The risk of product recalls across five key industries remains prevalent in the U.S. according to data from Sedgwick’s latest Recall Index report. Despite recall activity falling less than one percent in Q2 2023 compared to the previous quarter, at over 850 events, it remains at its highest level since the last quarter of 2018.
While U.S. events remained stable, the number of defective units increased 13.7% in Q2, taking the total number of recalled units to 440.0 million at the half way point of the year. With further increases expected in the second half of 2023, there remains a strong possibility that the U.S. will experience a third consecutive year of defective units surpassing the one billion mark (2021: 1.01 billion, and 2022: 1.48 billion).
In this latest edition of the Index report, Sedgwick’s brand protection experts analyze recall data from the second quarter of 2023 and preview the third quarter with key insights from July. In addition, to assist stakeholders in preparing for regulatory changes and evolving product safety risks their industry may encounter in the second half of 2023, the Index report also provides key analysis and guidance from our strategic partners at leading U.S. law firms.
Regulators and legislators focused on EVs and lithium-ion batteries in automotive industry
As the U.S. continues its push to increase adoption of electric vehicles (EVs), more regulatory agencies are releasing proposals to support these efforts, including the U.S. Treasury Department and the Internal Revenue Service (IRS), as well as the Environmental Protection Agency (EPA). These proposals include clarifications around the Clean Vehicle Credit and new regulations to establish federal vehicle emissions standards. State and federal legislators are also taking steps to improve the safety of lithium-ion batteries, especially those used in micromobility devices like electric bicycles and scooters. The U.S. automotive industry saw recalls fall 4.5% in Q2 2023 from the previous quarter, although the number of units impacted increased 8.0%. Backover prevention systems accounted for the most units recalled, which is only the second time in 15 years that we have seen this as the leading cause by unit.
Consumer product regulators target online and secondary markets with new rules
In the second quarter, Congress’s INFORM Consumers Act went into effect, which imposes stricter requirements for online marketplaces to monitor the activities of high-volume third-party sellers and protect consumers from fraudulent activities. The Consumer Product Safety Commission (CPSC) has also indicated it expects operators of online marketplaces to assume more responsibility for monitoring their platforms for recalled and dangerous products and taking action to remove violative products. With online shopping remaining popular with consumers, secondary markets will continue to face strict scrutiny from CPSC and other regulators. In Q2 2023, consumer product recalls decreased 19.1% from Q1, down to 76 events. Fire was the top recall hazard by event, and laceration was responsible for the most units recalled.
FDA prioritizes food labeling improvements in second quarter
The U.S. Food and Drug Administration (FDA) has taken several steps recently to improve food labeling and provide consumers with better information to make healthier food choices. In recent months, the FDA has released draft guidance on the use of Dietary Guidance Statements in food labeling and a request for information (RFI) to find ways to improve consumer access to consistent and accurate food labeling information provided through online grocery platforms. The agency also updated its Compliance Policy Guide (CPG) regarding major food allergen labeling and cross-contact. While these actions are not legally binding, stakeholders in the food industry should take steps now to review their labeling practices and ensure they are aligned with the FDA’s recent updates. Overall, FDA food recalls increased 30.8% from Q1 to Q2 2023 with 153 events. The number of U.S. Department of Agriculture (USDA) recalls also increased by a significant 54.5% from the previous quarter, but the number of pounds recalled in Q2 fell 87.3% from the volume recalled in Q1 2023.
Adapting to new technological advancements top of mind for the medical device industry
Rapid advancements in artificial intelligence and machine learning (AI/ML) are impacting all industries, including medical device. The FDA is working to adapt regulations to accommodate evolving technologies and released a draft guidance in the second quarter to facilitate the marketing approval process for AI/ML-enabled medical devices. The FDA is also taking steps to address new rules for medical device cybersecurity outlined in the Consolidated Appropriations Act of 2022 and has published guidance on the increased cybersecurity requirements. Additionally, the Federal Trade Commission (FTC) is addressing data security breaches with proposed changes to the Health Breach Notification Rule (HBNR) that would clarify definitions, expand notification methods, and increase content requirements for breach notifications. In the second quarter, medical device recalls fell 4.4% to 241 events. Quality concerns accounted for the most recalls in Q2 2023 for the first time since Q1 2016.
FDA seeks to spur innovation in pharmaceutical industry with new guidance
As regulators around the world adopt new measures to promote innovation in the pharmaceutical industry, the FDA is taking its own steps to help manufacturers develop new drugs. This includes releasing guidance on decentralized clinical trials (DCTs) for drugs, biological products, and devices that clarify the FDA’s expectations for oversight and other special considerations for DCTs. The FDA also released a discussion paper in May that addresses the use of AI/ML in drug and biological product development, highlighting the need to balance innovations and oversight to protect public safety. The pharmaceutical industry saw recalls decrease slightly from 144 events in Q1 to 135 events in Q2 2023, although these two quarterly figures are the highest recorded in over 10 years. Sterility concerns were the leading cause of both recall events and units impacted during Q2 2023.
Looking ahead
Regulators are still working to find the balance between encouraging innovation and ensuring product safety, which means that businesses across all industries will face strict oversight and regulatory scrutiny. We’re also seeing regulators expand their expectations for which parties are responsible for protecting consumers from unsafe products, especially in the consumer product industry. And as consumers continue to pay closer attention to regulatory activity and product recalls, businesses will find that maintaining thorough and well-tested recall and crisis response plans is no longer a nice-to-have, but a necessity.
The U.S. Recall Index is published every quarter by Sedgwick’s brand protection experts. It is the only report that aggregates and tracks recall data across the U.S. to help automotive, consumer product, food and beverage, medical device, and pharmaceutical industry stakeholders navigate the regulatory environment, product recalls, and other in-market challenges.
To download your copy of the latest Recall Index report, click here.