01-3408. Hanro, USA, Inc., a Corporation, Provisional Acceptance of a Settlement Agreement and Order

AGENCY:

Consumer Product Safety Commission.

ACTION:

Notice.

SUMMARY:

It is the policy of the Commission to publish settlements which it provisionally accepts under the Consumer Product Safety Act in the Federal Register in accordance with the terms of 16 CFR 1118.20(f). Published below is a provisionally-accepted Settlement Agreement with Hanro, USA, Inc., a corporation, containing a civil penalty of $150,000.

DATES:

Any Interested person may ask the Commission not to accept this agreement or otherwise comment on its contents by filing a written request with the Office of the Secretary by February 26, 2001.

ADDRESSES:

Persons wishing to comment on this Settlement Agreement should send written comments to the Comment 01-C0004, Office of the Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT:

Dennis C. Kacoyanis, Trial Attorney, Office of Compliance and Enforcement, Consumer Product Safety Commission, Washington, D.C. 20207; telephone [phone], 1346.

SUPPLEMENTARY INFORMATION:

The text of the Agreement and Order appears below.

Dated: February 6, 2001.

Sadye E. Dunn,

Secretary.

Settlement Agreement and Order

1. This Settlement Agreement and Order, entered into between HANRO USA, INC. (hereinafter, “HANRO USA” or “Respondent”), a corporation, and the staff of the Consumer Product Safety Commission (hereinafter, “staff”), pursuant to the procedures set forth in 16 C.F.R. 1118.20, is a compromise resolution of the matter described herein, without a hearing or determination of issues of law and fact.

I. The Parties

2. The “staff” is the staff of the Consumer Product Safety Commission (hereinafter, “Commission”), and independent federal regulatory commission of the United States government established pursuant to section 4 of the Consumer Product Safety Act (CPSA), as amended, 15 U.S.C. 2053.

3. Respondent HANRO USA, INC. is a wholly owned subsidiary of HANRO A.G. (hereinafter, “HANRO of Switzerland”), a Swiss corporation located in Liestal, Switzerland. HANRO USA is located at 40 East 34th Street, Suite 207, New York, NY 10016. HANRO USA is an importer and wholesaler of women's and men's underwear and robes.

II. Allegations of the Staff

A. Violations of the Flammable Fabrics Act

4. In 1998, HANRO of Switzerland manufactured Ladies' Fleece Robes, style number 6812, 6813, and 6814, 90% cotton/10% polyester fleece fabric.

5. In September and October of 1998, Respondent imported into the United States 1,261 of these fleece robes.

6. These fleece robes were subject to the Standard for the Flammability of Clothing Textiles (hereinafter, “Clothing Standard”), 16 CFR part 1610, issued under section 4 of the Flammable Fabrics Act (FFA).

7. Neither before importation, nor before sale of these fleece robes, did Respondent verify whether they complied with the requirements of the Clothing Standard.

8. Respondent sold these fleece robes to its retail customers from September 1998 through December 1998.

9. In 1999, HANRO of Switzerland manufactured Ladies' Fleece Robes, style numbers 6314 and 6315 made from essentially the same fleece fabric as the fleece robes identified in paragraph 4 above.

10. On or about September 15, 1999, Respondent received flammability test results for the fleece robes identified in paragraph 9 above. The test results showed that these fleece robes were dangerously flammable and unsuitable for clothing because of their rapid and intense burning and, therefore, violated the Clothing Standard.

11. Between October 22, 1999 and November 3, 1999, Respondent imported into the United States 870 of the fleece robes identified in paragraph 9 and 10 above.

12. Between October 28, 1999 and November 13, 1999, Respondent sold the fleece robes identified in paragraphs 9 and 11 above to its retail customers.

13. On December 5, 1999, Respondent received an incident report involving an accidental ignition of one of these fleece robes. According to the report, the victim wore the rob while making tea, the sleeve caught fire, and the victim received burns to her hair and wrenched her back while removing the flaming robe.

