National Association of Manufacturers Issues Public Comment on CPSC Notice

WASHINGTON, May 30 -- Chris Netram, vice president for tax and domestic economic policy at the National Association of Manufacturers, has issued a public comment on the Consumer Product Safety Commission's notice entitled "Commission Agenda and Priorities; Notice of Hearing". The comment was written on May 1, 2020, and posted on May 26, 2020:

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On behalf of the 12.8 million men and women who make things in America, the National Association of Manufacturers ("NAM"), appreciates the opportunity to comment in response to the Consumer Product Safety Commission's ("CPSC" or "Commission") request for information in anticipation of its public hearing on Commission Agenda and Priorities for Fiscal Years 2021 and FY 2022./1

The NAM is the largest industrial association in the United States, representing small and large manufacturers in every sector and in all 50 states. Manufacturers of consumer products are committed to providing safe products and ensuring a well-functioning and credible product safety regime that gives all stakeholders confidence that products meet all applicable safety standards and regulations. To support this commitment, the NAM has long been a leader in the effort to improve the Consumer Product Safety Act ("CPSA") and the Consumer Product Safety Improvement Act ("CPSIA") to ensure the laws works for consumers, manufacturers and importers. Manufacturers' long-standing commitment to product safety drives our support for an effective, tailored regulatory regime.

At this unique moment in history, manufacturers are playing a key role in the effort to combat COVID-19, which reflects the industry's commitment to product safety. As part of the nation's critical infrastructure, manufacturers have been supplying health care workers and other Americans on the front lines of this crisis with vital goods, including personal protective equipment, hospital beds, and ventilators. Our unique perspective informs the NAM's American Renewal Action Plan, which helps policymakers chart a path forward through the response, recovery and renewal phases of this crisis./2

We applaud the Commission's ongoing leadership in improving the safety of consumer products and addressing the growing problem of counterfeit products. We respectfully request that the Commission include the items outlined below in its agenda for FY 2021 and 2022 to help protect the public from unreasonable risk of harm. If adopted, these policies will foster the collaborative and communicative relationship necessary to simultaneously protect consumers and empower manufacturers to continue leading the efforts secure the future health, safety, and prosperity of all Americans.

I. Address the Disproportionate Regulatory Burden Borne by Manufacturers

Manufacturers are making the products essential to supporting America during the crisis and a strong economic recovery will simply not be possible without a robust manufacturing industry. Manufacturing has the highest multiplier effect of any economic sector, with every $1.00 spent in manufacturing adding another $2.74 to the economy./3

In addition, for every one worker in manufacturing, there are another five employees hired elsewhere./4

Taken alone manufacturing's $2.18 trillion value in the United States would constitute the eighth-largest economy in the world, built almost entirely on the backs of small businesses./5

Yet, despite the immense value of the manufacturing sector, the cost of federal regulations falls disproportionally on manufacturers. On average, manufacturers pay $19,564 per employee to comply with federal regulations, or nearly double the $9,991 per employee costs borne by all firms as a whole./6

This burden falls heavily on small businesses; of the 248,039 firms in the manufacturing sector in 2017, all but 3,914 were considered small (i.e., less than 500 employees), with three-quarters of these firms having less than 20 employees./7

The importance of a stable and tailored regulatory regime has become particularly clear during the COVID-19 crisis, as manufacturers across the country work around the clock (in some instances completely redesigning their shop floors) to produce critical materials like respirators and protective equipment. Accordingly, the NAM respectfully submits the following suggested actions that the Commission should take to enhance the regulatory environment in which manufacturers operate and protect consumer safety while fostering collaboration with industry.

A. Make Combating Counterfeit Goods a Priority

According to multiple recent reports, counterfeiters--who have long preyed on vulnerable consumers to make a profit--are trying to take advantage of consumers' increased anxiety and fear, high demand for certain goods, and the substantial increase in e-commerce necessitated by stay-at-home orders./8

The Internet has long provided these unscrupulous actors with channels through which to sell counterfeits easily, quickly and anonymously. These sales channels present unique challenges for manufacturers who must devote ever-increasing resources and time to monitoring search engine results, e-commerce channels, social media postings, payment providers and others who may all play a role in driving online traffic to counterfeit products.

