Segway Powersports Inc., Provisional Acceptance of a Settlement Agreement and Order, 52753-52756 [2022-18531]

Agencies

• Consumer Product Safety Commission

[Federal Register Volume 87, Number 166 (Monday, August 29, 2022)]
[Notices]
[Pages 52753-52756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18531]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 22-C0004]


Segway Powersports Inc., Provisional Acceptance of a Settlement 
Agreement and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Notice.

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SUMMARY: The Commission publishes in the Federal Register any 
settlement that it provisionally accepts under the Consumer Product 
Safety Act. Published below is a provisionally accepted Settlement 
Agreement with Segway Powersports, Inc., containing a civil penalty in 
the amount of $5 million, with all but $1.25 million suspended, subject 
to the terms and conditions of the Settlement Agreement.

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 September 13, 2022.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to Alberta Mills, Office of the Secretary, 
Consumer Product Safety Commission, 4330 East West Highway, Bethesda, 
MD 20814; telephone: (240) 863-8938 (mobile); (301) 504-7479 (office); 
email: [email protected] (mailto:[email protected]).

FOR FURTHER INFORMATION CONTACT: Gregory M. Reyes, Supervisory 
Attorney, Division of Enforcement and Litigation, Office of Compliance 
and Field Operations, Consumer Product Safety Commission, 4330 East 
West Highway, Bethesda, Maryland 20814-4408; [email protected] 
(mailto:[email protected]) or 301-504-7220.

SUPPLEMENTARY INFORMATION: The Commission voted (4-0-1) to 
provisionally accept the proposed Settlement Agreement and Order 
pertaining to Segway Powersports Inc. Chair Hoehn-Saric, Commissioners 
Baiocco, Trumka and Boyle voted to provisionally accept the Settlement 
Agreement and Order. Commissioner Feldman voted to take other action. 
The text of the Agreement and Order and Exhibit A to the Agreement 
appears below.

Abioye Mosheim,
Acting Secretary, Consumer Product Safety Commission.

United States of America

Consumer Product Safety Commission

    In the Matter of: SEGWAY POWERSPORTS INC.

CPSC Docket No.: 22-C0004

Settlement Agreement

    1. In accordance with the Consumer Product Safety Act, 15 U.S.C. 
2051-2089 (``CPSA''), and 16 CFR 1118.20, Segway Powersports Inc. 
(``SPI''), and the United States Consumer Product Safety Commission 
(``Commission'' or ``CPSC''), through its staff, hereby enter into this 
Settlement Agreement (``Agreement''). The Agreement and the 
incorporated attached Order resolve staff's charges set forth below.

The Parties

    2. The Commission is an independent federal regulatory agency, 
established pursuant to, and responsible for, the enforcement of the 
CPSA, 15 U.S.C. 2051-2089. By executing the Agreement, staff is acting 
on behalf of the Commission, pursuant to 16 CFR 1118.20(b). The 
Commission issues the Order under the provisions of the CPSA.
    3. SPI is a corporation, organized and existing under the laws of 
the state of Delaware, with its principal place of business in 
McKinney, Texas.

Staff Charges

    4. Between February 2021 and April 2021, SPI imported into the 
United States approximately 152 all-terrain vehicles (``ATVs'') that 
were not subject to an Action Plan approved by the Commission (the 
``Matter'').
    5. The ATVs are ``consumer products'' that were ``import[ed]'' and 
``distribut[ed] in commerce,'' as those terms are defined or used in 
sections 3(a)(5), (7), and (9) of the CPSA, 15 U.S.C. 2052(a)(5), (7), 
and (9). SPI is a ``manufacturer'' and ``distributor'' of the ATVs, as 
such terms are defined in sections 3(a)(8) and (11) of the CPSA, 15 
U.S.C. 2052(a)(8) and (11).

[[Page 52754]]

