Sunday June 17, 2012
Governing Recalls – Is the Fast Track Restrained?By Sean Oberle, Product Safety Letter publisher
There is a stark, strong and impassioned disagreement about the state of CPSC’s fast-track recall program. On one side are those who are privy to the inside workings of recall negotiations and who have told me that the process has slowed significantly. On the other side are agency management and staff who strongly and sternly rejected that description when I brought it to their attention.
Indeed, the CPSCers raised the possibilities that I’ve received misinformation or that I and my sources are confusing fast-track recalls with traditional ones. For most points in this article, the closed-door nature of recall negotiations limits me to accurately reporting what either side is telling me occurs there. I can, however, comment directly on CPSC’s concerns about misinformation and confusion.
If there is misinformation afoot, there’s already a consensus about it. Most people I spoke with describe similar experiences; others are aware of these worries. This is not coming from a sole malcontent. The concerns are out there. They already are affecting the way that many of those who negotiate with CPSC view the agency.
As for confusion, neither my sources nor I were confused about what we were discussing. Indeed, our conversations frequently touched on the differences between fast-track and traditional recalls. Concern about fast-track was the premise of our conversations; that was the point.
More substantively, CPSC’s response included its assessment that delays often, in fact, are due to companies’ actions or lack of actions, and it fired back with a warning about a “disturbing trend” involving an allegedly “false claim” made by some manufacturers to retailers in handling recalls.
On the other hand, CPSC’s response does note that it is looking internally into improving the fast-track recall process, and it gives many hints about what can speed recalls. For example, a refund, because it doesn’t need technical review, is likely to get the OK stamp as a remedy faster than, say, a repair.
Unfortunately, the available data aren’t much help in sorting this out. CPSC says in its 2011 Performance Report that in fiscal 2011 (October 2010 to September 2011), it initiated 95% of fast-track recalls within the program’s stated goal of 20 days. However, data about what happened nine to 21 months ago don’t tell us much about what’s happening today.
Finally, before exploring the two sides, I’m going to do a little editorializing.
I’ve been a part, at one level or another, of PSL’s coverage of CPSC for most of the past 23 years. I’ve seen this sort of divide in the past – it comes in waves – and I’ve heard about others that occurred before I arrived. Meanwhile, I’ve always been a bit amazed that this little community we work in can have such broad effect on both the health of the American public and the health of American industry. This current divide thus needs to be bridged, and it can be if the sides communicate in good faith. At the risk of seeming Polyanna, the first step is to air and thus identify the differences. That’s the only role I can play here; the rest is up to those inside recall negotiations.
Here is what I've learned. My goal is to give a fair shake to both views.
CPSC’s fast-track recall process has slowed significantly, say many of those I spoke with, and they assert that the cause is an increased level of information that the agency seeks. The effects, they suggest, include worries that CPSCers seem concerned with building cases against companies at the expense of getting products off the market quickly or seem focused on ticking-off all items on a checklist regardless of their relevance to particular situations. The source, they surmise, may be twofold: increased and earlier involvement by CPSC lawyers in recall negotiations and a rise in the number of newer and thus less experienced compliance officers who might not trust themselves and the process the way seasoned staffers do.
All this, they say, is leading to ostensibly fast-track corrective actions sometimes taking months and even longer. The incentive for companies could be waning, they conclude, because not only is the speed in doubt, but the carrot of a waived preliminary determination letter can be outweighed by the feeling that CPSC itself is digging for evidence. That feeling is exacerbated by a perception that CPSC lawyers appear worried that firms might use the fast-track process to hide deficiencies.
Those who spoke with PSL asserted that CPSC seems increasingly concerned with ruling out mistakes. Examples include asking for evaluation of whether a fast-track recall should be expanded beyond the range of manufacturing dates in which incidents occurred as well as increasingly making extra-regulatory requests like applying reverse logistics. Compliance officers, they say, seek as much information as possible about products often beyond the needs of the recall. For example, they might seek design information about all elements of the product rather than about just the components involved in the hazard. Moreover, some report that their suggestions for remedies – fixes that in the past were quickly accepted as reasonable – are routinely questioned with requests that companies consider other possibilities or demonstrate likely effectiveness.
A particularly frustrating point for some is that sometimes the information they initially presented and the actions they first requested eventually are mostly if not wholly accepted, but only after weeks or months pass while they justify their plans or explain why certain information is not needed.
On the other hand, some also report an experience akin to that old military complaint of “hurry up and wait” – but its opposite: “wait and hurry up.” Because of increased uncertainty about what CPSC will accept, they explain, it is harder for companies to plan corrective actions until they get the agency’s answer. However, they say, CPSC expects them to set matters in motion quickly once it makes its decisions, often before the companies can adapt plans to the CPSC-approved remedies. They also report concerns about situations such as early “stop sale” notices to retailers followed by long waits, creating risks that information about pending recalls might leak in ways not beneficial to either the companies or CPSC.