A tide of fake products is coming into the U.S. through both physical and, increasingly, online channels./9

Ultimately, the flood of fake products entering the market represents a threat to consumer safety./10

These counterfeit parts may present health and safety risks to Americans.

They also impose a significant economic burden on law-abiding manufacturers. Counterfeits are estimated to cost the U.S. economy up to $41 billion annually by diverting sales away from purchases of legitimate products./11

Collectively, a failure to take swift action to prevent the flow of counterfeits and hold e-commerce platforms accountable for their role in the sale of counterfeits will significantly hamper manufacturers' ability to continue to secure the future health, safety and prosperity of all Americans.

The CPSC should therefore prioritize addressing the growing issue of counterfeit consumer products making their way to the U.S. marketplace, as identified in CPSC Strategic Objective 2.3./12

Specifically, the Commission should consider adopting the following proposals in the coming years, and, where necessary, work with Congress to effectuate these reforms.

* Prioritize utilizing its unique access to the product injury and recall data built into the National Electronic Injury Surveillance System to identify patterns of injuries and deaths likely to be caused by counterfeit products and report them to Customs and Border Patrol ("CBP"), the National Intellectual Property Rights Coordination Center ("IPR Center"), and other relevant governmental entities, domestically and internationally, to better enable them to identify and seize counterfeits before they reach consumers./13

* Prioritize fully implementing Commission authorities to address counterfeits that have been granted by Congress, such as the authority under the CPSIA to establish and make full use of a substantial product hazard list./14

* Prioritize surveillance, enforcement and public awareness campaigns of counterfeit product categories that also pose public health and safety concerns (e.g., children's products, consumables and household electrical and electronic products).

* Identify ways to hold e-commerce platforms to the same standard as brick and mortar retailers. Online virtual shelves should not escape the agency's scrutiny for failing to closely monitor for fake and untested goods, while physical shelves face intense scrutiny and, in some instances, steep penalties.

B. Prioritize Identifying and Implementing Regulatory Improvements to Support Investment in Domestic Manufacturing

The renewal of the U.S. economy will require policymakers to take actions now that will set the stage for long-term growth, including identifying and implementing regulatory improvements. Given the CPSC's vast jurisdiction and critical mission, the Commission is uniquely well-positioned to be a leader in identifying ways to ensure the U.S. regulatory regime is the most effective and efficient in the world.

An effective regulatory regime is one that simultaneously improves the health and safety of consumers while encouraging economic investment and ingenuity. Accordingly, the NAM respectfully urges the CPSC to prioritize policies to:

* Engage in periodic review of all regulations and mandatory standards to determine effectiveness, results and continued need for the regulations. All significant proposed regulations should include specific plans for when they will sunset and a review for effectiveness, which includes a description of how effectiveness is evaluated. Similarly, all proposed regulations should include a timeframe and process for withdrawing proposed rules on which the Commission fails to act in a timely manner rather than allowing a proposal to sit in a docket for decades.

* Focus resources on the most cost-effective and least intrusive means to achieve voluntary compliance. Compliance assistance programs, especially for small businesses, better serve the public's interest in achieving beneficial outcomes. Regulatory programs' success should be measured by outcomes and improvements in economic and social welfare, not by amounts of fines or the number of enforcement actions.

* Ensure regulations and supporting material are written in plain, understandable language.

* Prioritize conducting robust cost-benefit analyses of significant rules and subject the Commission's analysis to third-party review through the Office of Information and Regulatory Affairs (OIRA) or a similar governmental entity just as Executive Branch agencies do. Consistency across the government in regulatory procedures and analysis would only improve regulatory certainty and the transparency of the process.

C. Consider Providing Enforcement and Compliance Flexibility to Consumer Product Manufacturers Now Producing Essential Products

The CPSC should consider ways that the agency can provide regulatory flexibility for manufacturers that are rising to meet the challenge of COVID-19, particularly those that have shifted production to help produce essential products such as PPE and respirators. These products are critical to health and safety of Americans, and firms manufacturing these items may face the new regulatory compliance issues as they switch production. This challenge is compounded by the necessity of remote work for compliance teams and the implementation of social distancing on shop floors. In recognition of these unique circumstances, we urge the CPSC to prioritize regulatory flexibility for manufacturers.

