What to Do If Your Product Is Defective

If you have discovered—or even suspect—that one of your products is defective, here is what you need to do: stop distribution immediately, preserve every document and communication related to the defect, engage legal counsel, and prepare to report to the Consumer Product Safety Commission (CPSC) within 24 hours. Do not attempt a quiet fix. Do not wait for more data. The window for protecting your company is narrow, and the decisions you make in the first 48 hours will determine whether this becomes a manageable business event or an existential crisis.

That is the short version. The rest of this guide explains why each of those steps matters and how to execute them in a way that protects your company, your customers, and your reputation.

Why Your First Instinct Is Probably Wrong

When a business owner learns that a product may be defective, the natural impulse is to gather more information before acting. You want certainty. You want to understand the scope. You want to avoid overreacting.

That instinct—while understandable—is the most dangerous move you can make.

Here is the reality: the CPSC does not require you to know with certainty that your product is defective before reporting. Under Section 15(b) of the Consumer Product Safety Act (15 U.S.C. § 2064(b)), you are required to report when you obtain information that “reasonably supports the conclusion” that a product contains a defect which could create a substantial product hazard. The standard is reasonable information, not confirmed defect.

The CPSC’s own guidance reinforces this: a company’s investigation to determine whether to report “should not exceed 10 working days, unless the firm can demonstrate that a longer time is reasonable.” And their standing instruction to companies is simple: when in doubt, report (CPSC Duty to Report Guidance).

Companies that delay reporting to build a more complete picture often find themselves in a far worse position than companies that reported early with incomplete information. The CPSC treats late reporting as a separate violation—and the penalties reflect it.

Who Is Required to Report—and When?

The reporting obligation under Section 15(b) applies to manufacturers, distributors, and retailers of consumer products distributed in commerce. If you are anywhere in the supply chain, you have an independent duty to report.

The 24-Hour Clock

Once you obtain reportable information, you have 24 hours to notify the CPSC. The initial report can be made by any means—phone, email, or through the CPSC’s online portal at SaferProducts.gov—but if it is not made in writing, you must confirm it in writing within 48 hours (16 CFR § 1115.13).

What Triggers the Reporting Obligation?

You must report when your information reasonably supports the conclusion that a product:

• Contains a defect that could create a substantial product hazard. This includes design defects, manufacturing defects, inadequate warnings, or defective packaging.
• Creates an unreasonable risk of serious injury or death. Even one defective product can trigger this standard if the potential injury is severe.
• Fails to comply with a consumer product safety rule or a voluntary standard that the CPSC has relied upon.

The regulations are clear that even a single defective product can present a substantial product hazard if the potential injury is serious or likely to occur (16 CFR § 1115.12(g)). You do not need a pattern of failures or multiple injuries before the duty to report attaches.

What to Do Before You Call the CPSC

Reporting within 24 hours does not mean you should report blindly. The steps you take in the hours before that first call matter enormously.

1. Engage Legal Counsel Immediately

Before you communicate with the CPSC, your insurance carrier, your supply chain partners, or the public, talk to an attorney experienced in product safety matters. There are two critical reasons:

Privilege. Communications with your attorney about the defect are protected by attorney-client privilege. Internal investigations conducted at the direction of counsel may be protected by work product doctrine. Once you start making statements to the CPSC, those statements are not privileged. The order of operations matters.

Strategy. Your attorney can help you structure the initial report, evaluate whether the Fast Track program is appropriate, and begin assessing your contractual rights against suppliers and manufacturers.

2. Preserve Everything

Issue a document preservation notice to every employee and department involved with the product. This includes:

• Engineering and design files
• Quality control records and testing data
• Customer complaints and warranty claims
• Internal communications (email, Slack, Teams) discussing the defect
• Supply chain records and component specifications
• Marketing materials and product labeling

Destruction of relevant documents after you become aware of a potential defect—even routine destruction under a normal retention policy—creates catastrophic legal exposure.

3. Stop Distribution

Halt all shipments of the affected product. Notify your distribution partners and retailers to pull remaining inventory. This may feel premature if you are not yet certain of the defect’s scope, but continuing to distribute a product you suspect is defective dramatically increases your liability and signals bad faith to regulators.

4. Assess Your Insurance Coverage

Most standard commercial general liability (CGL) policies do not cover recall costs—notification, shipping, disposal, replacement product. Product recall insurance is a separate line of coverage. If you have it, notify your carrier immediately. Many policies require notice within a specified window, and late notice can void coverage entirely.

The CPSC Fast Track Program: How It Works

The CPSC’s Fast Track recall program is one of the most valuable tools available to companies facing a recall, and it is underutilized because most business owners do not know it exists.

Here is how it works: when you submit your Section 15(b) report, you simultaneously submit a Corrective Action Plan—a full refund, a tested replacement product, or a repair. If you implement the consumer-level recall within 20 business days of filing, the CPSC will not make a formal preliminary determination that your product contains a substantial product hazard.

Why does this matter? Because that preliminary determination becomes a public record, a litigation magnet, and a regulatory finding that can be used against you in product liability lawsuits. Avoiding it is significant.