    6. Pursuant to section 42(a)(2)(B) of the CPSA, 15 U.S.C. 
2089(a)(2)(B), it is unlawful for any manufacturer or distributor to 
import into or distribute in commerce in the United States any new 
assembled or unassembled ATV unless ``the ATV is subject to an ATV 
action plan . . . filed with and approved by the Commission . . . .''
    7. ATV action plans focus on ``promot[ing] the safe and responsible 
use of ATVs,'' in particular, for children under age 16, and are 
defined in the CPSA as ``a written plan or letter of undertaking that 
describes actions the manufacturer or distributor agrees to take to 
promote ATV safety, including rider training, dissemination of safety 
information, age recommendations, other policies governing marketing 
and sale of the ATVs, the monitoring of such sales, and other safety 
related measures, and that is substantially similar to the plans 
described under the heading `The Undertakings of the Companies in the 
Commission Notice' published in the Federal Register on September 9, 
1998.'' 15 U.S.C. 2089(e)(2); 63 FR 48,199-204 (Sept. 9, 1998).
    8. Under section 42(a)(3) of the CPSA, the failure to comply with 
the ATV action plan requirement in section 42(a)(2)(B) ``shall be 
deemed to be a failure to comply with a consumer product safety 
standard under [the CPSA] and subject to all of the penalties and 
remedies available under [the CPSA].'' 15 U.S.C. 2089(a)(3).
    9. On numerous occasions, CPSC staff informed SPI that it could not 
import or distribute ATVs without an approved ATV action plan, and that 
such unlawful importation or distribution would subject SPI to 
enforcement actions and potential civil penalties.
    10. Despite having knowledge that it was unlawful to import ATVs 
that were not subject to an approved ATV action plan on file with the 
Commission, SPI unlawfully imported eight separate ATV shipments.
    11. SPI failed to comply with a consumer product safety standard 
under the CPSA by importing the ATVs, see 15 U.S.C. 2089(a)(3), and 
knowingly violated section 19(a)(1) of the CPSA, 15 U.S.C. 2068(a)(1), 
as the term ``knowingly'' is defined in section 20(d) of the CPSA, 15 
U.S.C. 2069(d).
    12. Pursuant to section 20 of the CPSA, 15 U.S.C. 2069, SPI is 
subject to civil penalties for its knowing violation of section 
19(a)(1) of the CPSA, 15 U.S.C. 2068(a)(1).

Response of SPI

    13. This Agreement does not constitute an admission by SPI to the 
charges set forth in paragraphs 4 through 12, including charges that 
SPI violated any statute or regulation, unlawfully imported ATVs, or 
knowingly violated the CPSA. In fact, SPI imported the ATVs based on 
its reasonable belief that the Action Plan initially submitted to CPSC 
in December, 2019, about 15 months before the importation, would be 
approved by the CPSC by the time the ATVs arrived at the ports of the 
United States. As soon as the shipments arrived while CPSC still had 
not yet approved the Action Plan, SPI voluntarily self-reported the 
importation and fully and timely cooperated with the inspection and 
other inquiries from the Commission. Further, SPI placed the ATVs in 
warehouses pending approval of the Action Plan, none of which has been 
distributed or sold and none of which has any alleged product defect or 
has caused any injury.

Agreement of the Parties

    14. Under the CPSA, the Commission has jurisdiction over the Matter 
involving the ATVs and over SPI.
    15. The parties enter into the Agreement for settlement purposes 
only. The Agreement does not constitute an admission by SPI that it 
violated the CPSA.
    16. In settlement of staff's charges, and to avoid the cost, 
distraction, delay, uncertainty, and inconvenience of protracted 
litigation or other proceedings, SPI shall pay a civil penalty in the 
amount of five million dollars ($5,000,000) (``Total Civil Penalty 
Amount''). In reliance on the accuracy and completeness of SPI's 
representations and warranties within this Agreement, the Commission 
agrees to suspend all but one million, two-hundred and fifty thousand 
dollars ($1,250,000) of the Total Civil Penalty Amount (``$1,250,000 
Payment''), on the terms and conditions set forth in this Agreement. 
The $1,250,000 Payment shall be paid in two equal installments, the 
first within thirty (30) calendar days after SPI receives service of 
the Commission's final Order accepting the Agreement, and the second 
within sixty (60) calendar days of service of the final Order. All 
payments to be made under the Agreement shall constitute debts owing to 
the United States and shall be made by electronic wire transfer to the 
United States via https://www.pay.gov, for allocation to, and credit 
against, the payment obligations of SPI under this Agreement. Failure 
to make any payment by the dates specified in this paragraph shall 
constitute ``Default,'' making the Total Civil Penalty Amount, plus any 
accrued and unpaid interest minus any penalty amounts paid by SPI, 
immediately due and payable, and may subject SPI to additional 
enforcement action under the CPSA.
    17. The Commission's agreement to suspend part of the Total Civil 
Penalty Amount is expressly premised upon SPI's representations that 
the following financial documents, communications, and representations 
provided by SPI do not contain any untrue statement of a material fact 
or omit any material fact that is required to be stated therein or 
necessary in order to make the statement therein, true, accurate, and 
not misleading:
    1. the sworn Affidavit of Shane Wilson signed on July 21, 2022, 
including the exhibits;
    2. the sworn Affidavit of Meng Li signed on July 21, 2022, 
including the exhibits;
    3. the sworn Affidavit of SPI signed on July 21, 2022; and
    4. the Balance Sheet, Profit and Loss, and Statement of Cash Flows, 
all of SPI, submitted to Commission counsel Gregory M. Reyes on October 
11, 2021 (collectively, ``SPI's Representations'').
    18. If SPI failed to disclose any material asset, materially 
misstated the value of any asset, or made any other material 
misstatement or omission in SPI's Representations, the suspension of 
the Total Civil Penalty Amount shall be lifted, and the entire 
$5,000,000 Total Civil Penalty Amount shall become immediately due and 
payable.
    19. The Commission or the United States may seek enforcement for 
any breach of, or any failure to comply with, any provision of this 
Agreement and Order in United States District Court, to seek relief 
including, but not limited to, lifting the suspension of the Total 
Civil Penalty Amount and collecting amounts due.
    20. All unpaid amounts, if any, due and owing under the Agreement, 
shall constitute a debt due and immediately owing by SPI to the United 
States, and interest shall accrue and be paid by SPI at the federal 
legal rate of interest set forth at 28 U.S.C. 1961(a) and (b) from the 
date of Default, until all amounts due have been paid in full 
(hereinafter ``Default Payment Amount'' and ``Default Interest 
Balance''). SPI shall consent to a Consent Judgment in the amount of 
the Default Payment Amount and Default Interest Balance, and the United 
States, at its sole option, may collect the entire Default Payment 
Amount and Default Interest Balance, or exercise any other rights 
granted by law or in equity, including, but not limited to, referring 
such matters for private collection, and SPI agrees not to contest, and 
hereby waives and discharges any defenses to, any collection action

