Growing Number of Companies Fined For Failing to Report Product Defects

When companies learn of a dangerous product flaw, they have a duty to alert the authorities. Yet, there was a startling rise in the number of firms that tried to dodge this responsibility in 2011.


April 20, 2012 /24-7PressRelease/ — Every day, you rely on thousands of manufactured products. From the brakes on your car to the bed you sleep in, somewhere down the line a company had to design, construct and test the items that fulfill your basic needs.


Although most products are safe, sometimes hazardous items slip through the cracks and enter the stream of commerce. Defective products are responsible for thousands of injuries every year.


When a company finds out that one of its products presents a danger, they are required to take measures to protect the public. Yet, the latest numbers show that companies are becoming increasingly tightlipped about big product defects.


Defective Product Reporting Requirements


The Consumer Product Safety Commission is the federal agency responsible for publicizing information on recalled products. Under the terms of the Consumer Product Safety Act, manufacturers, distributors, importers and retailers are all required to report potentially hazardous products to the CPSC once they become privy to information that reasonably supports the conclusion that a product:


– Fails to meet a consumer product safety rule, standard or ban;

– Contains a defect that could create a substantial product hazard; or,

– Creates an unreasonable risk of serious injury or death


Information that can give rise to reporting responsibility arises in many ways, from internal quality control data to customer complaints. Generally, companies must make a report to the CPSC within 24 hours of the receipt of such information.


Reporting Failures Increased Fivefold In the Span of a Year


The CPSC is empowered to levy fines against companies that fail to file a timely report regarding a product defect. In 2010, the CPSC used this power against only two companies for a combined penalty of just over half a million dollars.


In 2011, however, the number of companies penalized for their sluggish response to product defects skyrocketed to ten. This time, the total annual fines topped the $4 million mark.


A Lawyer Can Help You Hold Negligent Manufacturers Responsible


The disturbing trend towards more defective product cover-ups is bad news for consumers. But, CPSC fines are not the only way to combat marketers of dangerous items. If you or a loved one has been injured by a product due to a design flaw, a fault in the manufacturing process or a failure to provide adequate warnings about known dangers, you may be entitled to monetary damages. Call a defective products lawyer to learn more about your right to compensation from makers of unsafe products.


Article provided by The Kreeger Law Firm

Port Surveillance News: CPSC Investigators Find, Stop Nearly 650,000 Unsafe Products at the Start of Fiscal Year 2012

April 5, 2012
Release #12-142
CPSC Hotline: (800) 638-2772
CPSC Media Contact: Carl Purvis, (301) 504-7805

WASHINGTON, D.C. – Investigators with the U.S. Consumer Product Safety Commission (CPSC) prevented more than half a million violative and hazardous imported products from reaching the hands of consumers in the first quarter of fiscal year 2012.

Working with U.S. Customs and Border Protection (CBP) agents, CPSC port investigators successfully identified consumer products that were in violation of U.S. safety rules or found to be unsafe. CPSC and CBP teamed up to screen more than 2,900 imported shipments at ports of entry into the United States. As applicable, these screenings involved use and abuse testing or the use of an X-ray fluorescence (XRF) analyzer. Their efforts prevented more than 647,000 units of about 240 different noncomplying products from reaching consumers, between October 1, 2011 and December 31, 2011.

Topping the list of products stopped were children’s products containing levels of lead exceeding the federal limits, toys and other articles with small parts that present a choking hazard for children younger than 3 years old, and toys and child care articles with banned phthalates.

In addition to violative toys and other children’s products, items stopped at import included defective and dangerous hair dryers, lamps and holiday lights.

“We mean business when it comes to enforcing some of the toughest requirements for children’s products in the world. If an imported product fails to comply with our safety rules, then we work to stop it from coming into the United States,” said Chairman Inez Tenenbaum. “Safer products at the ports means safer products in your home.”

During fiscal year 2011, CPSC inspected more than 9,900 product shipments at the ports nationwide and stopped almost 4.5 million units of violative or hazardous consumer products from entering the stores and homes of U.S. consumers.

CPSC has been screening products at ports since it began operating in 1973. In 2008, the agency intensified its efforts with the creation of an import surveillance division.