The numbers bear this out. Traditional recall negotiations typically take 90 to 120 days. Fast Track recalls resolve in approximately 20 working days. Since the program launched in 1995, the CPSC has used it to expedite hundreds of recalls affecting millions of product units (CPSC Fast Track Program).

The tradeoff is speed. You must be prepared to commit to a corrective action immediately, before your investigation is complete. For many companies, that tradeoff is well worth it.

What Are the Penalties for Failing to Report?

The CPSC takes reporting failures seriously—and the enforcement trend is unmistakable.

Current civil penalties for failure to report under Section 15(b) are up to $120,000 per violation, with a cap of $17.15 million for a related series of violations. These amounts are adjusted periodically for inflation.

Recent enforcement actions illustrate the scale:

Company	Penalty	Violation
HSN Inc. (2023)	$16 million	Failed to report clothing steamer burn defects for over 6 years (CPSC)
Bestar (2024)	$16.025 million	Failed to report detaching wall beds for 8 years; 1 death, 15 injuries (CPSC)

In fiscal year 2023, total CPSC civil penalties exceeded $52 million—a 64% increase over the prior year (Commissioner Trumka Statement on BJ’s Wholesale Penalty). The agency conducted over 369 recalls in 2024 alone, and the pace has only increased in 2025 (CPSC Press Release).

The message is clear: late reporting is not treated as a minor procedural lapse. It is treated as a willful failure to protect consumers, and it is penalized accordingly.

Can You Recover Recall Costs from Your Supplier?

This is where your contracts become critically important—and where many companies discover, too late, that their agreements do not protect them.

Review Your Supply Agreement

Most supply and manufacturing agreements contain indemnification clauses, but the scope varies enormously. Key questions:

• Does the indemnification cover recall costs? Many clauses cover “third-party claims” (lawsuits) but not first-party expenses like notification, logistics, and replacement product.
• Are there caps or exclusions? Some agreements cap indemnification at the purchase price of the defective components—a fraction of the total recall cost.
• Is there a duty to defend? Indemnification without a defense obligation means you bear the upfront legal costs and seek reimbursement later.
• What are the notice requirements? Most indemnification clauses require prompt notice. Failing to notify your supplier within the contractual window may waive your rights entirely.

Preserve Your Claims

Even if your contract is less protective than you would like, you may have common law claims against your supplier for breach of warranty (express or implied), negligence, or contribution. But these claims require evidence—manufacturing specifications, quality certifications, inspection records, communications about tolerances and standards.

This is another reason to preserve everything from the outset and involve counsel early. Your attorney can help you build the evidentiary record you will need if cost recovery becomes contested.

How to Handle the Public Narrative

A product recall is not just a legal event. It is a reputational event. Your customers, employees, and business partners are watching.

Get Ahead of the Story

Companies that announce recalls proactively—before the CPSC issues a press release—consistently fare better in public perception. The narrative shifts from “company hid a dangerous product” to “company prioritized customer safety.”

Communicate Directly with Affected Customers

Do not rely solely on the CPSC’s recall notice. Contact customers directly through every channel available—email, social media, your website, retail partners. Provide clear instructions on what to do with the product and how to obtain a remedy.

Brief Your Team

Your employees will receive questions from customers, media, and their own networks. Provide them with talking points that are accurate, empathetic, and consistent. A single off-script statement from a customer service representative can become the story.

Do Not Speculate

In public communications, stick to what you know. Do not speculate about the cause of the defect, the number of injuries, or the scope of the recall beyond what has been confirmed. Every public statement is a potential exhibit in future litigation.

The Decision Framework: Is This a Reportable Issue?

Not every product complaint triggers a reporting obligation. But the threshold is lower than most business owners assume. Here is how to think through it:

Step 1: Has there been an injury, illness, or close call? If yes, proceed to Step 2. If no, ask: could a reasonable person conclude that the product could cause serious injury in foreseeable use?

Step 2: Is the issue a defect in design, manufacturing, labeling, or packaging? A defect is any flaw that creates a risk of injury that is not obvious to consumers. This includes inadequate warnings and instructions.

Step 3: Could the defect create a “substantial product hazard”? Consider: the severity of potential injury, the likelihood of injury, the number of products in the market, and the population exposed (products used by children receive heightened scrutiny).

Step 4: When in doubt, report. The cost of over-reporting is virtually zero. The cost of under-reporting can be measured in millions—and in the trust of your customers.

Protect Your Company Before a Recall Happens

The companies that navigate recalls most successfully are the ones that prepare before a defect surfaces.

• Audit your supply chain contracts. Ensure your indemnification clauses cover recall expenses, not just third-party litigation.
• Obtain product recall insurance. This is a separate policy from your CGL coverage, and it is worth every dollar if you manufacture or distribute consumer products.
• Establish a recall response plan. Identify the team, the communication channels, the legal contacts, and the logistics before you need them.
• Maintain rigorous quality control records. These records are both your early warning system and your defense in litigation.
• Train your team on reporting obligations. The 24-hour clock starts when anyone in your organization obtains reportable information—not when it reaches the C-suite.

A product recall handled well can actually strengthen customer trust. A recall handled poorly—or worse, concealed—can end a business.

If you are facing a potential product defect or recall, experienced legal counsel can help you navigate the reporting process, manage the recall efficiently, and preserve your rights against responsible parties in the supply chain.