14. On December 7, 1999, Respondent reported the incident to the Commission.

15. After reporting the incident to the Commission, Respondent admitted its 1998 importation and sale of the fleece robes identified in paragraph 4 above.

16. In January 2000, Respondent conducted flammability testing for the first time on the fleece robes imported in 1998. The test results showed that those fleece robes were dangerously flammable and unsuitable for clothing because of their rapid and intense burning and, therefore, violated the Clothing Standard.

17. Respondent knowingly imported into the United States and sold in commerce the fleece robes identified in paragraphs 4 and 9 above that violated the Clothing Standard, as the term “knowingly” is defined in section 5(e)(4) of the FFA, 15 U.S.C. 1194(e)(4), in violation of section 3 of the FFA, 15 U.S.C. 1192. A knowing violation of this provision subjects Respondent to civil penalties under section 5(e)(1) of the FFA, 15 U.S.C. 1194(e)(1).

B. Violations of the Consumer Product Safety Act

18. The allegations contained in paragraphs 4 through 17 above are realleged.

19. Respondent's fleece robes are “consumer products” and Respondent is an “importer” and therefore, a “manufacturer” of “consumer products” which are “distributed in commerce” as those terms are defined in sections 3(a)(1), (4), and (11) of the CPSA, 15 U.S.C. 2052(a)(1), (4), and (11).

20. Section 15(b) of the CPSA, 15 U.S.C. 2064(b) requires every manufacturer of a consumer product distributed in commerce, who obtains information which reasonably supports the conclusion that such product contains a defect which could create a substantial product hazard or creates an unreasonable risk of serious injury or death to immediately inform the Commission of such defect, or of such risk.

21. Respondent knew or should have known that the fleece robes identified in paragraphs 4 and 9 above contained a defect which could create a substantial product hazard or created an unreasonable risk of serious injury or death. These fleece robes were highly flammable and were likely to cause severe burn injuries or death and, therefore, violated the Clothing Standard. Respondent did not immediately notify the Commission of the risk presented by these fleece robes.

22. Only after receiving a report of a fire incident caused by one of these fleece robes, did Respondent notify the Commission pursuant to section 15(b) of the CPSA, id.

23. Respondent knowingly failed to file a timely report under section 15(b) of the CPSA, id, as the term “knowingly” is defined in section 20(d) of the CPSA, 15 U.S.C. 2069(d), in violation of section 19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4). A knowing violation of this provision subjects Respondent to civil penalties under section 20 of the CPSA, 15 U.S.C. 2069.

III. Response of Respondent

24. Respondent denies the staff's allegations set forth in paragraphs 4 through 23 above.

25. Respondent denies that it knowingly violated either the Flammable Fabrics Act or the Consumer Product Safety Act.

26. On its own initiative, Respondent reported the incident that is the basis of these proceedings, and, beginning on December 8, 1999, voluntarily undertook a recall of Ladies' Fleece Robes, style numbers 6314 and 6315. Beginning on January 7, 2000, Respondent voluntarily initiated a recall of Ladies' Fleece Robes, style numbers 6812, 6813, and 6814. Respondent voluntarily offered a substantial gift certificate to consumers to encourage returns, voluntarily undertook a second round of retailer notices when the initial term of the recalls expired, voluntarily extended the term of its recalls and consumer incentives through December 31, 2000, and voluntarily destroyed or identified for destruction virtually all the robes returned under the recall.

IV. Agreement of the Parties

27. The Commission has jurisdiction over Respondent and the subject matter of this Settlement Agreement and Order under the Consumer Product Safety Act (CPSA), 15 U.S.C. 2051 et seq.; the Flammable Fabrics Act (FFA), 15 U.S.C. 1191 et seq.; and the Federal Trade Commission Act (FTCA), 15 U.S.C. 41 et seq.

