The Canada Consumer Product Safety Act (CCPSA), which received Royal Assent on December 15, 2010, will significantly change Canada's approach to consumer product regulation and recalls. The CCPSA was introduced to respond to concerns that Canada's product safety regime was inadequate to protect the health of Canadian consumers, as well as to align Canadian laws with the level of protection provided in other jurisdictions in response to pressure from trading partners. The CCPSA is expected to enter into force in the Spring of 2011.
The CCPSA places new restrictions and obligations on manufacturers, importers and sellers of consumer products. Specifically, the CCPSA:
(a) Prohibits the manufacture, importation, sale or advertisement of any consumer product posing a potential hazard to the health or safety of consumers.
(b) Prohibits false, misleading, or deceptive advertising in connection with claims relating to the safety of consumer products.
(c) Places new reporting and record keeping obligations on manufacturers, importers and sellers of consumer products.
(d) Increases enforcement mechanisms available, including expansive inspection powers, mandatory product recalls, and orders for product testing.
(e) Provides for monetary penalties and criminal prosecution.
It will be important for Canadian business to review and adjust their business practices in order to align with the new requirements under the CCPSA. As the CCPSA is expected to come into force within the next few months, businesses need to prepare now by working with legal counsel to assess current practices and implement a compliance strategy. Compliance strategies will need to consider:
(a) The implementation of testing procedures and performance standards to make certain products sold in the Canadian market do not have the potential to cause death, injury, or illness.
(b) The promulgation of conditions shifting liability and/or responsibility up the supply chain to foreign and domestic manufacturers/suppliers (e.g., contractual provisions providing for the sharing of costs resulting from steps taken against goods prohibited under the CCPSA or permit the cancellation and/or refunds in case of banned merchandise).
(c) The establishment of policies, processes and procedures to ensure reporting obligations can be satisfied.
(d) The devotion of knowledge management resources to the maintenance of detailed records on product sources and consumers.
The exact parameters of the obligations under the CCPSA and the steps that must be taken to implement these obligations will become clearer when the CCPSA comes into force. Canadian businesses should keep informed of the status of the CCPSA and make sure they understand the regulations enacted by Health Canada, which will provide clarification on the obligations and how the government authorities will administer the CCPSA.
The following summarizes the key requirements in the CCPSA that will impact Canadian manufacturers, importers, and sellers.
Prohibitions and Restrictions
The CCPSA prohibits the manufacture, importation, advertisement, or sale of any consumer products posing an unreasonable danger to human health or safety. This means consumer products posing potential safety hazards (i.e., could cause death, injury, or adverse effects on consumer health) will be prohibited from sale or importation into Canada.
The CCPSA also prohibits false, misleading, or deceptive advertising in connection with claims relating to the safety of consumer products. This means packaging and labelling must not create an erroneous impression that an unsafe product is not a danger to human health or safety or an unsafe product is compliant with safety standards and/or regulations. The false and misleading advertising provisions in the CCPSA overlap with the prohibitions on false or misleading representations in the Consumer Packaging and Labelling Act, the Textile Labelling Act, the Precious Metals Marking Act, and the Competition Act. This raises the jurisdictional issue of which legislative authority will apply in circumstances where a false or misleading advertisement or representation constitutes a contravention of more than one act. It has not yet been determined how this jurisdictional overlap will work in practice, i.e., whether one or another legislative authority will take precedence or whether they will all apply independently.
Prohibitions and regulations already apply to specific types of products. These product-specific prohibitions and regulations will continue under the authority of the CCPSA. For example, there will be prohibitions on products containing asbestos, restrictions on the lead content in children's toys, and minimum flammability requirements in respect of textile articles.
Canadian businesses may be able to obtain an exemption from compliance with these prohibitions and restrictions in certain circumstances. Exemptions will be available in circumstances where the product will not be sold to the general public. The availability of an exemption in circumstances where products will not be sold in Canada will be of particular benefit to businesses who intend to:
(a) Import products for exhibition and participation in trade shows.
(b) Import products and bring them into compliance after entry into Canada (where, for example, it is more cost-effective to complete performance testing or revise product packaging/labelling in Canada as opposed to another jurisdiction).
