Copyright 2008, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on International Trade, August 2008
The federal government recently introduced new legislation that, when passed, will dramatically increase the obligations of Canadian companies and impose particularly onerous requirements on companies that import consumer products from foreign suppliers. This legislation, referred to as the Consumer Products Safety Act, follows several recent high-profile recalls affecting toys, food, and pharmaceuticals.
Recalls Will No Longer Be Voluntary
When approved, Bill C-52 will provide the Minister of Health with extensive powers to deal with products that pose health or safety risks to consumers, including the ability to issue mandatory recalls. This new power represents a significant change from the current system whereby product recalls are entirely voluntary. The Minister will also be given the authority to ban any product that poses an "existing or potential hazard". Moreover, the Minister will be granted the ability to disclose confidential company information in the absence of company consent where it is believed that a product poses a "serious and imminent" health risk.
New Ministerial Powers To Order Health Safety Tests
The proposed legislation empowers the Minister to order an importer or manufacturer to conduct tests on consumer products and to compile any information that the Minister considers necessary to verify compliance with the Act or regulations. The Minister may also require importers or manufacturers to provide documents that contain information on the results of such tests within the timeframe to be determined by the Minister. Failure to comply with any such order by the Minister is an offence under the Act.
These obligations could pose difficulties for importers who may not have access to thorough and accurate information from their foreign suppliers. Furthermore, considering that international suppliers may not be required to comply with equivalent standards in their home country, there is no guarantee that such information or records even exist. Thus, in the absence of full co-operation by foreign suppliers, importers may have to choose between conducting tests themselves and providing the requisite information, facing penalties, or choosing new sources of supply from co-operating foreign suppliers.
Proposed Legislation Will Affect Wide Range Of Products
The proposed legislation will introduce liability on most manufacturers, importers, advertisers and those who sell consumer goods in Canada. The range of consumer products covered by the legislation is quite broad and includes most products with the exception of those that are covered under the following Acts:
- Explosives covered by the Explosives Act
- Cosmetics, devices, drugs, and food covered under the
Food and Drugs Act
- Pest control products covered under the Pest Controls
- Vehicles and equipment covered by the Motor Vehicles
- Vessels covered by the Canada Shipping Act
- Firearms, ammunition, cartridges, crossbows and devices
prohibited under the Criminal Code
- Plants covered by the Plant Protection Act
- Controlled substances covered by the Controlled Drugs
and Substances Act, and
- Aeronautical products covered by the Aeronautics
Interestingly, considering the well-publicized international recall on contaminated pet foods last spring, the legislation does not impose any requirements on importers, manufacturers or retailers of pet food or products. As it currently reads, the scope of protection under Bill C-52 is limited to human health and safety.
Prohibitions Under Bill C-52
The proposed legislation prohibits individuals or organizations from importing, manufacturing, advertising or selling consumer products that are expressly identified by the Act as posing a danger to human health or safety.
The proposed legislation identifies a number of products in a schedule that are considered dangerous to human health and safety. Among other things, this list includes baby products (e.g., teethers and pacifiers containing viable micro-organisms), certain kites containing parts of uninsulated metal, sneezing powder, and urea formaldehyde-based thermal insulation (UFFI).
Moreover, the proposed legislation prohibits the import, manufacture, advertisement or sale of not only those items identified in the schedule, but of any item considered to pose a "danger to human health or safety". The term "danger to human health or safety" is defined in Bill C-52 as meaning any existing or potential hazard that is posed by a consumer product during, or as a result of, its normal or foreseeable use and that may reasonably be expected to cause death of an individual exposed to it or have an adverse effect on that individual's health – including an injury. This may exist regardless of whether or not the death or adverse effect occurs immediately after the exposure to the hazard. Thus, by definition, a danger to human health or safety includes any exposure to a consumer product that is likely to have a chronic adverse effect on human health.
Products that are the subject of a mandatory recall made by the Minister or that are the subject of a voluntary recall in Canada related to health and safety concerns cannot legally be manufactured, sold, advertised, or imported.
Entities in Canada that sell consumer products covered by the Act are required to advise the Minister of any "incident" related to the product they are importing, manufacturing, advertising or selling. The incidents that must be reported are not limited to those occurring in Canada. The legislation imposes an obligation to report any occurrence where the use of the product has resulted in a death, injury, or serious adverse effect on health, whether the incident took place in Canada or elsewhere. The legislation also obligates Canadian entities to report to the Minister any recall or measure initiated for human health or safety reasons by a foreign entity. For this reason, an importer who fails to inform itself of foreign recalls or problems with the products in other areas of the world could be held liable and face penalties under the Act.
Off-Side Canadians May Face Steep Penalties
Under the proposed legislation, companies that "wilfully" expose Canadians to danger will face steep penalties. Manufacturers or importers who violate the new safety standards risk fines of up to C$1-million, and up to C$5-million if they are convicted of a criminal offence under the Act. Directors, officers, or agents who have directed, authorized, acquiesced in, or participated in, the commission of an offence by their corporation may also be held liable under the proposed legislation.
The Minister of Health, Tony Clement, commented that the new legislation will reverse the onus onto manufacturers or sellers of products to demonstrate that they have abided by the rules. For Canadian companies seeking to comply with the new legislation, due diligence is available as a defence for an alleged violation of the Act.
In addition to the product testing and documentation requirements, importers will be required under the legislation to track the names and addresses of foreign suppliers of consumer products and the names and addresses of persons to whom they sold the consumer products. Certain prescribed documents must also be provided to the Minister at the time of importation. Failure to keep the necessary records or provide the prescribed documents is an offence under the Act.
Potential For Inconsistency With Canada's International Obligations
Although standards are clearly necessary in respect of many domestically produced and imported products, standards can sometimes result in trade barriers, particularly if they are applied in a manner that discriminates between countries or creates unnecessary obstacles to trade in the fulfillment of legitimate objectives. From a World Trade Organization (WTO) perspective, questions arise as to whether these measures are consistent with Canada's international obligations under the various WTO Agreements, including the Technical Barriers to Trade (TBT) Agreements.
The preamble of Bill C-52 expressly recognizes that the "growing number of consumer products that flow across the borders of an increasingly global marketplace make the realization of that objective [i.e., protecting human health or safety from risks posed by consumer products] a challenge."
A thorough understanding of the new and onerous obligations introduced by this legislation is critical for Canadian importers, manufacturers and retailers of consumer products into Canada.
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