The overall problem, they say, is that these developments go against the spirit of the fast-track recall program: a deal of trust between manufacturers and CPSC; a notion that firms coming to the agency intent – often eager – to recall probably are acting in good faith; a belief that if the immediate action turns out to be insufficient, it can expand later; an acknowledgement that something now and possibly something more later is better than everything later.
They wonder about the agency being overly cautious, pointing out that the fast-track designation does not stop CPSC from giving continued attention to a situation or to a product. Oversights, whether intentionally hidden or accidently overlooked, can come to light even after the primary goal of telling the public occurs. Indeed, the rules of the program stipulate that companies must file full reports under 16 CFR 1115.13(d), which details 15 types of required data, including descriptions of defects, the ways and dates of learning about problems, details about distribution chains, and similar information. What concerns some of those I spoke with is being asked for information that they deem to be beyond those requirements and the effects that has on the speed of the process and the trust of its participants.
When I presented the agency with a list of the concerns, observations, and experiences that I was hearing about, I didn’t expect the level of attention and the volume of responses that the list generated. Clearly, CPSC is taking this matter very seriously. Much of the reaction, understandably, has a defensive or a “right back atcha” tone, but not all of it. For example, the team that formulated CPSC’s responses wrote:
“Generally, Fast Track Recalls continue to be handled expeditiously and are completed more quickly than the traditionally reported recalls. Review of data for the past few years does not indicate significant delays in the processing of fast track reports. However, the agency is always working to improve internal processes and has taken a number of steps to improve the filing and processing of fast track reports. These improvements include: greater promotion of reporting via CPSC.gov and the hiring of a new Defect Investigations Division Director, who is reviewing the current process flows to identify improvement opportunities that will yield more efficient and timely responses to industry.”
Meanwhile, here are CSPC’s reactions to the complaints raised in this story.
Complaint: Increased demand for information – increased paperwork – is creating a disincentive to use fast-track.
CPSC Response: “Fast Track Recalls were never intended to eliminate or reduce paperwork. In fact, a requirement to participate in Fast Track is the filing of all information requested in the Full Report (16 C.F.R. Section 1115.13(d)). Frequently, delays are created because the reporting firm fails to provide CPSC staff with ALL of the information required to initiate the Fast Track process. Additional delays can be created if firms are not prepared to immediately provide CPSC staff with information or a copy of what the remedy is that will be offered to consumers. These delays slow down technical staff’s evaluation of the proposed Fast Track repair or replacement. Firms wishing even more expedited review should consider offering a refund, which requires little, if any, technical input. Additionally, some delays may occur where questions are raised by Compliance staff as to the scope of a problem or the population of products involved, where the firm has limited the population. In order to best serve the interests of consumers, Compliance staff is expected to conduct due diligence in assuring that the agency understands the reason for reporting, the products involved, etc.”
Complaint: The increased information that CPSC seeks sometimes includes information outside the needs of the recall such as information not directly related to the hazard.
CPSC Response: “As part of our effort to ensure we have done our due diligence, we may ask for information above and beyond the initial report. This has been the exception rather than the rule, and generally comes into play when we believe similar products or styles of products may contain the same problem as that reported. Consumers are well served by CPSC when staff takes these extra steps, because the scope of the problem is more clearly analyzed and considered.”
Complaint: CPSC wants companies to demonstrate the likely effectiveness of and gives greater scrutiny to proposed remedies that traditionally were deemed reasonable yet often approves them in the end.
CPSC Response: “To achieve due diligence, it requires that CPSC Compliance staff be confident (along with technical staff) that the remedy proposed is an appropriate one and will keep the consumer safe.”
Complaint: CPSC is questioning the scopes of proposed recalls such as asking companies to look at dates outside the ranges of known incidents.
CPSC Response: “It makes more sense to CPSC and consumers, if the agency catches all the problems up front by asking additional questions to clearly define the scope of the problem, rather than going back to the firm later on and expanding the scope of the recall. CPSC is about preventing injuries and to fail to ask questions up front that could prevent even one incident/injury goes against our process and mission.”
Complaint: CPSC increasingly is seeking information not required by law or regulation, such as reverse logistics plans
CPSC Response: “Commission regulations require that other information must be provided to CPSC staff as needed. This is not new and has been our approach for years. Reverse logistics information has been a part of the corrective action plan for a while, because agency staff wants to make sure recalled products never find their way back into commerce or consumers hands. The CPSIA made it illegal to sell recalled products. Within the last year, we announced a major recall where many firms sold recalled products. CPSC and recalling firms need to avoid this in the future, and as a result, we need to know in advance what their disposition plans are with respect to the recalled products. CPSC staff firmly believes that is not an unreasonable request, especially in light of the new CPSIA prohibited act.”