II. Agency Administration Priorities: Improving the Effectiveness of the CPSC

A. The CPSC Should Prioritize Promoting, Not Discouraging, Open Communications Between Manufacturers and the Commission

The CPSC should prioritize taking steps to promote one of the most important aspects of its role in ensuring a well-functioning product safety regime: fostering a system that encourages industry and the Commission to work as partners rather than combatants. Indeed, Congress made it clear in the CPSA that the Commission must work closely with industry when it mandated that the Commission first rely on voluntary standards created by industry where the standards would eliminate or adequately reduce the risk of injury addressed and there is likely to be compliance with the voluntary standards./15

In other words, the CPSC has no authority to act unilaterally to impose mandatory standards unless it first works with industry to create and utilize voluntary standards.

The CPSA also requires industry to work closely and communicate regularly with the Commission. Section 15(b) of the CPSA requires every manufacturer, importer, distributor and retailer of consumer products to report immediately to the Commission when the firm obtains information which reasonably supports the conclusion that such product distributed in commerce contains a defect which could create a substantial product hazard or that such product creates an unreasonable risk of serious injury or death./16

Congress clearly expressed its intent to encourage manufacturers to openly communicate with the CPSC regarding potential issues without fear of reputational risk. It included multiple sections in the CPSA prohibiting the Commission from disclosing certain information about manufacturers to facilitate these communications. While providing for exceptions for urgent safety issues, Section 6(b) "generally prohibits the Commission from disclosing information about a consumer product that identifies a manufacturer unless the Commission has taken "reasonable steps" to assure (1) that the information is accurate, (2) that disclosure of the information is fair in the circumstances, and (3) that disclosure of the information is reasonably related to effectuating the purposes of the CPSA and of the other laws administered by the Commission."/17

Similarly, Section 6(a) of the CPSA prohibits the Commission from disclosing confidential business information.

Protecting Section 6(b) is perhaps the most important role the agency can play in ensuring the agency fosters an open and affable relationship with manufacturers. The congressionally mandated protections of Section 6(b) perform a critically important balancing function with the congressionally mandated reporting requirements of Section 15(b), encouraging companies to voluntarily over-report potential product concerns and work cooperatively with the CPSC, even when reporting might not be required under the law. Any erosion of Section 6(b) protections would act as a disincentive to speedy voluntary disclosure, creating a bias toward working with legal counsel before alerting the Commission. In turn, this would deprive the agency of access to critically important information that, while perhaps not legally required to be reported, could nonetheless inform the agency of dangerous counterfeit products. The Commission's policies on information disclosure have also been in place for over 30 years and provide manufacturers and other firms a clear expectation of when the Commission considers information disclosures to be subject to section 6(b). Removing this clarity, particularly at a time when manufacturers are struggling to address a global health crisis, would inject unnecessary regulatory uncertainty and potentially cause significant delays in the relaying of information critical to the agency's ability to fulfill its mission.

Legal obligations aside, however, it is simply in the best interest of consumers' safety for the CPSC and industry to work collaboratively. It is critically important that manufacturers and the Commission have knowledge of and access to the unique technical knowledge and expertise that each party possesses. Manufacturers have technical knowledge of their products and the Commission has a unique understanding of consumer needs and behavior. Together, these sources of information can play a critical part in making the safest and most durable products possible.

As such, the Commission should prioritize encouraging an open and cooperative relationship between industry and the CPSC, including maintaining Section 6(b) protections, to ensure that the Commission is the first organization manufacturers turn to for guidance when they have questions or concerns regarding a product's safety.