Hong Kong amends Juvenile & Toy Safety Standards

Effective from April 1, 2012, Hong Kong has recently updated two toy safety standards and realigns the standards to reflect changes to European, Australia/New Zealand and United States standards for eight children’s product categories.

The government of Hong Kong published the Toys and Children’s Product Safety Ordinance (Amendment of Schedules 1 and 2) Notice 2011 in its gazette on December 30, 2011 as. This notice updates two safety standards for toys and some of the standards for eight types of children’s products.

This amends chapter 424 of the Laws of Hong Kong by providing an update to the Toys and Children’s Product Safety Ordinance and Regulations. According to product type, the Hong Kong regulations ( specify that toys and children’s products for domestic use should comply with one of several major international toy safety standards. These include British standards enacting European norms (BS EN), American international standards (ASTM); Australia/New Zealand harmonized joint standards (AS/NZS) as well as standards of the International Standards Organization (ISO).
Toys represent a wider category and various types of toy fall under a mixture of ISO and BS EN standards. A similar situation exists for playpens, where ASTM and BS EN standards are employed. The types of children’s products that are regulated purely referring to ASTM standards include baby walking frames, cots, high chairs and child safety barriers. Those regulated by AS/NZS standards are confined to bunk beds, while children’s paints are regulated by ISO.

The changes generally align existing Hong Kong regulations to the latest revisions of the referenced standards. As examples of realignments, bunk beds for domestic use are amended from AS/NZS 4220:2003 to AS/NZS 4220:2010 and children’s paint from ISO 8124-3:1997 to ISO 8124-3:2010.

For the local market, Hong Kong requires of products that need consumer warnings to have labels and instructions written in both English and Chinese.

Product Safety Conference Concludes with CPSC Chairman Keynote Address

Yesterday was the last full day of the 2012 ICPHSO Annual Meeting and Training Symposium.

The day featured a keynote by U.S. Consumer Product Safety Commission (CPSC) Chairman Inez Moore Tenenbaum (pictured delivering the keynote)

   Some of her key points:

  • CPSC is being proactive at ports.  In 2010 & 2011, 6.5M units of over 2,000 products were seized.
  • Independent 3rd party testing is set up and running well.
  • A strong CPSC is good for business – it provides a more level playing field.
  • Standards development, recalls process, and federal rulemaking will be priorities in 2012.
  • Successful public database will have one year anniversary on March 11.  It has had 6,300 unsafe product reports.

Penalties and Enforcement
Also featured was a panel on Penalties and Enforcement, featuring Cheryl Falvey, U.S. CPSC General Counsel.  Some of the points made there:

In August 2009, the maximum penalty went from $1.8M to $15M.

If the duty to report occurred in 2008 but was not reported until 2010, the violation occurred in the higher penalty period.

A failure to report and the deliberate subsequent sale of recalled product doubles the maximum penalty to $30M.

There has been less self-reporting and more anticipated litigation since the penalty increase.

There is no formula to calculating a penalty.  Statutory factors include:

  • Nature
  • Circumstance
  • Extent and gravity of the violation

Other factors include:

  • Safety/compliance program
  • History of noncompliance
  • Economic gain for noncompliance
  • Failure to respond timely to staff requests

Every settlement is subject to approval by CPSC commissioners.  Then it is listed in the Federal Register for public comment.

The CPSC is looking for a case that makes a statement.  “This has a deterrent effect,” says Falvey.

Individuals are now being pursued for felony criminal penalties.  This often happens with Subchapter S corporations, where the individual is virtually the same as the corporation.

The CPSC can be creative.  E&B Giftware was given a $550,000 civil penalty, with all but $50,000 suspended if they met requirements of the settlement.

The whistleblower provision in the Consumer Product Safety Improvement Act (CPSIA) of 2008 has only been used once.  Calls are more likely to be a trade complaint from a competitor.

Is Innovation Key to Compliance Best Practices?

FEBRUARY 28, 2012 BY 

innovation and compliance best practices

Can compliance be innovative? Or can innovation inform your compliance program? Can some of the techniques and strategies of the world’s most innovative companies be brought to bear in the field of anti-corruption and anti-bribery?

