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Head Injury Settlement Agreement And Order

1. This Settlement Agreement is made by and between the staff (``the staff') of the U.S. Consumer Product Safety Commission (``the Commission') and Dynacraft BSC, Inc., formally known as Dynacraft Industries, Inc. (``Dynacraft' or ``Respondent'), a corporation, in accordance with 16 CFR 1118.20 of the Commission's Procedures for
Investigations, Inspections, and Inquiries under the Consumer Product Safety Act (``CPSA'). This Settlement Agreement and the incorporated attached Order settle the staff's allegations set forth below.

I. The Parties

2. The Commission is an independent federal regulatory agency responsible for the enforcement of the Consumer Product Safety Act, 15  U.S.C. 2051 et seq.
3. Dynacraft is a corporation organized and existing under the laws of the Commonwealth of Massachusetts with its principal corporate offices located at 2550 Kerner Boulevard, San Rafael, CA 94901. Dynacraft imports bicycle products from China for sale in the United States.

II. Allegations of the Staff

A. Vertical XL2 Mountain Bicycle

4. In July 1999, Respondent manufactured for nationwide distribution 3,562 Vertical XL2, 26' Mountain Bicycles, Model Number 8526-26. Respondent also manufactured the JY906 bicycle fork (``fork') and incorporated it into these bicycles.

 5. The bicycles described in paragraph 4 above are sold and/or are used by consumers in or around a permanent or temporary household or residence, a school, in recreation, or otherwise and are therefore, ``consumer products' as defined in section 3(a)(1) of the Consumer Product Safety Act (CPSA), 15 U.S.C. 2052(a)(1). Respondent was a ``manufacturer' of the bicycles described in paragraph 4, which were ``distributed in commerce' as those terms are defined in sections
3(a)(4), (11), and (12) of the CPSA, 15 U.S.C. 2052(a)(4), (11), and (12).

6. Some of the front suspension forks for these bicycles had defective welds that allegedly broke apart during normal and
foreseeable use of the bicycles. The flaws in these forks are ``defects' under section 15 of the CPSA, 15 U.S.C. 2064.
7. If the fork breaks during use, it may cause the rider to lose control, fall and suffer serious injuries such as facial brasions, concussions, other head injuries, chipped or lost teeth, broken bones, and lacerations requiring sutures. Death is also possible.

 8. On or about February 29, 2000, Respondent announced the recall of 19,000 Vertical XL2 Bicycles, Model No. 8526-26 with a manufacturing date of October 11, 1999. At the time, the firm was aware of at least
two failures of the bicycles with a manufacturing date of July 1999, but did not provide that information to the Commission staff. In the staff's letter of February 14, 2000 accepting Respondent's corrective action plan, the staff said, ``If the firm [Respondent] receives or learns of any information concerning other incidents or injuries, or information affecting the scope, prevalence or seriousness of the reported problem, it must report to [the Office of Compliance] immediately.'

 9. Between January 2000 and July 2000, Respondent received five incident reports involving Vertical XL2, Model 8526-26 bicycles' forks allegedly breaking part during normal and foreseeable use of the bicycles, causing riders to lose control and fall to the ground. These bicycles had a manufacturing date of July 1999. Dynacraft knew about injuries including broken and lost teeth, fractures, and lacerations requiring sutures. Dynacraft did not report this pattern of defect to the Commission until on or about July 26, 2000.

10. Before July 26, 2000, Dynacraft had obtained information which reasonably supported the conclusion that the bicycles' forks described in paragraph 4 above contained a defect which could create a substantial product hazard or created an unreasonable risk of serious injury or death, but failed to report such information in a timely manner to the Commission as required by sections 15(b)(2) and (3) of the CPSA, 15 U.S.C. 2064(b) and (c).

 11. By failing to provide the information to the Commission in a timely manner as required by section 15(b) of the CPSA, 15 U.S.C. 2064(b), Dynacraft violated section 19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4).

12. Dynacraft committed this failure to timely report to the Commission ``knowingly' as the term ``knowingly' is defined in section 20(d) of the CPSA, 15 U.S.C. 2069(d), thus, subjecting Dynacraft to civil penalties under section 20 of the CPSA, 15 U.S.C. 2069.

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