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The recall of millions of Bridgestone/Firestone tires focused national attention on the possible relevance of information available on products sold outside the United States to safety issues within the United States. Accordingly, the Consumer Product Safety Commission (CPSC) issued a policy statement that information concerning products manufactured or sold outside of the United States may be relevant to defects and hazards associated with products distributed within the United States. The CPSC’s position is that firms should evaluate such information in determining whether to report substantial product hazards under § 15(b) of the Consumer Product Safety Act (CPSA). On Oct. 31, the CPSC formally incorporated this policy statement into the existing interpretive rule advising firms regarding compliance with § 15(b). The revision will be effective Nov. 30. (66 Fed. Reg. 54923). The following provides general background information and summarizes the key issues raised by the revision to the interpretive rule. BACKGROUND ON REPORTING OBLIGATIONS Section 15(b) of the Consumer Product Safety Act, 15 U.S.C. 2064(b), requires manufacturers, distributors, and retailers of consumer products to report potential product hazards to the CPSC. In 1978, the CPSC published a Substantial Product Hazard Reports interpretative rule, 16 C.F.R. 1115. The interpretive rule clarified the Commission’s understanding of the § 15(b) requirement and established policies and procedures for filing reports under § 15(b). That interpretive rule addressed the various types of information a firm should evaluate in considering whether there exists a noncompliance, a defect or an unreasonable risk of serious injury or death. Examples of information to be evaluated include: � engineering, quality control or production data; � information about safety-related production or design changes; � product liability suits and/or claims for personal injury or damage; � information from an independent testing laboratory; � complaints; � information received from governmental agencies; and � information received from other firms including requests to return a product for replacement or credit. The 1978 interpretive rule did not specifically address information about experience with products manufactured or sold outside of the United States. REPORTING STATUTE NOT LIMITED TO DOMESTIC PRODUCT EXPERIENCE OR SALES The CPSC’s recent revision to the interpretive rule indicates that the various types of information that a firm should consider in determining whether to report does not exclude information based on its geographic source. Thus, if a firm obtains information that meets the criteria for reporting listed above, and that information is relevant to a product sold or distributed in the United States, a firm should take that information into account in determining whether to report under § 15(b). The CPSC’s revision to the interpretive rule does not provide specific examples about the types of information that might be received by a firm, but directs firms to the preamble to and text of the 1978 guidance. In the preamble for that guidance, for example, § J discusses imputing knowledge of safety-related information to a firm only when an employee capable of appreciating the significance of the information receives it. Section L of that guidance reflects the Commission’s view that firms must exercise reasonable diligence in investigating possible product defects. The preamble to the revision clarifies the information that should be evaluated is that which a firm has obtained, or reasonably should have obtained. REVISION RAISES SIGNIFICANT LEGAL QUESTIONS � The revision to the interpretive rule may not be legally enforceable because it is not a rule. � To the extent the revision to the interpretive rule suggests that a U.S. firm has “knowledge” of information held by an overseas corporate affiliate, it is contrary to normally accepted notions of corporate separation. For example, U.S. subsidiaries of foreign companies may not be able to require corporate parents or foreign subsidiaries of their corporate parents to collect and forward relevant safety information. � The revision to the interpretive rule counsels that incidents or experience with the same or “a substantially similar product, or a component thereof, sold in a foreign country” may trigger a reporting obligation. The revision provides no guidance as to how the CPSC will consider whether a product is “substantially similar” or how firms should evaluate information pertaining to such products to determine if they have a reporting obligation. � The CPSA requires that companies “immediately” inform the CPSC if they have obtained information which reasonably supports the conclusion that a reportable §15(b) failure to comply, defect or risk exists. The CPSC’s 1978 guidelines indicate that “immediately” means that the reportable information must be submitted within 24 hours after the information is “obtained.” 16 C.F.R. 1115.14(e). When such information is “obtained” is open to one’s subjective interpretation. Although the CPSC acknowledges that there may be a difference in degree in what it is reasonable to expect from reporting firms with respect to collecting foreign, as opposed to domestic, information, it provides no specific guidance to companies on what is “reasonable.” REVISION TO INTERPRETIVE RULE MAY GO FURTHER THAN STATUTE In our view, the revision to the interpretive rule contains elements not contained in the statute. Specifically, §15(b) of the CPSA requires companies to report when a “product” fails to comply with a rule or voluntary standard, or contains a defect or creates an unreasonable risk. As noted above, the interpretive rule revision states that foreign incidents or experience with “a substantially similar” product may trigger a reporting obligation. This appears to go beyond the reporting obligation specified in the statute. CIVIL PENALTY BASED ON FOREIGN INFORMATION ALREADY IMPOSED Although significant questions remain, it is important for all manufacturers, distributors, retailers, and importers to be aware of the CPSC’s position concerning foreign information. The CPSC imposed a civil penalty against a company that allegedly failed to report safety problems that occurred in water distillers sold overseas. The CPSC claimed that the overseas incidents should have led the firm to recognize problems in the distillers it sold in the United States. See66 Fed. Reg. 11,565 (Feb. 20, 2001). The company chose to settle the matter rather than litigate. This case reflects the fact that unless companies choose to litigate, the revision to the interpretive rule may have the practical effect of a regulation and lead to the imposition of civil penalties. CONCLUSION The CPSC’s implementation of the interpretive rule revision raises numerous questions regarding the extent to which the CPSC will seek to exercise its jurisdiction and hold companies responsible for reporting information pertaining to products produced and sold overseas. Although it does not have the force and effect of law, firms may want to consider seeking guidance on the applicability of this revision to case-specific situations. Peter L. Winik is a partner in the Litigation Department of Latham & Watkins’Washington, D.C., office. He may be reached at [email protected]or (202) 637-2224 Laura H. Neuwirth, an associate in the Environmental Department in the D.C. office, may be reached at [email protected]or (202) 637-2248. The information contained in this article should not be construed as legal advice.

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