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Segment 3 - How to Handle Product Recalls in Your Ebiz – Dennis Blasius

Colette: Dennis, has there ever been a case where a retailer has simply had to take a loss on a recalled product or are the manufacturers required by law to buy them back?

Dennis: Well, our primary responsibility is to protect the consumer product, however when we negotiate and eventually agree to the terms of a voluntary recall we want to be assured that the public is adequately notified of the hazard and that as much of the defective product that is possible can be recovered from consumers hands.

Chris: Mm-Hmm.

Dennis: And the retailer obviously is going to play a big part in that. Typically we look for the responsible firm to retrieve the recalled units from the retailers, especially those units that the retailers may still have in stock or maybe units that they’ve accepted as returns from consumers. And I would expect this would also include reimbursement to the retailer, however that’s between you and your vendor. The reality is because there was a recall does not mean the relationship between the vendor and the etailer should be destroyed. No one intended, in most cases, to distribute a product that was a potential hazard and I think it’s important to remember that if your experience has been that you’ve had a good relationship with this same supplier that you work together and resolve the problem in a way that’s best for the public and move on.

Chris: That’s a very good point, it’s in the best interest of the manufacturer and supplier and everyone else in the supply chain to make sure that good relations continue. So it’s in their best interest to take care of the retailer as well.

Dennis: Really it is.

Chris: Is there an investigative or law enforcement component to your work, Dennis, or to the work of the agency? Can civil or criminal penalties be leveled in any situations?

Dennis: There is. The CPSC is a small agency of approximately 400 employees currently, and while our headquarters is located in the Washington D.C. area and our laboratory is located in Gaithersburg, Maryland, there are approximately 80 other field investigator employees who are permanently based throughout the country. These are the investigators that conduct those onsite investigations of incidents that involved serious injury or death and they also conduct inspections of the firms that are responsible for the manufacture, import, or distribution of the products involved. We also conduct import surveillance at the ports. We examine retail stock in traditional stores. And we conduct internet surveillance looking for recalled, banned, or potentially dangerous products. In fact, I manage our Internet Surveillance Unit.

Chris: Oh, really? Wow.

Dennis: We do impose civil penalties. We don’t do this often and we don’t do it, again, without much deliberation, but any person who knowingly commits a violation is subject to a civil penalty of $8,000 for each violation. The maximum civil penalty for a related series of violations, however, is capped at $1.825 million.

Chris: Wow.

Dennis: So the fines can be substantial for repeated violations. And finally, the real bad news, criminal penalties, which can include imprisonment, are also possible for willful violations.

Chris: Yeah. Do you see a fair amount of that going on or is it rare?

Dennis: It is rare. In most of the cases that we see companies are coming to us or we’re getting information and we’re able to quickly recall a product in many cases before any injury occurs, and that’s the best case scenario. In cases where people have been injured or killed and if a firm was slow to report to the CPSC or slow to conduct a recall they might be responsible for civil penalties.

Chris: Yeah.

Dennis: But for those firms, and it’s very rare when we run into these, who know that they have a product that poses a serious hazard to consumers and yet, out of greed or desire for a better profit margin, decide to go ahead and distribute that product anyway, those are the people who are going to be responsible for criminal sanctions.

Chris: Yeah, that’s terrible. You have to imagine that most of the big companies, especially with all the recalls this past summer, at their board meetings they’re like, oh my goodness, we’ve got a product that’s dangerous. You have to believe that they really want to take care of it as quickly as they can.

Dennis: I think you make a good point. When a team of engineers sits down in the laboratory and has a concept and goes to work to design a new product no one in the room is looking to design a product that would ever hurt anyone.

Chris: Absolutely.

Dennis: Let’s take the example of a baby crib or a playpen, wouldn’t that be everyone’s worst nightmare.

Chris: Yeah.

Dennis: So sometimes, despite the most diligent efforts, a problem slips through and most firms will react to that discovery very quickly and do the right thing.

Chris: A lot of times we see that it’s not really a design or engineering flaw, but a situation like we had with products coming out of China, for example, where the paint that was supplied to paint something had lead in it. And the designer of the product expects that they’re going to be painted according to standards, but it’s a little bit beyond their control sometimes.

Dennis: And that brings up a good point. It’s true that many of the consumer products that we use are no longer manufactured here in the United States and it’s harder for importers or manufacturers to ensure that the product they’re getting is actually the one that they ordered. In fact today 70% of toys and 95% of fireworks, and even 59% of electrical products are manufactured in other countries, but particularly in China.

Chris: Wow.

Dennis: Imported products increased by 200% from 1997 to 2006 and currently about two-thirds of all U.S. consumer product recalls are of imported products. So I think the stats themselves…

Chris: …speak for themselves.

Colette: Along those lines, what steps can etailers who import products from China take to ensure that the products they’re sourcing are safe for consumers? And not only China, but there are so many different countries out there now that you can import from. What are those things that etailers can do to make sure they’re getting good quality products?