28. This Agreement is entered into for settlement purposes only and does not constitute an admission by Respondent or a determination by the Commission that Respondent knowingly violated the FFA's Clothing Standard and/or the CPSA's Reporting Requirement.

29. Upon provisional acceptance of this Settlement Agreement and Order by the Commission, this Settlement Agreement and Order shall be placed on the public record and shall be published in the Federal Register in accordance with the procedures set forth in 16 CFR 1118.20(f). If the Commission does not receive any written request not to accept the Settlement Agreement and Order within 15 days, the Settlement Agreement and Order will be deemed to be finally accepted on the 16th day after the date it is published in the Federal Register.

30. Upon final acceptance of this Settlement Agreement by the Commission and issuance of the Final Order, Respondent knowingly, voluntarily, and completely waives any rights it may have in this matter (1) to an administrative or judicial hearing, (2) to judicial review or other challenges or contest of the validity of the Commission's actions, (3) to a determination by the Commission as to whether Respondent failed to comply with the FFA, as alleged, or the CPSA, as alleged, (4) to a statement of findings of facts and conclusions of law, and (5) to any claims under the Equal Access to Justice Act.

31. In settlement of the staff's allegations, Respondent agrees to pay a $150,000.00 civil penalty as set forth in the attached Order incorporated herein by reference.

32. The Commission may publicize the terms of this Settlement Agreement and Order.

33. Upon final acceptance by the Commission of this Settlement Agreement and Order, the Commission shall issue the attached Order.

34. A violation of the attached Order shall subject Respondent to appropriate legal action.

35. Agreements, understandings, representations, or interpretations made outside this Settlement Agreement and Order may not be used to vary or contradict its terms.

36. The provisions of this Settlement Agreement and Order shall apply to, and be binding upon, Respondent and each of its shareholders, officers, directors, employees, agents, successors, assigns, and representatives, directly or through any corporation, subsidiary, division, or other business entity, or through any agency, device, or instrumentality.

Respondent Hanro USA, Inc.

Dated: December 26, 2000.

Niki Sachs,

President and Chief Executive Officer, Hanro USA, Inc., 40 East 34th Street, New York, NY 10016.

Commission Staff

Alan H. Schoem,

Assistant Executive Director, Consumer Product Safety Commission, Office of Compliance, Washington, DC 20207-0001.

Eric L. Stone,

Director, Legal Division, Office of Compliance.

Dated: January 3, 2001.

Dennis C. Kacoyanis,

Trial Attorney, Legal Division, Office of Compliance.

Order

Upon consideration of the Settlement Agreement entered into between Respondent Hanro USA, Inc. (hereinafter, “Respondent”), a corporation, and the staff of the Consumer Product Safety Commission (“Commission”); and the Commission having jurisdiction over the subject matter and Respondent; and it appearing that the Settlement Agreement and Order is in the public interest, IT IS

Ordered, that the Settlement Agreement be and hereby is accepted, and it is

Further Ordered, that upon final acceptance of the Settlement Agreement and Order, Respondent Hanro USA, Inc. shall pay to the United States Treasury a civil penalty in the amount of ONE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($150,000.00) in three (3) payments of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00) each. The first payment of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00) shall be paid within twenty (20) days after service of the Final Order of the Commission (hereinafter, “the anniversary date”). The second payment of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00) shall be paid within nine (9) months of the anniversary date. The third payment shall be paid within eighteen (18) months of the anniversary date. Upon the failure of Respondent Hanro USA, Inc. to make a payment or upon the making of a late payment by Respondent Hanro USA, Inc. (a) the entire amount of the civil penalty shall be due and payable, and (b) interest on the outstanding balance shall accrue and be paid at the federal legal rate of interest under the provisions of 28 U.S.C. §§ 1961(a) and (b).

Provisionally accepted and provisional Order issued on the 6th day of February, 2001.

By Order of the Commission.

Sadye E. Dunn,

Secretary, Consumer Product Safety Commission.