I thought about those questions, and perhaps some others, while reading the March issue of Fast Company that had a cover title of “The World’s 50 Most Innovative Companies.” In his column, editor Robert Safian wrote about the “The Lessons of Innovation.” He said in reviewing the Top 50 most innovative company, he drew eight key themes. As I read these I thought about them and their relationship to compliance. So with a tip of the hat to Mr. Saflan, here is my compliance spin on his eight key themes of corporate innovation.

1. Compliance should be a strategy, not a tactic. Starbucks recognized that profit alone is a “fairly shallow aspiration, and it’s not enduring.” Most people want to do business with companies that do not engage in bribery and corruption. Indeed the U.K. Bribery Act enshrines this in its Six Principles of an Adequate Procedures by stating that a company should only conduct business with other ethical companies.

2. Big companies need to be as nimble as small companies. Safian notes that the top four companies: Apple, Google, Facebook and Amazon all continue to “drive the agenda across the global economy.” This should also be true of your compliance program. You need to use the tools available to you to update your risk assessment if you move into new business lines, products or geographical areas. Similarly if one of your competitors comes under anti-corruption scrutiny, you should review any similar practices that your company might have, such as its sales model or vendors in the supply chain.

3. Technology is disruptive in unexpected places. Here Safian gives the example ofLegalZoom, which is “challenging the definition of a law practice” by providing useful legal forms and documents to consumers. In the compliance arena, the number of technological innovations is as broad as it is deep. Companies like Catelas and Visual Risk IQ have developed software products that can allow review and assessment of a large number of data points or other quantitative data. You can even get apps for smartphones that allow submission of expense requests directly to your compliance department.

4. Compliance is a competitive advantage. Apple has never been publicly reported as going through a Foreign Corrupt Practices Act (FCPA) investigation. What is their stock price today and is it still undervalued? Even when it recently received negative publicity regarding its manufacturing facilities in China, it responded quickly and brought in an outside monitor to assess and report. Apple also annually assesses its third-party vendors and makes that report public. Do you think that keeps vendors on their collective toes? You bet it does.

5. Use of social media makes compliance better. My former speaking cohort, Stephen Martin, then General Counsel for Corpedia, often spoke about Code of Conduct 3.0, which is a web-based interactive tool that helps guide employees through a code in an interesting and stimulating manner.

The same is true of training. You no longer need to simply have a video conference to deliver compliance training around the world. Companies like Click4Compliance have interactive, web-based solutions that you can utilize. I noted above about the smartphone app that allows employees from around the world to submit expense requests to the compliance department and receive an instant response back from an assigned compliance team member.

document compliance best practices

6. Data is power. If you don’t document it, you can’t measure it. If you don’t measure it, you can’t assess it. If you don’t assess it, you can’t improve it. That is how an engineer tends to look at things. In the compliance world, if you don’t document it, it never existed (Cue drum roll for: document, document and document). Both are true. You have to document things to prove that you actually did them. But if you do not have data, you cannot determine if your corporate compliance program is successful or improve it.

7. Money is flowing. Here, Safian does not mean necessarily that more funding is available. However, in the compliance world, what I believe that this means is forces, other than legal compliance.

For example: the U.S. Department of Justice (DOJ) or the U.K. Serious Fraud Office (SFO) enforcements are beginning to drive compliance. Insurance companies have developed insurance coverage for FCPA investigations; D&O insurers are requiring companies to have a compliance program to cover directors and officers sued in shareholder derivative actions based upon admitted FCPA violations; and perhaps most interestingly, banks and other financial institutions are reviewing anti-corruption compliance programs to determine if they meet minimum best practices and then writing maintenance of these programs into their loan covenants.

8. Copycats are history. Safian notes that emerging market entrepreneurs aren’t just following the successes of others, they are creating new, distinct models. In the compliance arena I believe that out-of-the-box solutions are no longer best practices. Companies need to assess their specific compliance risks and then design programs to specifically manage those compliance risks.

If your company uses a sales model of agents, one type of compliance management strategy may need to be employed. However, if your company is a manufacturing company that sells through distributors, another compliance management strategy may be required. Do not simply purchase a compliance program off the shelf. Either design it to fit the needs (and realities) of your business model or work with an expert who can do so.