[[Page 52755]]

undertaken by the United States, or its agents or contractors, pursuant 
to this paragraph. SPI shall pay the United States all reasonable costs 
of collection and enforcement under this paragraph, respectively, 
including reasonable attorney's fees and expenses.
    21. After staff receives this Agreement executed on behalf of SPI, 
staff shall promptly submit the Agreement to the Commission for 
provisional acceptance. Promptly following provisional acceptance of 
the Agreement by the Commission, the Agreement shall be placed on the 
public record and published in the Federal Register, in accordance with 
the procedures set forth in 16 CFR 1118.20(e). If the Commission does 
not receive any written request not to accept the Agreement within 
fifteen (15) calendar days, the Agreement shall be deemed finally 
accepted on the 16th calendar day after the date the Agreement is 
published in the Federal Register, in accordance with 16 CFR 
1118.20(f).
    22. This Agreement is conditioned upon, and subject to, the 
Commission's final acceptance, as set forth above, and it is subject to 
the provisions of 16 CFR 1118.20(h). Upon the later of: (i) 
Commission's final acceptance of this Agreement and service of the 
accepted Agreement upon SPI, and (ii) the date of issuance of the final 
Order, this Agreement shall be in full force and effect, and shall be 
binding upon the parties.
    23. Effective upon the later of: (1) the Commission's final 
acceptance of the Agreement and service of the accepted Agreement upon 
SPI and (2) the date of issuance of the final Order, for good and 
valuable consideration, SPI hereby expressly and irrevocably waives and 
agrees not to assert any past, present, or future rights to the 
following, in connection with the Matter described in this Agreement:
    1. an administrative or judicial hearing;
    2. judicial review or other challenge or contest of the 
Commission's actions;
    3. a determination by the Commission of whether SPI failed to 
comply with the CPSA and the underlying regulations;
    4. a statement of findings of fact and conclusions of law; and
    5. any claims under the Equal Access to Justice Act.
    6. SPI shall maintain a compliance program designed to ensure 
compliance with the CPSA with respect to any consumer product imported, 
manufactured, distributed or sold by SPI, which shall contain the 
following elements:
    1. written standards, policies and procedures concerning products 
sold by SPI in the United States, including those designed to ensure 
that information that may relate to or impact CPSA compliance is 
conveyed effectively to personnel responsible for CPSA compliance, 
whether or not an injury has been reported;
    2. procedures for reviewing claims and reports for safety concerns 
and for implementing corrective and preventive actions when compliance 
deficiencies or violations are identified;
    3. procedures requiring that information required to be disclosed 
by SPI to the Commission is recorded, processed, and reported in 
accordance with applicable law;
    4. procedures requiring that all reporting made to the Commission 
is timely, truthful, complete, accurate, and in accordance with 
applicable law;
    5. procedures requiring that immediate disclosure is made to SPI's 
management of any significant deficiencies or material weaknesses in 
the design or operation of such internal controls that are reasonably 
likely to affect adversely, in any material respect, SPI's ability to 
record, process and report to the Commission in accordance with 
applicable law;
    6. mechanisms to effectively communicate to all applicable SPI 
employees, through training programs or other means, compliance-related 
company policies and procedures to prevent violations of the CPSA;
    7. a mechanism for confidential employee reporting of compliance-
related questions or concerns to either a compliance officer or to 
another senior manager with authority to act as necessary;
    8. SPI's senior management responsibility for, and general board 
oversight of, CPSA compliance; and
    9. retention of all CPSA compliance-related records for at least 
five (5) years, and availability of such records to CPSC staff upon 
request.