Dennis: I think retailers need to pressure their vendors and suppliers to provide them with some written assurance that the product meets all applicable voluntary and mandatory standards. I think if nothing else, it forces that manufacturer to pause and recognize that certain standards must be met and hopefully it will prompt any country’s manufacturing group to research that and make sure they are complying with U.S. standards. It’s also important to look for testing certification labeling. In many cases you’re buying products from a catalog or from a vendor who offers many foreign manufactured products and it’s just not that easy to research each and every one. In that case look for those third party testing laboratories, that we’ve all become very familiar with, and maybe that can provide some additional assurance, not to just the importer and retailer, but also to the customer in the end.

Chris: Dennis, a while back I was looking at importing some children’s play tents from China. I was talking to one of my partners about it and we were going to get a sample. You can always order a sample of a product from a manufacturer overseas and they’ll FedEx it to you. And I told my partner, I want to get two samples because I’m going to set one of them up and drop a match on it and if it goes up in flames I’m not going to order it.

Dennis: I do think it’s important to consider, if there’s any doubt in your mind about whether or not the product is in compliance or could pose a hazard, to enlist the help of a third party testing agency to do a very careful review.

Chris: Absolutely, and they are out there. Can we find those agencies through CPSC?

Dennis: I’m not sure if our website actually provides a list of them, but they’re pretty well known and I think a simple internet search for product testing would provide various agencies.

Colette: How does the CPSC work with the Chinese government, or any international government, and the manufacturers to make sure they’re following standards? Do they have information they can use?

Dennis: We’ve really improved the relationship in recent months, for all the obvious reasons. The recalls have involved Chinese-made products and so we’ve focused our attention there most recently. But we’ve worked with foreign governments and manufacturers for many years and really this is nothing new. In September this past year we made an important breakthrough with the Chinese government when we hosted the second biannual U.S./China Product Safety Summit. In fact, we reached an agreement with the Chinese government to important product safety in a number of areas and some of the things they agreed to and, of course, we’re doing this in partnership with them, is to increase inspections at their manufacturing locations to take specific steps to assist the CPSC in tracing imported products with identified safety problems. We’ve agreed to exchange technical personnel with each other and we’ve already begun having regular and systematic exchanges of information about emerging product safety issues. So we’ve done a lot in this area and the push right now is with the Chinese government, but again, parts are no better or no worse if they were made in China than if they were made in any other country or even in the United States. It depends on the reliability and the practices of that particular manufacturer.

Chris: Sure. You know, if I was part of the Chinese government and this huge commerce boom was going on in China I would want to make sure that I didn’t have another year like this one.

Dennis: And I would expect just that. And of course, we want to make sure that the U.S. consumer is protected just as well as is possible.

Chris: Yeah.

Dennis: But the reality is we’re not going to be able to examine every product as it enters through Customs. We’re not going to be able to check every retail store. We’re not going to be able to visit every online website. It is a difficult problem and really requires a close partnership between the CPSC and industry in general if we want to make strides in this area.

Chris: Right. Dennis, what would you the #1 action that a retailer can take when choosing their product lineup would be to ensure they aren’t picking products that might be recalled?

Dennis: It’s important to know your product and know your supplier. If you’re just going to begin distributing a product at random and you have no background in that product area, then you’re at a disadvantage and you’re going to have to do some research. If you’re purchasing odd lots of merchandise, for example, from a vendor and you don’t know anything about it and you’re purchasing it at a price that’s just too good to be true, you have to wonder.

Chris: Ahh.

Dennis: If no one else can come close to the price that you’re being offered for the same item there’s probably a reason. The product may be old. It may not be in compliance with current safety standards. Or it might even be counterfeit. So it’s very important to carefully examine the product yourself and consider additional testing if you have any concerns.

Chris: Makes a great deal of sense. So when it comes to product safety, is the CPSC the primary agent at work or is it the actions of individual retailers and consumers?

Dennis: As I just explained, our resources are finite.

Chris: Yeah.

Dennis: We can’t be everywhere all the time.

Chris: So it’s a partnership.

Dennis: It is a partnership. We rely on everyone in the distribution chain to both keep their eyes open for emerging product hazards and to stop distribution of consumer products that are under recall. I think that doing both is mandated by federal law and quite simply it’s the right thing to do.

Chris: Well, I can tell you that as someone who has three children and four grandchildren, I definitely appreciate the work that you do Dennis.

Dennis: Thank you.

Chris: I’m very appreciative of that.

Colette: It’s been wonderful having you on the show Dennis.

Dennis: Thank you both.

Chris: That is our time today with Dennis Blasius of CPSC.gov. Please check that out. If you’re selling online you really need to look at CPSC.gov. There’s great information there including a list of products that are being recalled and so forth. Coming up next, our Product Source of the Week segment, when Product Sourcing Radio continues. I’m Chris Malta.

Colette: And I’m Colette Marshall.


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