Complaint: There seems to be increased involvement by lawyers, including from the Office of the General Counsel, from the start in recall negotiations.
CPSC Response: “Compliance investigations have always been a team consisting of the Compliance Officer and Attorney. This is nothing new. Fast Track cases have traditionally and continue to have a lower level of attorney involvement, which is a reason why CPSC staff believe PSL is confusing Fast Track reporting with traditional Section 15 reporting.
Complaint: Newer compliance officers seem to be an issue more than older ones. They seem to have less confidence in what they are doing, sometimes giving the impression of fearing to deviate from a checklist.
CPSC Response: “This is unfair characterization, as all new staff need time to learn their position and gain experience. There are protocols, but no checklists. Every case is unique and handled personally by a Compliance Officer. At CPSC, we have seasoned Compliance Officers and managers, and some newer staff. Every Compliance Officer works under the guidance of a Compliance Lead and the new Defect Director. If a firm or their counsel feels they are not getting the attention they need, they should request a conference call with the Compliance Lead or Scott Simmons,” Director, Defect Investigations Division, Office of Compliance: firstname.lastname@example.org.
Complaint: The information demands leave companies worried whether the goal is to get recalls out or to build cases against them.
CPSC Response: "The goal of the Office of Compliance and Field Operations has always been to prevent injury and death to consumers through adequate corrective action plans. At the same time, CPSC staff has always told the regulated industry that we will review whether they met their obligation to report, and that is always done after corrective action plans are negotiated and implemented."
Complaint: The information demands leave companies worried that CPSC sees fast-track as way for companies to hide problems like reporting deficiencies more than as a way to speed recall information to consumers.
CPSC Response: “If there is nothing to hide, then firms should provide the requested information in a timely manner. CPSC staff will do their due diligence to ensure that the agency has been as comprehensive as we need to be. Staff takes this approach in order to achieve a level of assurance we have identified the full scope of any reported defect and eliminated the hazard to consumers through an adequate corrective action plan.”
Complaint: The information demands leave companies worried that CPSCers are gathering information just for the sake of doing so, again, sometimes giving an impression of compliance officers working with a checklist and not wanting to deviate from it.
CPSC Response: “Everything we request has a purpose and is part of our investigative process. CPSC staff does not need the extra paperwork for any other purpose than to assure ourselves that the agency has conducted a full and comprehensive investigation. This ultimately affords the reporting firm some additional level of protection if and when questions may be asked about other products not included in a recall plan.”
Complaint: There are instances of CPSC wanting action as soon as the company reports – such as telling retailers to stop sale right away – but then moving slow. The company then is in pinch if the coming recall “leaks” due to being with the distribution-contacts before the company has a remedy in place.
CPSC Response: “Based upon initial information, staff often asks a firm to stop sale. This action, of course, limits the number of products that may have to be recalled later. Firms that have questions about our timeliness of putting a remedy in place should be speaking with the Compliance Office, the Compliance Lead, or other Compliance managers. Generally, CPSC staff believes it takes firms too long to put the remedy in place, especially when they have other options they should be considering (refunds/credit/replacement product, etc.)”
Complaint: Once the fast-track is approved, CPSC wants quick (or immediate) action. But sometime the company cannot plan those actions until it knows what CPSC will approve.
CPSC Response: “Generally a firm has an idea of when a recall will be announced. If that is not the case, the firm should speak with the Compliance Officer and settle that issue. Timing is always a balancing act as to the risk presented, other activities going on within Compliance and the Office of Communications, and the ability of a firm to be prepared to respond to a recall. Even today, some firms say they are ready once the corrective action plan is “approved,” yet they may not have the infrastructure in place to handle calls, inquiries, requests from retailers etc. We do not want to set up firms to fail once the recall is announced, so we make sure all logistics are in place for the day that the media and public is made aware of the recall.”
CPSC concluded its reactions with this warning:
“One disturbing trend CPSC staff has seen over the last couple of months is the failure of recalling companies to notify its retailers and distribution chain of an upcoming recall. In many cases, notice is going to the buyer of the retailer, but not to the appropriate product safety staff within the retailer. CPSC Compliance staff always advise recalling firms to give sufficient notice in order for the retailer to be able to stop sale and notify all stores. After so many years of working with safety officials within the retail community, it is disappointing to CPSC Compliance officials that recalling companies continue to notify the buyer and not their safety counterparts. As a result, the retailers call CPSC Compliance staff complaining that they were not given adequate and timely notice. In fact, several retailers advised CPSC management that certain manufacturers said they were advised to not tell the retailer of the upcoming recall. This is a false claim by those manufacturers. This is a problem that we experienced years ago and hopefully we are not going back to those days.”