B. The CPSC Should Prioritize Ensuring Stakeholders Are Provided Fair Notice and Due Process

Under the CPSA, the CPSC is required to "take reasonable steps" to ensure information is fair and accurate before making it public./18

The CPSC is required to provide prior notice when the agency wants to talk about a particular company./19

However, the CPSA offers only injunctive relief where the Commission makes a disclosure that a company believes is inaccurate or unfair. To obtain an injunction, the company must sue the CPSC in courts that frequently defer to agencies, and the litigation unfolds in public--"a cure that may be just as bad as the disease when a company's brand is at stake."/20

Further, the law does not require the agency to make its case before any neutral arbiter either before or after making the press release public, only requiring it to retract any factual errors ... well after the damage has been done. Finally, even where notice is required, the CPSC can--and regularly does--shrink the notice period, reducing the time available to a company to make what could be a bet-the-company decision.

The CPSC's mission of protecting the public from unreasonable risks of injury will be better served if the CPSC works with, not against, manufacturers to ensure that all information released to the public is accurate prior to issuing any unilateral press release. The CPSC should therefore prioritize developing an action plan to ensure that (1) manufacturers are provided as much advance notice as is possible to verify the information, (2) the agency has time to make necessary adjustments, and (3) where necessary and appropriate, the two parties can agree on alternative corrective actions prior to any public statement by the Commission. Such a system would ensure that accurate safety information is provided to the public and allow the Commission and regulated entities to avoid the costs associated with years-long litigation.

C. Make Fast-Track Fast Again

Instituted by the CPSC in August 1995, the fast-track program provides companies who are willing the ability to move quickly with a voluntary recall of their product. The fast-track program eliminates procedural steps from the traditional recall process, which includes CPSC staff's technical evaluation of a product to determine if a defect exists that could harm consumers. This procedure, called a preliminary determination, can take several months.

Shortly after its introduction, the fast-track program garnered immense praise for its effectiveness, being named a 1998 winner of Harvard University and the Ford Foundation's prestigious Innovations in American Government award for programs that "have taken a fresh approach to a problem in government."/21

The issue, however, is that the program's signature quality--that of being fast--seems to have been recalled itself. Recently, this fast track program has slowed down not by any substantive reviews by either the agency or the manufacturer undertaking the voluntary recall, but by non-substantive bureaucratic issues. This is not good for consumers, the Commission or manufacturers. The Commission should therefore prioritize ensuring the fast track program becomes fast again to ensure that unsafe consumer products can be recalled voluntarily as quickly and efficiently as possible.

D. CPSC Should Be More Involved in Safety Issues Posed by "Right to Repair" Movement

Under the "right to repair" regulations and proposals, consumers and independent repair providers ("IRPs") argue they should have an unadulterated right to possess and use IP-protected diagnostic and repair information, software, tools and parts created by original equipment manufacturers ("OEMs"). Supporters of this movement argue that state and/or federal legislation is necessary "to prevent a monopoly by compelling manufacturers to make parts, diagnostic software and repair tools freely available to individuals and independent repair shops," which they believe would lower the total cost of ownership for IP-protected products./22

The theory underlying this movement has two major flaws, one of which should deeply trouble the CPSC. In addition to the fact that efforts to erode the value of IP protections involve important constitutional questions and implicate deeply rooted American legal concepts, manufacturers' ability to maintain a meaningful degree of quality control over the subsequent repair of their products is important to consumers--and to consumer safety./23

Right to repair laws would create innumerable harms and unintended consequences for consumers and manufacturers alike, including threatening consumers' safety and wellbeing and opening the door to counterfeits parts. Many consumer products--particularly when electronic in nature-- contain parts that may pose serious safety risks to the physical well-being of consumers when repaired by anyone but an authorized expert. Indeed, the Commission regularly warns consumers not to attempt to repair their own products, as attempts to do so have resulted in injury and even death./24

Further, for some consumer products that are typically repaired in a consumer's home, manufacturers may lose the ability to take certain precautions to ensure that repair providers are authorized, properly certified and do not pose a risk to the consumer.

Although these may be state bills at the moment, the CPSC should nonetheless prioritize taking on a more involved role in right to repair discussions to ensure that these consumer safety issues are fully considered and appropriately addressed as the unintended safety consequences of these bills, if passed, will not respect state borders. In some cases, right to repair laws would directly contradict CPSC guidance on safety measures for making repairs. Accordingly, we urge the Commission to take a more involved role in in right to repair discussions to ensure that these consumer safety issues are fully considered and appropriately addressed. Specifically, we urge the Commission to consider holding a public hearing on the safety issues surrounding right to repair laws, solicit comments, and consider publishing a report to inform Congress and state legislatures.

