Polaris 2011 Annual Report Download - page 27

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Product Safety and Regulation
Safety regulation. The federal government and individual states have promulgated or are considering
promulgating laws and regulations relating to the use and safety of certain of our products. The federal
government is currently the primary regulator of product safety. The Consumer Product Safety Commission
(“CPSC”) has federal oversight over product safety issues related to ATVs, snowmobiles and off-road
side-by-side vehicles. The National Highway Transportation Safety Administration (“NHTSA”) has federal
oversight over product safety issues related to on-road motorcycles and small electric vehicles.
In 1988, Polaris, five competitors and the CPSC entered into a ten-year consent decree settling litigation
involving CPSC’s attempt to force an industry-wide recall of all three-wheel ATVs and four-wheel ATVs sold
that could be used by youth under 16 years of age. The settlement required, among other things, that ATV
purchasers receive “hands on” training. In 1998, this consent decree expired and we entered into a voluntary
action plan under which we agreed to continue various activities previously required under the consent decree,
including age recommendations, warning labels, point of purchase materials, hands on training and an
information and education effort. We also agreed to continue dealer monitoring to ascertain dealer compliance
with safety obligations, including age recommendations and training requirements.
We do not believe that our voluntary action plan has had or will have a material adverse effect on us or
negatively affect our business to any greater degree than those of our competitors who have undertaken similar
action plans with the CPSC. Nevertheless, there can be no assurance that future recommendations or regulatory
actions by the federal government or individual states would not have an adverse effect on us. We will continue
to attempt to assure that our dealers are in compliance with their safety obligations. We have notified our dealers
that we may terminate or not renew any dealer we determine has violated such safety obligations. We believe
that our ATVs have complied with safety standards relevant to ATVs.
In August 2006, the CPSC issued a Notice of Proposed Rulemaking to establish mandatory standards for
ATVs and to ban three-wheeled ATVs. The CPSC did not complete this rulemaking process or issue a final rule.
In August 2008, the Consumer Product Safety Improvement Act (“Act”) was passed. The Act includes a
provision that requires all manufacturers and distributors who import into or distribute ATVs in the United States
to comply with the American National Standards Institute (“ANSI”) ATV safety standards, which were
previously voluntary. The Act also requires the same manufacturers and distributors to have ATV action plans
filed with the CPSC that are substantially similar to the voluntary action plans that were previously in effect
through the voluntary agreement with the CPSC. We believe that our products comply with the ANSI/SVIA
standard and we have had an action plan filed with the CPSC since 1998 when the consent decree expired. We do
not believe the law will negatively affect our business to any greater degree than those of our competitors who
are subject to the same mandatory standards.
The Act also includes a provision that requires the CPSC to complete the ATV rulemaking process it started
in August, 2006 and issue a final rule regarding ATV safety. The Act requires the CPSC to evaluate certain
matters in the final rule, including the safety of the categories of youth ATVs as well as the need for safety
standards or increased safety standards for suspension, brakes, speed governors, warning labels, marketing and
dynamic stability.
The Act also includes provisions that limit the amount of lead paint and previously limited the lead content
that can exist in the accessible components of ATVs and snowmobiles that we sell in the United States for youth
12 years of age and younger. Under the Act, products that have lead content in excess of these limits may not be
sold in the United States starting February 10, 2009.
In response to a petition from the recreational products industry, the CPSC issued a Stay of Enforcement
(“Stay”) providing that the CPSC would not seek to enforce the Act against manufacturers who sell recreational
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