The High Cost to Small Business for Product Safety Compliance

Rising administrative costs for  household, recreational and children’s products

The Consumer Product Safety Commission (CPSC) is under increased fire from Congress and the public because of the overwhelming number of product recalls over the past few years. This is especially true for foreign products imported into the U.S. It’s obvious that CPSC lacks the resources to adequately oversee product safety compliance.  As a result, on August 14, 2008, the president signed legislation that should reform the laws and regulations governing CPSC.

CPSC is the federal agency responsible for overseeing product-safety recalls of toys, household products, recreational equipment, some vehicles, and consumer products not under the jurisdiction of other federal agencies.

How the new legislation affects you

We provide Product Liability insurance to a large number of manufacturers, importers and distributors of children’s, household and recreational products. This makes me curious as to how much compliance with CPSA of 2008 will to cost them.

Below are four new administrative costs that businesses manufacturing, importing and distributing children’s, household and recreational products must bear:

1. Products must have permanent product identification markings  for determining their inclusion in the event of a product recall.
2. Businesses must provide registration forms to consumers and keep accurate records of registered consumers.
3. All children’s products must be tested by an independent testing company before they can be imported or distributed.
4. Warnings that are on or included with the products must also now be included in the advertising.

Non-compliance penalties other consequences

Business owners not complying with the new CPSC statutes are subject to harsh penalties.  Civil penalties will rise to $100,000 per violation with a cap of $15 million.  Criminal penalties also increased, permitting imprisonment and forfeiture of assets.  Also, state attorneys general can sue companies for violation of CPSC statues.

We believe more needs to be done to protect the American public from the number of unsafe products being imported. But we also understand that the administrative costs for small businesses in the U.S. make it more difficult for them to be profitable and stay in business.