(c) Manufacture products in Canada for export to another country.
New Reporting and Record Keeping Obligations
The CCPSA places new reporting and record keeping obligations on manufacturers, importers and sellers of consumer products. The purpose of these obligations is to facilitate product recalls in the case of products posing a danger to health and safety. The obligations will ensure incidents and complaints relating to the safety of consumer products will be brought to the attention of Health Canada authorities and unsafe products can be traced backed to the manufacturer and/or supplier.
The record keeping obligations under the CCPSA requires manufacturers, importers and sellers of consumer products in Canada to maintain accurate records of their product sources and consumers. Specific information that must be maintained includes: (i) the name and address of the source from which products were obtained and (ii) the name and address of the person or business to whom the products were sold (or, in the case of retailers, where the products were sold). Retailers are also obligated to maintain records on the time period during which the products were sold.
The reporting obligations require manufacturers, importers, and sellers to report incidents and defects involving their products supplied to Canadian consumers. Incidents and defects must be reported when they involve, or are reasonably expected to cause, death or serious adverse effects on health (including incidents occurring in other countries provided the involved products are also supplied in Canada). Health Canada's consultation document, "Consultation on Mandatory Reporting Policy for the Proposed Canada Consumer Product Safety Act," provides guidance on what constitutes a serious adverse effect on health necessitating reporting. For example, serious adverse effects on health include injuries requiring medical treatment, non-fatal threats to breathing such as choking, and fire or property damage that could have resulted in death or injury. Incorrect or insufficient information on a label or instructions (e.g., inadequate warning statements or instructions for assembly that could result in injury) should also be reported.
The onus will be on Canadian importers, manufacturers, and sellers to conduct investigations (upon receiving a complaint or notice of a product safety issue) to determine whether a reportable incident or defect has occurred. Companies will need to report incidents to both the supplier and Health Canada within two days after the day on which a "responsible person" – defined in the CCPSA as the "directing mind of the organization who should become aware of an incident through the exercise of due diligence" – becomes aware that an incident has occurred. The type of information that will need to be provided in this initial report includes the type of incident, product name or general category, supplier of the product, and corrective measures already taken.
Manufacturers and importers will also need to provide a more detailed report within 10 days after the day on which a "responsible person" becomes aware that an incident has occurred. This report will need to include all details of the incident or defect, including the number of people affected, details on any injuries, the serial numbers of the products involved, dates of sale or distribution, a risk assessment and proposed corrective measures.
Enforcement Mechanisms and Penalties
The CCPSA will give the federal government powerful enforcement tools to secure compliance with the prohibitions and requirements in the CCPSA. Enforcement mechanisms include:
(a) The Minister of Health will be able to order the mandatory recall of any consumer product that the Minister believes, on reasonable grounds, poses a danger to human health and safety.
(b) The Minister of Health will be able to issue orders requiring product testing and reporting of test results for the purpose of verifying compliance.
(c) Health Canada will have broad inspection and investigation powers permitting inspectors to enter any place and seize products, documents and computer files for the purpose of verifying compliance or preventing non-compliance.
Monetary penalties, ranging from $1,000 to $25,000 per day, can be imposed for persistent instances of non-compliance (i.e., if non-compliance is not corrected after receipt of warning letters issued by Health Canada). In addition, criminal prosecution will be available for intentional and/or reckless instances of non-compliance (i.e., if a person or business sells a product they know to pose a safety hazard or makes advertising claims they know to be false or misleading).
Impact on Civil Actions
While there are no specific provisions in the statute dealing with civil actions, certain features of the CCPSA and Orders made under the CCPSA have the potential to support plaintiffs in the prosecution of products liability class actions. The CCPSA will likely result in increased recalls and history has shown that product recalls are often precursors to class action filings. Plaintiffs' counsel often cite a recall as evidence of a widespread product defect that constitutes a "common issue" among the members of a proposed class to establish that a case is appropriate for class certification. The increased reporting and record keeping obligations will also provide plaintiffs' counsel with access to additional information to support their claims (through Access to Information Requests) and any findings of non-compliance with the CCPSA will feature prominently in class action pleadings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.