The innovation angle is not one that is usually in the front of the line at compliance conferences or in thinking through compliance programs. But if you listen to Lanny Breuer, Chuck DuRoss or any other DOJ speaker, they continually talk about evolving best practices in anti-corruption compliance. Any reader of deferred prosecution agreements (DPAs) from the past 18 months is well aware of the changes in focus that the DOJ has in these documents. Certainly, many of the compliance techniques are driven by the compliance challenges in the individual companies.

But if your company has engaged in mergers and acquisitions, why would it not follow the “enhanced” compliance guidance found in the Johnson & Johnson DPA and train all high-risk employees within 12 months of acquisition and perform a full compliance audit within 18 months of acquisition? So my conclusion is that innovation in the compliance arena is key. As compliance programs mature and as companies mature in their approach to compliance, innovation will continue to lead best practices.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at © Thomas R. Fox, 2012

CPSC Accepts ASTM F963-11 for Toy Safety

Federal Register / Vol. 77, No. 35 / Wednesday, February 22, 2012 / Rules and Regulation

16 CFR Chapter II
Acceptance of ASTM F963–11 as a Mandatory Consumer Product Safety Standard
AGENCY: Consumer Product Safety Commission.
ACTION: Acceptance of standard.
SUMMARY: The Consumer Product Safety  Commission (‘‘CPSC,’’ Commission,’’ or ‘we’’) is announcing that we have accepted the revised ASTM F963–11
standard titled, Standard Consumer Safety Specifications for Toy Safety. Pursuant to section 106 of the Consumer Product Safety Improvement Act of
2008, ASTM F963–11 will become a mandatory consumer product safety standard effective June 12, 2012.
DATES: ASTM F963–11 will become effective on June 12, 2012.
Jonathan Midgett, Ph.D., Office of
Hazard Identification and Reduction,
U.S. Consumer Product Safety
Commission, 4330 East West Highway,
Suite 600, Bethesda, MD 20814;
telephone (301) 504–7692; email
Dated: February 15, 2012.

Todd A. Stevenson,
Secretary, Consumer Product Safety
[FR Doc. 2012–3990 Filed 2–21–12; 8:45 am]

The Anatomy of a Children’s Product Certificate

There has been a lot of confusion on what information needs to be included in a Children’s Product Certificate (CPC).  While the Consumer Product Safety Commission (CPSC) has not given any guidance on the format of a CPC they have given detailed instructions on the type of information which needs to be included in a CPC (Final Rule, 16 CFR Part 1110, Certificates of Compliance dated November 18, 2008).

There are seven (7) major areas of information which at a minimum must be on each CPC and they include;

1. Identification of the product covered by this certificate:

The information provided here must be more than just the common name of the product as it is known by the consumer or retailer.  It must contain model, item or SKU number to uniquely identify the product from other products manufactured or imported by the issuer of the certificate.  The CPSC has allowed for “family” of products to be listed on the certificate where the testing has been the same or when the issuer is citing one laboratory report to show compliance for the whole family of products as for an example; the issuer had a stuffed bear that was in a variety of fabric colors and each color was a different item or SKU number and the testing was the same for each item or SKU number then one certificate could be issued for the family of bear products.

2. Citation to each CPSC product safety regulation to which this product is being certified:

Each CPSC product safety regulation must be listed which builds the case for compliance of the product.  The safety regulation must be identified so that there might not be any confusion as to what the safety regulation is.  As for example; if the product was tested for small parts then the safety regulation would be cited as, ASTM F963-08 (or most current version) Section 4.6 Small Parts.

3. Identification of the U.S. importer or domestic manufacturer certifying compliance of the product:

The information provided here MUST be the company name, full mailing address and telephone number of the manufacturer or importer of record certifying the product.

4. Contact information for the individual maintaining records of test results:

The information provided here MUST be the company name, full mailing address, e-mail address and telephone number of the person maintain test records for the company in support of the certification of the product.

5. Date and place where this product was manufactured:

The information provided can be the date or dates when the product was manufactured using at least a month and year format (MM/YYYY).  The place of manufacture needs to be identified as well with AT LEAST the city and country or administrative region of the place where the product was finally manufactured or assembled.  If the factory that produced the product has more than one location in the city listed then the street address of the factory will be used to further identify the place of manufacture.