III. Specific Regulatory and Rulemaking Priorities

A. Withdraw Proposed Rule on Public Disclosure of Information, 6(b)

In February 2014, the CPSC issued a proposed rule that would significantly alter the Commission's policy on publicly disclosing company and product information, eliminating protections for manufacturers that encourage cooperation with the agency. The law requires the CPSC to "take reasonable steps to assure" that any disclosure of information relating to a consumer product safety incident is accurate and fair. Congress never directed CPSC to undertake this rulemaking and, after no agency action on the rule for 6 years, the agency should withdraw the rule.

B. Withdraw Proposed Mandatory Standards for Table Saws

In April 2017, the CPSC voted to issue a proposed rule that would establish a mandatory standard that would require all table saws to employ patented technology. This would create a government-mandated monopoly run by the owner of more than 100 granted patents. Not only would such action violate the law, it would conflict with the important principle of cooperation that is the foundation of our product safety framework. A final rule would also increase the price of the most common table saws from roughly $300 to $1,300. As such, the Commission should prioritize withdrawing the proposed rule from consideration.

C. Withdraw Proposed Mandatory Standard for Recreational Off-Highway Vehicles

In November 2014, the CPSC issued a proposed rule that would establish mandatory standards for lateral stability, vehicle handling, occupant retention, and information and warnings for recreational off-highway vehicles (ROVs). In November 2016, following developments of the relevant voluntary standards, CPSC staff recommended withdrawing the proposed rule and terminating the rulemaking. CPSC staff found that "the current voluntary standards will adequately address the risk of ROV rollover and occupant ejection."/25

The Commission has twice rejected this recommendation without providing a substantive rationale for disputing staff's conclusions. Moreover, in its Fiscal Year 2020 Midyear Review, the CPSC allocated $250,000 for research on ROVs, but specifically linked to two areas that are outside the scope of the 2014 proposed rule. As there is no information to suggest that staff's November 2016 recommendation changed, and as the areas the CPSC is now investigating could not lawfully be the subject of the current proposed rule, the agency should withdraw the proposed rule.

D. Withdraw Voluntary Recalls Proposed Rule

In November 2013, the CPSC issued a proposed rule that would negatively impact the Commission's voluntary recall process and place significant burdens on manufacturers and retailers of consumer products. Among other provisions, the proposal would make voluntary corrective action plans and recalls legally binding and effectively end the Fast Track Recall program. The agency lacks the statutory authority to proceed with binding regulations for voluntary programs. If finalized, firms could face increased enforcement jeopardy and legal consequences in product liability, other commercial contexts or in a civil penalty matter. For these reasons, the Commission should withdraw the rule.

IV. Conclusion

Thank for your consideration of these comments. Manufacturers stand ready to work with the CSPC to ensure that the agency discharges its critical mission in a responsible, collaborative, and effective manner. We all share the Commission's goal of ensuring that products on the market are safe, and that consumers can trust the products they purchase.

Sincerely,

Chris Netram

Vice President

Tax and Domestic Economic Policy

National Association of Manufacturers

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Footnotes:

1/ See Notice of Public Hearing, 85 Fed. Reg. 12908 (Mar. 5, 2020).

2/ See, infra Appendix A, NAT'L ASS'N OF MFRS., AMERICAN RENEWAL ACTION PLAN (April 22, 2020), https://www.nam.org/wp-content/uploads/2020/04/v9-NAM-American-Renewal-Action-Plan.pdf.

3/ NAT'L ASS'N OF MFRS., FACTS ABOUT MANUFACTURING: TOP 18 FACTS YOU NEED TO KNOW, https://www.nam.org/facts-about-manufacturing/ (last visited April 30, 2020).

4/ Id.

5/ Id.

6/ Id.

7/ Id.