    10. SPI shall submit a report under CPSA Section 16(b), sworn to 
under penalty of perjury:
    1. describing in detail its compliance program and internal 
controls and the actions SPI has taken to comply with each subparagraph 
of paragraph 24;
    2. affirming that during the reporting period SPI has reviewed its 
compliance program and internal controls, including the actions 
referenced in subparagraph (a) of this paragraph, for effectiveness, 
and that it complies with each subparagraph of paragraph 24, or 
describing in detail any non-compliance with any such subparagraph; and
    3. identifying any changes or modifications made during the 
reporting period to the SPI's compliance program or internal controls 
to ensure compliance with the terms of the CPSA and, in particular, the 
requirements of CPSA Section 15 related to timely reporting.
    Such reports shall be submitted annually to the Director, Office of 
Compliance and Field Operations, Division of Enforcement and 
Litigation, for a period of three (3) years beginning 12 months after 
the Commission's final Order of acceptance of the Agreement. The first 
report shall be submitted 30 days after the close of the first 12-month 
reporting period, and successive reports shall be due annually on the 
same date thereafter. Without limitation, SPI acknowledges and agrees 
that failure to make such timely and accurate reports as required by 
this Agreement and Order may constitute a violation of Section 19(a)(3) 
of the CPSA.
    4. Notwithstanding and in addition to the above, SPI shall promptly 
provide written documentation of any changes or modifications to its 
compliance program or internal controls and procedures, including the 
effective dates of the changes or modifications thereto. SPI shall 
cooperate fully and truthfully with staff and shall make available all 
non-privileged information and materials and personnel deemed necessary 
by staff to evaluate SPI's compliance with the terms of the Agreement.
    5. The parties acknowledge and agree that the Commission may 
publicize the terms of the Agreement and the Order.
    6. SPI represents that the Agreement:
    1. is entered into freely and voluntarily, without any degree of 
duress or compulsion whatsoever;
    2. has been duly authorized; and
    3. constitutes the valid and binding obligation of SPI, enforceable 
against SPI in accordance with its terms.
    4. The signatories represent that they are authorized to execute 
this Agreement.
    5. The Agreement is governed by the laws of the United States.
    6. The Agreement and the Order shall apply to, and be binding upon, 
SPI and each of successors, transferees, and assigns; and a violation 
of the Agreement or Order may subject SPI, and each of successors, 
transferees, and assigns, to appropriate legal action.
    7. The Agreement and the Order constitute the complete agreement 
between the parties on the subject matter contained therein.
    8. The Agreement may be used in interpreting the Order. 
Understandings, agreements, representations, or interpretations apart 
from those contained in the Agreement and the Order may not be used to 
vary or

[[Page 52756]]

contradict their terms. For purposes of construction, the Agreement 
shall be deemed to have been drafted by both of the parties and shall 
not, therefore, be construed against any party, for that reason, in any 
subsequent dispute.
    34. The Agreement may not be waived, amended, modified, or 
otherwise altered, except as in accordance with the provisions of 16 
CFR 1118.20(h). The Agreement may be executed in counterparts.
    35. If any provision of the Agreement or the Order is held to be 
illegal, invalid, or unenforceable under present or future laws 
effective during the terms of the Agreement and the Order, such 
provision shall be fully severable. The balance of the Agreement and 
the Order shall remain in full force and effect, unless the Commission 
and SPI agree in writing that severing the provision materially affects 
the purpose of the Agreement and the Order.

(Signatures on next page)

Segway Powersports Inc.

Dated: July 21, 2022
By:--------------------------------------------------------------------
Kun Zhu,
Segway Powersports Inc., President.

