contractual provisions requiring compliance with specifications and quality programs  Visiting manufacturing locations  Spot-checking products for ongoing compliance with safety requirements  Conduct regular audits to confirm compliance within your firm and among your suppliers
  22. 22.  Establish systematic procedures for collecting the information to be reviewed and evaluated for potential safety issues  Consider multiple sources of information  Types of incident information to collect:  Date of report  Consumer contact information (name, address, email, and phone)  Product name, make, model, serial number, date code, and any other identifying information on the product or packaging  Incident details such as:  Date of incident  Circumstances surrounding incident  Injury/medical attention, medical records if appropriate, and photographs  Collection of incident sample, if available
  23. 23. Establish a central database to track information; ensure early issue identification and closing open issues:  Set up a system to capture all incidents and route potential safety related incidents to the compliance team  Make sure that your databases speak to one another  Ensure that employees are trained to recognize safety related issues, so they are prepared to elevate these issues to management as soon as they see them  Have a system in place to regularly analyze what is contained in the Database to make certain that issues are identified and addressed as soon as possible
  24. 24.  Safety issues will eventually surface, but it is best to get ahead of them  Make employees comfortable in reporting safety issues; create a confidential path for sensitive issues  Ensure that information gets to the right people in your organization based on its structure and roles and responsibilities
  25. 25.  Maintain a culture that emphasizes and values product safety, compliance with CPSC safety requirements and voluntary standards, and a comprehensive quality assurance program  Oversight of compliance by the firm’s responsible official will facilitate prompt disclosure to senior management of any deficiencies and allow for consistent decision making  Develop a mechanism for elevating product safety reports to senior management
  26. 26.  Understand your legal responsibility to report information to the CPSC about the product if it:  (i) fails to comply with a CPSC rule, regulation, standard or ban  (ii) contains a defect which could create a substantial product hazard  (iii) creates an unreasonable risk of serious injury or death  Keep up with the CPSC’s new and updated regulations through e-mail notification:
  27. 27.  Step-by-step guidance for conducting a recall can be found in the Recall Handbook: Manufacturing/Recall-Guidance.  Understand the system(s) of product distribution and the potential challenges in executing a recall and develop an implementation plan. Ensure the plan is updated.  Common reverse logistic mistakes:  SKUs were reused; consider how lot or batch controls or model and serial numbers are used to identify products  computer systems did not communicate with each other  no one individual was identified as the point person for the recall  inventory reports for recalled SKUs were not regularly conducted  sales reports for recalled SKUs were not regularly conducted  register prompts were unclear
  28. 28.  Establish a records retention system  CPSC staff recommends keeping all compliance-related records for at least five years  If you are upgrading systems, make sure you can access legacy data  Retention of documents can help identify actions to ensure future safety and compliance  In the event of a product recall, documentation helps CPSC understand the efforts you made to provide safe consumer goods, what went wrong and how it has been corrected
  29. 29. 29 This presentation has not been reviewed or approved by the Commission and may not reflect their views. Compliance Program Seminar Reverse Logistics and Adequate Notice November 1, 2018
  30. 30.  Public Notice  Remedy  Communication with consumers, retailers, distributors, and other parties  Destruction or remediation of recalled products 30
  31. 31.  Reverse logistics is the process of planning, implementing, and controlling the efficient and effective flow of goods from their typical final destination for the purpose of recovery or proper disposal  Physically recovering and properly disposing of products in the event of a recall or stop sale is just one aspect of a good reverse logistics plan  A Compliance Program should be comprehensive and anticipate potential reverse logistics issues that may arise 31
  32. 32.  Develop a reverse logistics and recall plan before you need it  Rehearse your plan and conduct mock recalls  Identify gaps and define exactly what will happen and who is responsible for each part of the plan to allow for effective plan execution  Update to reflect changes in the supply chain 32
  33. 33.  Alert the entire supply chain  Provide specific instructions for disposition of recalled products  Provide a recall point of contact  Ensure everyone knows exactly what to do, their role, and who to contact  Notifications should happen leading up to and including recall announcement date 33
  34. 34. When developing a reverse logistics plan, consider:  Communication avenues  Central location quarantine vs retail destruction  Computer system limitations  Auctioning and selling off  Disposal/recycling procedures 34
  35. 35. Tanya Topka, Team Lead U.S. CPSC, Office of Compliance, Defects Investigation Division 301-504-7594 35
  36. 36. COMPLIANCE PROGRAMS - REGULATED RODUCTS Carolyn Manley Team Lead, Regulated Children’s Products Regulatory Enforcement Division Office of Compliance and Field Operations This presentation has not been reviewed or approved by the Commission and may not reflect their views.
  37. 37. Purpose of Compliance Program  What is the purpose of developing a compliance program? For a company to develop internal safe guards to ensure their products comply with regulations.