8/ See, e.g., Jay Kennedy, Buyer Beware: Counterfeit markets can flourish during a public health crisis, The Conversation (March 26, 2020), https://theconversation.com/buyer-beware-counterfeit-markets-canflourish-during-a-public-health-crisis-134492; Europol, How Criminals Profit From the Covid-19 Pandemic (Mar. 27, 2020) https://www.europol.europa.eu/newsroom/news/how-criminals-profit-covid-19-pandemic; Daniel Bennett, Covid-19 and Counterfeiting: How the Pandemic is Reshaping Brand Protection - Part 1 (Apr. 2, 2020), https://www.corsearch.com/covid-19-counterfeiting-how-pandemic-reshaping-brand-protection/.

9/ According to a 2019 OECD report, international trade for counterfeit goods reached $509 billion, or 3.3 percent, of world trade in 2016. ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT AND THE EUROPEAN UNION INTELLECTUAL PROPERTY OFFICE, TRENDS IN TRADE IN COUNTERFEIT AND PIRATED GOODS, 11 (Mar. 18, 2019), https://doi.org/10.1787/g2g9f533-en.

10/ Protecting E-Commerce Consumers from Counterfeits: Hearing Before the S. Comm. on Fin., 115th Cong. 61 (2018) (response to question for the record).

11/ See SENATE FINANCE COMMITTEE, THE FIGHT AGAINST FAKES: HOW STATUTORY AND REGULATORY BARRIERS PREVENT THE SHARING OF INFORMATION ON COUNTERFEITS 6 (2019), https://www.finance.senate.gov/imo/media/doc/The%20Fight%20Against%20Fakes%20%20(2019-1107).pdf.

12/ U.S. CONSUMER PRODUCT SAFETY COMM'N, STRATEGIC PLAN 2018-2022 5 (2018), https://www.cpsc.gov/s3fs-public/CPSC_2018-2022_Strategic_Plan.pdf.

13/ Reports show that 4 out of every 5 consumer product recalls (or 345 of 439 recalls) involve imported products and approximately 90 percent of counterfeits are imported from China. With this data, the CPSC should prioritize looking for patterns of fake goods starting with injury reports stemming from Chinese imports purchased via e-commerce platforms. See U.S. CUSTOMS & BORDER PROTECTION, INTELLECTUAL PROPERTY RIGHTS SEIZURE STATISTICS: FY2009 (2009).

14/ 15 U.S.C. Sec. 2064(j).

15/ 15 U.S.C. Sec. 2056(b)(1).

16/ 15 U.S.C. Sec. 2064(b).

17/ 15 U.S.C. Sec. 2055(b).

18/ 15 U.S.C. Sec. 2055(b)(1)-(3).

19/ No such notice is required when discussing category of products, even when it may otherwise be obvious which company is being referred to, resulting in the same "economic death knell".

20/ See Gentine, CPSC Data Breach.

21/ See U.S. Consumer Product Safety Comm'n, Innovations in American Government Award: Fast-Track Recall Program (Feb. 14, 2013), https://www.cpsc.gov/Business--Manufacturing/RecallGuidance/Innovations-in-American-Government-Award-Fast-Track-Recall-Program.

22/ Daniel Cadia, Fix Me: Copyright, Antitrust, and the Restriction on Independent Repairs, 52 U.C. DAVIS L. REV. 1701, 1704 (2019).

23/ For a more in-depth analysis of the constitutional questions and safety issues raised by the proposed right to repair laws, please see the NAM's written comments from the Federal Trade Commission's recent workshop on the subject. See Nat'l Ass'n of Manufacturers, Comment Letter on Fed. Trade Commn's "Nixing the Fix" Workshop (Sept. 16, 2019), https://www.regulations.gov/document?D=FTC-2019-00130079.

24/ See e.g. Consumer Product Safety Comm'n, Repairing Aluminum Wiring 2 (2011), https://www.cpsc.gov/s3fs-public/516.pdf.

25/ CAROLEENE PAUL, EVALUATION OF VOLUNTARY STANDARDS FOR RECREATIONAL OFF-HIGHWAY VEHICLES (ROVS) 3 (Nov. 2016), https://www.cpsc.gov/s3fspublic/RecreationalOffHighwayVehiclesTerminationofRulemaking.pdf.

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The notice can be viewed at: https://beta.regulations.gov/document/CPSC-2020-0014-0001

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