6. Date and place where this product was tested for compliance with the regulation(s) cited above:

Information provided here must be the date or dates of the testing on the test reports, the report numbers and the location or locations of testing.

7. Identification of any third-party laboratory on whose testing the certificate depends:

The third-party laboratory which tested the product for conformity must be listed with AT LEAST their name, full mailing address and telephone number of the laboratory.


At the recent Toy Fair conference, Neil Cohen, Small Business Ombudsman of the CPSC announced that companies can use the same certificate and add Production Run / Tracking label information to it for each production run in the testing calendar year as long as there is no material change in that batch or run. This will give companies the option of consolidating certificates under each product. As more information regarding this practice becomes available, I will share it on this site.

Remember that the issuance of Children’s Product Certificates is the responsibility of the manufacturer and it is their duty to provide access to these reports with each sale to retailers. CPC’s are not required when selling directly to consumers.

Bill Jacoby is the principal at Jacoby Solutions which has developed a CPSIA Operational Readiness  CORE Audit to help companies identify risk and improve their company’s business operations.

CPSC Chairman Inez Tenenbaum Delivers Keynote at Toy Fair

From Toy Industry Association (TIA)

February 14, 2012 | Consumer Product Safety Commission (CPSC) Chairman Inez Tenenbaum spoke to an audience of more than 300 toy industry stakeholders this morning in a keynote address delivered at the Toy Industry Association’s (TIA) annual Toy Safety Compliance Update.

Chairman Tenenbaum shared the CPSC’s progress in 2011 – including the long-anticipated amendments to the Consumer Product Safety Improvement Act (CPSIA) last August– before discussing the Commission’s goals for 2012, which include “education and prevention over reaction and recalls” and the importance of “toy safety by design.”

While the CPSC has made headway alongside Homeland Security inspectors in monitoring the ports to detect and detain shipments that contain violative toys, Chairman Tenenbaum stated that companies must do their part to ensure safety through sound design – especially considering nearly 20 billion toys are imported annually to the U.S. from China. “The final design needs to be right, every time,” she said, adding that design flaws are the chief cause of injuries and recalls.

During her 45-minute address, Chairman Tenenbaum noted that the CPSC “still has a lot of work to do in educating everyone in the industry … from manufacturers and importers to wholesalers and retailers” about the latest toy safety requirements.  The CPSC is currently involved in ongoing conversations with several institutions of higher learning to explore the development of certification programs related to best manufacturing processes in China, in the hopes of educating and training a future generation of experts in supply chain management.

In closing, Chairman Tenenbaum stated that she believes “2012 will be another successful year for toy safety” and urged the audience to “take the necessary steps [to comply with the CPSIA] now so that children are safe and happy when your toys reach their hands.”

“I want statistics for injuries and recalls to decline this year, and I just know that the industry is up for this challenge. From New York to Hong Kong and everywhere in between, I want us to be partners …We’re here to educate, inform and empower you to ensure that your products comply with the law.”

Immediately following the Chairman’s address, CPSC Small Business Ombudsman Neal Cohen spoke to the crowd, discussing the various resources available to toy companies through the Small Business Ombudsman office as well as updates to the CPSIA and the recent changes to the U.S. Toy Safety Standard F963.

Held from 9:15 a.m. to 12:30 p.m. at the Jacob K. Javits Convention Center during Toy Fair, the educational seminar also included presentations by Joan Lawrence, TIA vice president of standards and government affairs, who provided detailed information on toy safety standards, laws and compliance requirements in the U.S. and abroad and Al Kaufman, TIA senior vice president of technical affairs, who provided details about the newly revised F963 toy safety standard and practical tips on compliance. Federal and state legislative updates were also provided by TIA’s external affairs team, as well as information on Canadian EPR Legislation.

Final ruling -Consumer Registration of Durable Infant or Toddler Products for CPSIA

The CPSC has issued a final ruling regarding the Product Registration component.

CPSC stated in the preamble to the proposed rule, 76 FR 48055, that they recognize
that manufacturers may have an existing inventory of registration forms and that the
changes to the forms are minor and would not affect safety. They proposed that the
amendment would take effect 12 months (Feb 2013) after publication of a final rule.