  38. 38. Developing a Compliance Program: Knowing the Statute and Requirements 38  Federal Hazardous Substances Act (FHSA) Small parts, labeling for toys and games, lead in paint, lead content, art materials  Consumer Product Safety Act (CPSA) Phthalates, ASTM F-963, durables, tracking label, certification  Flammable Fabrics Act (FFA)  Poison Prevention Packaging Act (PPPA)  Refrigerator Safety Act (RSA)  Virginia Graeme Baker Pool & Spa Safety Act  Children’s Gasoline Burn Prevention Act (CGBPA)
  39. 39. Common Problems These common problems can be avoided:  Products not meeting mandatory standards  Products being detained at the port  Products not tested to the applicable requirements  No Children’s Product Certification or General Certificate of Conformity  Appropriate Test Reports
  40. 40. Developing a Compliance Program: Small Parts Requirements (Toys for children under 3 years of age) 40  Toys and other articles for children under 3 years of age must not contain any small parts before and after use and abuse testing  Small parts are articles that fit into small parts cylinder.
  41. 41. Which requirements apply? Age 19+ months -Lead content -Lead and other heavy metals surface coating -Phthalates -Small parts -ASTM Battery operated toy -ASTM Sound producing toy -Tracking label -Certification
  42. 42. Which requirements apply? Age 19~35 months, 29 pieces, larger size blocks that will not fit into small parts cylinder Age 3+ years, 102 pieces, smaller size blocks that fit into small parts cylinder -Lead content -Phthalates -Small parts -Tracking label -Certification -Phthalates -Lead content -Small parts warning label -Tracking label -Certification
  43. 43. Developing a Compliance Program: Requirements for Labeling for Toys and Games (Toys for children 3 years of age and above) 43 Small parts: age 3- less than 6 Balloons: all latex balloons Small ball: age 3 and older Toy contains a small ball: age 3 - less than 8 Marble: age 3 and older Toy contains a marble: age 3- less than 8
  44. 44. Developing a Compliance Program: Requirements for Labeling for Toys and Games (Toys for children 3 years of age and above) Before the firm instituted a compliance program After the firm instituted a compliance program
  45. 45. Developing a Compliance Program: Durable Infant and Toddler Products What is a durable infant or toddler product? Section 104 (b) of the Consumer Product Safety Improvement Act – Danny Keysar Child Product Safety Notification Act (Danny’s Law)  “Durable infant or toddler product” is defined as a durable product intended for use, or that may be reasonably expected to be used, by children under the age of 5 years.  The products listed in the Commission’s regulations at 16 CFR 1130.2. 45
  47. 47. Common Problems with Durables  Ensuring that third-party testing laboratories are CPSC-accepted and accredited to test to the mandatory standards.  Ensuring that third-party testing is being conducted to the most up-to-date version of the standards approved by the Commission.  Ensuring that durables have a registration form attached to the product.  Ensuring that the products and their packaging are labeled in accordance with the registration and tracking label requirements.
  48. 48. EXAMPLE OF REGISTRATION FORM Purpose statement Postage paid Manufacturer’s U.S. mailing address Manufacturer’s U.S. contact information: address and registration website If no registration website, email is required. Consumer address and contact info Pre-printed product info. Consumer keeps Consumer mails out ABC ABC 123 123 Jan 1, 2018 Jan 1, 2018
  49. 49. The Overlap Between Tracking Label Requirement and Registration Requirement
  50. 50. Developing a Compliance Program: Lead Limit Requirements  Lead content: cannot exceed 100 ppm in children’s products  Lead in paint: cannot exceed 90 ppm for surface coating on children’s products  Commission has determined that certain materials would not contain lead, and therefore, do not require lead content testing. Some of the materials that do not contain lead are: wood, paper, most textiles and natural fibers (dyed and undyed), plant and animal-derived materials, and certain precious metals. A complete list of materials can be found at 16 C.F.R. § 1500.91(d).
  51. 51. Developing a Compliance Program: PPPA - Special Packaging Requirements  Special Packaging is packaging that is designed or constructed to be significantly difficult for children under five years of age to open or obtain a toxic or harmful amount of the substance contained therein within a reasonable time and not difficult for normal adults to use properly..” 15 U.S.C. § 1471(4)  32 Substances requiring Special Packaging are listed at 16 C.F.R. § 1700.14 (a)(1-13, 15-33)  Performance specifications for Special Packaging can be found in 16 C.F.R. § 1700.15.  How to test: the Testing Protocol for Special Packaging is at 16 C.F.R. § 1700.20.  Manufacturers and importers of certain general use products (i.e., non- children’s products) for which consumer product safety rules apply, must certify, in a written General Certificate of Conformity (GCC) based on testing or a reasonable testing program, that their products comply with those applicable rules. 51
  52. 52. Remember: 52 Know Your Products & Regulations Test Your Products & Develop a Compliance Program Contact CPSC
  53. 53. Remember: Resources
  54. 54. Questions? Carolyn Manley 301-504-7607