Feasibility of Requiring Financial Assurances for the Recall or Destruction of Unsafe Consumer Products

Correspondence issued by the Government Accountability Office with an abstract that begins "In 2008, the Consumer Product Safety Commission (CPSC) announced that it had obtained the voluntary recall of 563 unsafe or potentially unsafe products by the companies that manufactured, imported, distributed, or sold the products--the largest number for the agency in the past 10 years. In the prior year, CPSC announced 472 recalls--which was also an increase from the previous year and included some high-profile recalls of lead-tainted toys--leading some consumer groups to call 2007 the "year of the recall." Consumer products can be recalled for a variety of reasons, including violations of safety standards, incidents of injuries that can occur from the design or manufacture of a product, or other conditions that present an imminent or substantial hazard to consumers. Since 1979 there have been few instances in which CPSC could not obtain cooperation from manufacturers or importers to conduct recalls, either because these companies did not have the financial resources to conduct a recall or because the companies refused to assume responsibility for a recall. This included troubled recalls involving more than 1.5 million imported cribs associated with multiple deaths of children. Another recall of imported tires, conducted under the National Highway Traffic Safety Administration, was the responsibility of a small importer that did not have the resources to conduct an effective recall. These, and similar events, have raised concerns from consumer groups and others about the ability of businesses to conduct effective recalls and of the federal government to ensure consumer safety. In addition to these concerns, CPSC reports that more than two-thirds of recalled products in 2008 were imported. The proportion of consumer goods sold in the United States that are manufactured abroad has shifted significantly since CPSC was created in the 1970s. From 1997 to 2007, for example, the amount of imported consumer goods sold in the U.S. has more than tripled--an increase of 217 percent--according to CPSC. In response to these issues, Congress in 2008 passed the Consumer Product Safety Improvement Act (CPSIA), which greatly expanded CPSC's authorities over recalls and its ability to ensure the safety of products under its jurisdiction, including imported goods. Our objectives were to describe (1) the potential policy options for assuring CPSC that companies have adequate resources for the recall or destruction of consumer products, (2) the factors affecting implementation of these options, and (3) the potential consequences of implementing a financial assurance requirement, as one policy option, including potential benefits and disadvantages.