4 Reasons To Implement a Recall Plan Now as Company Policy
The objective of a product recall is to end the interaction between the subject product and product users. Informed decision making and the execution of specific tasks by a Recall Team determines the success of this goal. Early planning provides a reliable way to identify affected products, know their location, name Recall Team members, and assign individual tasks for them to execute when the recall occurs. A written Recall Plan accomplishes these ends when it is set as company policy well in advance of any recall the company may encounter.
This, however, is a lofty goal for a corporate legal department producing day-to-day results for its clients and living under a restricted budget. The Recall Plan must provide immediate, tangible benefits that can be measured. Otherwise, the plan will be merely a well-intentioned, let’s-make-things-better notion that is unwritten, unexecuted, and unenforced. Below are four reasons to implement this plan now.
1. The Recall Plan Sets a Course of Action During a Crisis
The Recall Plan is a written, pre‐planned procedure and action guide to be followed when a finished good must be removed from the market and taken from the hands of consumers. The plan must impose a practical crisis prevention system upon the company that compels the Recall Team to review facts continuously and make projections confidently about outcome scenarios for the company. It must identify step-by-step procedures when a recall occurs, and it must be designed so that the company can take control of the subject product quickly wherever it may be found.
To do this, a designated Recall Team must gather and assess data that will confirm or deny the existence of a product hazard, its potential to create serious injury to product users, and its distribution to consumers. At a minimum, the Recall Plan must identify team members from product development (design and engineering), manufacturing, sales & marketing, distribution (logistics), risk management, legal, and finance. Also, a team leader or recall coordinator must be designated.
Each team member must know their job function and how to execute it so that decisions are made quickly when recall events begin to occur. For example, the Recall Team must decide within the first twenty-four hours after the company receives information whether a product is eligible for recall because it is hazardous, noncompliant with regulations, or poses a risk of serious injury. Shortly after, the team must obtain engineering data about the product, its materials, its design, and its manufacturing specifications to make a recommendation to management about the recall decision and to report to the appropriate regulator. The only way to accomplish these tasks within such a tight timeframe is to plan for them in advance.
2. The Recall Plan Sets a Benchmark to Measure Effectiveness
Not all variables in a company’s global distribution system can be accounted for without individual consideration. The Recall Plan should be tested and evaluated, and this may be accomplished through mock recalls. A mock recall performed annually will determine the adequacy of the recall plan and will provide an opportunity to evaluate the thoroughness of the plan and its application to various recall scenarios. This is a reliable measurement of the plan’s effectiveness. In fact, your insurer may pay for such a practiced implementation and evaluation of the plan’s adequacy.
More important than whether the plan is effective, though, is whether the recall is effective. This is more than a way to measure internal corporate activity or confirm its participation as a good corporate citizen. In the first instance, this is the actual removing of defective product from the hands of consumers to end its potential risk of serious injury to them. Recall effectiveness measures that removal.
In the second instance, recall effectiveness determines when the recall can end, and it safeguards the company from allegations of negligent recall in a product liability suit. Effective recall occurs by executing the detailed logistics of product distribution, by gathering of statistical measurements of product removed from the market and returned by consumers, and by cataloging the efforts exhausted by the company to find, obtain, and destroy the recalled product. Planning for this high level of effectiveness will end the recall sooner, create confidence in the company’s performance during a crisis moment, and reduce costs.
3. The Recall Plan Reduces Insurance Premiums
Very simply, reducing risk creates a more insurable entity. Insurers issue separate cover to indemnify costs, business loss, and negligence claims arising from a product recall. A reliable Recall Plan will reduce a company’s liability on this front, which will bring about this reduced risk.
The existence of a recall plan creates certainty around uncertain events, especially recall events that unfold quickly, at any time, and without notice. Certainty brings about confidence and assures individuals within the organization how the company will act during a crisis. Also, the company’s recall team will benefit from a practiced implementation of the plan, whether it occurs through a mock or an actual recall, and plan implementation will create confidence around the company performance during a recall. This makes it a better risk to insurers.
4. The Recall Plan Identifies the Regulatory Compliance Required as a Matter of Law
Specific federal regulations must be written into the plan where they guide the identification of affected product or recall procedure that must be followed as a matter of law. For example, consumer products are recalled under CPSC regulations where they present a substantial product hazard, a regulatory non‐compliance, or an undue risk present in a finished good. Of particular importance are deadlines when reporting must be made as these often described by regulations as “immediate” and carry civil and criminal penalties for the failure to provide a timely report.
The Recall Plan should apply to company procedure regardless of type, category, or regulatory classification of the product and becomes active any time a recall must occur under any federal regulator, including the Consumer Product Safety Commission (consumer goods), the National Highway Transportation and Safety Administration (automobiles and motorcycles), the Food & Drug Administration (food, drugs, cosmetics, and medical devices), the Department of Agriculture (meat, poultry, and eggs), the Occupational Safety & Health Administration (industrial, commercial, and farm), Environmental Protection Agency (pesticides), or the U.S. Coast Guard (marine craft).
Many regulators offer free industry guidance materials, including preparedness materials for creating a recall plan. However, call your lawyer to understand the interpretation and application of statutes and regulations governing the recall of your product.