They also stated that until the amendment takes effect, they would consider registration

forms to be in compliance that meet either the existing rule or the amendment.

Accordingly, they amend 16 CFR part 1130 as follows:
1. The authority citation for part 1130 continues to read as follows:
Authority: 15 U.S.C. 2056a, 2065(b).
2. In § 1130.3(a)(2), remove “§ 1130.9” and add in its place “§ 1130.8”.
3. Section 1130.5 is amended as follows:
a. In § 1130.5 (a), remove “and 1130.7”.
b. In § 1130.5 (f), remove “1130.7(a)” and add, in its place “1130.6(c)(1)”.
4. Revise § 1130.6 to read as follows:

§ 1130.6 Requirements for format and text of registration forms.
(a) Size of form. The form shall be at least the size of two standard post cards,
connected with perforation for later separation, so that each of the two portions is at least
3 ½ inches high x 5 inches wide x 0.007 inches thick.
(b) Layout of form. (1) General. The form shall consist of four parts: top and
bottom, divided by perforations for easy separation, and front and back.
(2) Font size and typeface. The registration form shall use bold black typeface.
The size of the type shall be at least 0.12 in (3.0 mm) for the purpose statement required
in § 1130.6(c)(1), and no less than 0.10 in (2.5 mm) for the other information in the
registration form. The title of the purpose statement and the retention statement required
in § 1130.6(d)(2) shall be in all capitals. All other information shall be in capital and
lowercase type.
(c) Front of form. (1) Top front of form: Purpose statement. The top portion of
the front of each form shall state: “PRODUCT REGISTRATION FOR SAFETY ALERT
OR RECALL ONLY. We will use the information provided on this card to contact you
only if there is a safety alert or recall for this product. We will not sell, rent, or share
your personal information. To register your product, please complete and mail the
bottom part of this card, or visit our online registration at:”
Manufacturers that do not have a website may provide an e-mail address and state at the
end of the purpose statement: “To register your product, please complete and mail the
bottom part of this card, or e-mail your contact information, the model name and number,
and date of manufacture of the product, as provided on this card, to:

(2) Bottom front of form: Manufacturer’s mailing address. The bottom portion of
the front of each form shall be pre-addressed and postage-paid with the manufacturer’s
name and mailing address where registration information is to be collected. If a
manufacturer uses a third party to process registration forms, the third party’s name may
be included as a “c/o” (“in care of”) in the address on the form.
(d) Back of the form. (1) Top back of form.
(i) Product information and manufacturer’s identification. The top portion of the
back of each form shall state: “Manufacturer’s Contact Information” and provide the
manufacturer’s name and contact information (a U.S. mailing address displayed in
sentence format, website address, a telephone number, toll-free, if available); product
model name and number (or other identifier as described in § 1130.4(a)(1) and (2)); and
manufacture date of the product. A rectangular box shall be placed around the model
name, model number, and manufacture date.
(ii) Retention statement. On the back of each form, just above the perforation
line, the form shall state: “KEEP THIS TOP PART FOR YOUR RECORDS. FILL OUT
(2) Bottom back of form.
(i) Consumer information. The bottom portion of the back of each form shall have
blocks for the consumer to provide his/her name, address, telephone number, and e-mail
address. These blocks shall be 5 mm wide and 7 mm high, with as many blocks as
possible to fill the width of the card allowing for normal printing practices.
(ii) Product information. The following product information shall be provided on
the bottom portion of the back of each form below the blocks for consumer information
printed directly on the form or on a pre-printed label that is applied to the form: the
model name and number (or other identifier as described in § 1130.4(a)(1) and (2)), and
the date of manufacture of the product. A rectangular box shall be placed around the
model name, model number, and manufacture date. A manufacturer may include its
name on the bottom portion of the back of the form if they choose to do so.
5. Remove § 1130.7, and redesignate §§ 1130.8 and 1130.9 as §§ 1130.7 and
1130.8, respectively.
6. In redesignated § 1130.8, add new paragraph (d) to read as follows:
(d) Records required under this section shall be made available within 24 hours,
upon the request of any officer, employee, or agent acting on behalf of the U.S.
Consumer Product Safety Commission.
7. Revise Figure 1, as follows:





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