United States: The Federal Consumer Product Safety Improvement Act Of 2008: Measures For Compliance With CPSC´S New Precautionary Approach

Three months after the passage of the Consumer Product Safety Improvement Act of 2008 (the Act), the Consumer Product Safety Commission (CPSC) clarified the requirements for one of the Act's key features, testing and certification of consumer products. The requirement generated much attention from manufacturers and importers for its expansive reach and for the short deadline of November 12, 2008.

The Act requires manufacturers of consumer products to certify that the products meet the standards in the Act or any other standard enforced by the CPSC "based on a test of each product or upon a reasonable testing program." Last week, the CPSC issued a rule clarifying who should supply the certificate and how the certificate requirement can be fulfilled. The new rule provides that foreign manufacturers and private labelers of imported products need not issue certificates. Rather, the importer or domestic manufacturer of a product must issue the certificate - and the certificate can now be furnished through a variety of electronic means.

Domestic manufacturers and importers of children's products must similarly test and certify that such children's products comply with all applicable children's product safety rules. But they must additionally submit samples of the children's products to an accredited third party testing laboratory approved and authorized by the CPSC. The term "children's products" is broadly defined as consumer products primarily intended for children twelve years of age or younger.

The Act's testing and certification requirement is just one of many features that make the Act a new model of federal regulatory oversight of consumer products. Like the new REACH regulation (Registration, Evaluation and Authorisation of CHemicals) in Europe, the Act uses a framework which requires manufacturers to demonstrate safety first, prior to product introduction and use.

This default position, presuming that a product is dangerous unless it is proven safe, falls very much in line with several generations of product and consumer regulations issued in the European Community, Korea, Australia and elsewhere based on the Precautionary Principle (PP). The lynchpin of PP is that industrial manufacturers and regulators should presume risk, and should only permit products into the stream of commerce after safety has been adequately demonstrated.

Key Elements of the Act

The Act is based on the presumption that children's products containing potentially dangerous levels of lead or certain phthalates should be banned. The CPSC, the body historically authorized to regulate consumer products and the authority whose powers are greatly expanded under the Act, is given the authority to permit lead-containing products to enter the market, but only after a scientific showing that the lead or phthalates in the product does not render it unsafe.

In addition to restricting lead content in products, the Act strictly regulates, at a very low concentration, the percentage of six specified phthalates in toys and certain child care products. Phthalates, which have been identified by government agencies as potentially toxic, are used as a plasticizer to make many products flexible. By limiting the phthalate concentration levels to no more than 0.1%, the Act essentially bans their practical use because significantly higher percentages of phthalates are needed to get the desired flexible effect.

The federal phthalate restrictions take effect on February 10, 2009. Several states, including California, have adopted and implemented similar restrictions on certain phthalates in toys and child care products. California's restrictions on phthalates take effect on January 1, 2009.

The Act makes clear that its intended federal regulatory minimums can be supplemented by, and are not pre-emptive of, existing or new state regulation of product safety. Thus, even companies following the many detailed requirements of the Act are still responsible for complying with more restrictive state requirements where they exist.

Compliance with the standards (including ASTM F963-07) promulgated by the Act and other existing consumer product safety laws does not insulate producers from liability for damage claims. The Act, along with other federal laws such as the Federal Hazardous Substances Act, the Flammable Fabrics Act, and the Poison Prevention Packaging Act of 1970 (PPPA), does not preempt any cause of action under common law or State statutory law that would allow an injured party to bring a damage claim.

Enforcement

The Act provides for greater enforcement mechanisms and carries a heavier stick for violations. The Act amends the existing Consumer Product Safety Act (which created the CPSC) and the PPPA to allow the attorney general of a state to bring an action for injunctive relief where violations are suspected. State attorneys general may bring such an action if they first notify the CPSC and as long as the United States has not brought civil or criminal action for the same violations.

Violations of the Act carry far steeper penalties than before under CPSC regulatory authority. Now, maximum civil penalties for violations of the Act, as well as the Flammable Fabrics Act and the Federal Hazardous Substances Act, can reach as high as $100,000 for each violation (up from $8,000). The maximum civil penalty for any related series of violations is now capped $15 million, increased almost ten-fold from $1,825,000.

Criminal penalties have likewise increased to five years' imprisonment, up from a possible one year imprisonment. Directors, officers and agents may be criminally charged for knowing violations of the Act without the requirement of receiving notice of noncompliance from the CPSC.

Like some federal environmental laws, the Act also affords protection for "whistleblower" employees who report on potential consumer product safety issues and violations.

Practical Implications and Business Risk Management Considerations

The Act presents many practical commercial and business risk management considerations for industry to contemplate. Companies subject to these new requirements may wish to consider implementing some or all of the following measures:

Product development, conceptualization, and design:

• Develop a teaching tool to educate product development teams, including industrial designers, brand managers, engineers, chemists, etc. on the requirements of the Act

• Develop a management system for chemical introduction/inclusion in new products

Product manufacturing and testing:

• Establish or enhance supply chain management mechanisms to ensure that suppliers do not introduce non-compliant parts, subassemblies, chemicals, paints, glues, etc., into products

• Shift risk in these relationships through contractual mechanisms

• Engage certified laboratories and contractually mandate them to keep their certifications current

• Ensure certified labs use and advise the company on proper application of appropriate testing protocols and product standards

Product introduction, marketing, packaging, and labeling:

• Evaluate the feasibility of communicating compliance with consumer protection laws, potentially including in particular the Act, on company websites, in marketing materials, and product packaging

Product management:

• Establish or enhance systems to carefully track and meaningfully respond to consumer concerns and complaints before they ripen into threatened or actual litigation

Risk management:

• Establish or enhance document management systems to demonstrate compliance and ensure that proper pre-introduction product testing is undertaken and certified lab results are properly written, submitted, and retained

• Consider mechanisms to retain records of the other elements of this "life cycle" model

Conclusion

Considering these issues might enhance a company's compliance posture, reduce the risk of liability, and ultimately pay dividends as a competitive advantage. They can also support the brand promise of a company and pay dividends as sustainable and responsible business practices.

While these measures cannot guarantee that a company will avoid all claims, enforcement actions or other litigation under the new generation of Precautionary Principle-driven laws like the Act, they can reduce the risk of such claims and increase the likelihood of a successful resolution if and when they arise.

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.