On June 20, 2011, the Consumer Product Safety Act (the "Act") became law. It significantly increased the obligations on companies all along the supply chain of consumer products. It imposes a new set of broad restrictions, recordkeeping requirements and stringent reporting obligations for companies which manufacture, import, distribute, sell, advertise or test consumer products in Canada. Consumer products include any product and its parts or accessories which can reasonably be expected to be used by an individual for non-commercial purposes. The government has sweeping new powers to enforce these restrictions and requirements and dole out potentially severe penalties for non-compliance.
While the new rules have a huge impact throughout the supply chain, importers may feel the effects the most as they have historically been less exposed to liability for product safety than others because of their role as intermediary.
The Act prohibits companies from advertising, selling or distributing consumer products they know pose an unreasonable danger to human health or safety, or that have been recalled. This includes products that are labelled in a way that may be misleading about their safety. Additionally, certain products are prohibited entirely or must meet certain requirements set out in the Regulations.
It appears that manufacturers and importers have an increased burden under the Act. They are prohibited from manufacturing, importing, advertising, selling or distributing products that pose an unreasonable danger to human health or safety whether or not they know of the danger.
In addition to the restrictions, companies must report all the information they have about product recalls and occurrences, defects, characteristics or labelling deficiencies that may reasonably be expected to result in an individual's death or serious adverse impact on their health anywhere in the world. Reports have to be made within 2 days of learning about the problem with the product. Manufacturers and importers must make a more detailed report within 10 days of learning of the problem. In order to enforce these restrictions and requirements, the government has sweeping new powers, including:
- ordering that manufacturers and importers test and study their products at the company's own expense;
- ordering the immediate recall of products;
- very broad search and seizure powers;
The penalties for non-compliance with the Act can be severe. In most cases, non-compliance can result in a 2 year prison sentence and a fine of $5,000,000. For some offences, there is no maximum fine and the maximum prison sentence is 5 years.
Therefore, it is important for companies throughout the supply chain to review their products, labelling and advertising to ensure they are in compliance with the Act and Regulations. They must also ensure that they set up systems for immediately evaluating and reporting complaints or other information received about adverse health impacts resulting from the use of their products. This may require working with other companies along the supply chain to ensure compliance. Additionally, companies may need to revisit and rewrite contracts with the restrictions and requirements of these new rules in mind.
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