Dated: 7/21/2022
By:--------------------------------------------------------------------
Jennifer R. Coates, Partner,
Catherine X. Pan-Giordano, Partner,
Dorsey & Whitney LLP,
Counsel to Segway Powersports Inc.

U.S. Consumer Product Safety Commission

Mary B. Murphy, Director.

Dated: 7/21/2022
By:--------------------------------------------------------------------
Gregory M. Reyes, Supervisory Attorney,
Nicholas J. Linn, Trial Attorney,
Division of Enforcement and Litigation, Office of Compliance and 
Field Operations.

United States of America Consumer Product Safety Commission

    In the Matter of: SEGWAY POWERSPORTS INC.

CPSC Docket No.: 22-C0004

Order

    Upon consideration of the Settlement Agreement entered into between 
Segway Powersports Inc. (``SPI'') and the U.S. Consumer Product Safety 
Commission (``Commission'' or ``CPSC''), and the Commission having 
jurisdiction over the subject matter and over SPI, and it appearing 
that the Settlement Agreement is in the public interest, the Settlement 
Agreement is incorporated by reference and it is:

    Provisionally accepted and provisional Order issued on the __ 
day of ___, 2022.
    By order of the Commission:

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Alberta E. Mills, Secretary, U.S. Consumer Product Safety 
Commission.

    Finally accepted and final Order issued on the __ day of ___, 
2022.
    By order of the Commission:

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Alberta E. Mills, Secretary, U.S. Consumer Product Safety 
Commission.

Affidavit of Corporate Officer

    I, the undersigned, swear and affirm that I am employed by Segway 
Powersports Inc. (``SPI''), that I hold the position indicated below, 
and, by reason of my position, I am authorized and qualified to make 
the following statements. All capitalized terms not defined in this 
affidavit shall have the meanings given to them in the Settlement 
Agreement between SPI and the U.S. Consumer Product Safety Commission 
(``CPSC'') dated the same date, of which this affidavit is a part:
    1. SPI's financial statements provided by SPI to the CPSC in 
connection with the matters addressed in the Settlement Agreement (the 
``Matters'') are complete, accurate and current, and fairly represent 
the financial conditions of SPI as of the dates, and for the periods, 
indicated therein, subject to the absence of notes as these financial 
statements are unaudited.
    2. SPI has provided all available documents and information 
responsive to the CPSC's requests in connection with the Matters.
    3. The information provided by SPI to the CPSC in connection with 
the Matters do not, as of the date of the Settlement Agreement, and did 
not, at the time provided to the CPSC, contain any untrue statement of 
a material fact or omit any material fact required to be stated therein 
or necessary in order to make the statement therein, in light of the 
circumstances under which they were made, not misleading.
    4. SPI has insufficient cash or other liquid assets to satisfy a 
civil penalty payment in excess of $1,250,000. SPI has requested that 
its parent company, Ninebot Limited, or any of Ninebot's affiliated 
entities loan or otherwise provide funds for SPI to pay CPSC the 
demanded civil penalty amount. SPI's parent company and its affiliated 
entities have specifically declined SPI's request. SPI has provided 
copies of those communications to CPSC staff in connection with the 
Matters.
    5. SPI has attempted to obtain funding from multiple unaffiliated 
third-party lenders but has been unable to secure such funding. To my 
knowledge, SPI has provided copies of documents it submitted to the 
banks and communications from the banks regarding their decisions to 
CPSC staff in connection with the Matters.
    6. To my knowledge, Ninebot Limited and its affiliated entities 
have not provided a parent guarantee, nor any other written 
representations of financial support on behalf of SPI, to any third-
party lenders.
    7. The entire penalty amount of $1,250,000 will be paid solely by 
SPI, using funds available in SPI's own bank accounts at the time of 
the respective payments, and without any loans, funds, or other 
financial support from Ninebot Limited, any SPI or Ninebot Limited 
affiliated entities, or any other third-party, including but not 
limited to banks or other creditors, for this penalty.
    8. Any civil penalty payment by SPI in excess of $1,250,000 would 
cause SPI significant financial hardship and compel SPI to cease 
operations as an ongoing business.
    I declare under penalty of perjury that the foregoing is true and 
correct. I understand that any intentional false statement in this 
declaration may be a criminal offense under 18 U.S.C. 1001.

Executed on July 21, 2022

Signed by:-------------------------------------------------------------
Kun Zhu, President, Segway Powersports Inc.

[FR Doc. 2022-18531 Filed 8-26-22; 8:45 am]
BILLING CODE 6355-01-P