Safety and Compliance: A New Paradigm For The …expo.ppai.org/Sessions/handouts/Product Safety_.pdf · CONSUMER PRODUCT SAFETY AND COMPLIANCE: A NEW PARADIGM FOR THE PROMOTIONAL

Rick BrennerPrime Resource

Eric Rubel, Esq.Arnold & Porter, LLP

MAS ‐ 1.5 pts Thursday, January 14 

7:30 ‐ 8:45 am 

Product Safety and Compliance: A New Paradigm For The 

Promotional Products Industry 

The views and opinions expressed by presenters or others who have provided materials to and for this meeting are not necessarily those of PPAI. PPAI assumes no responsibility for, nor endorses, any of the comments, recommendations or materials that are provided.

CONSUMER PRODUCT SAFETY AND COMPLIANCE:A NEW PARADIGM FOR THE PROMOTIONAL PRODUCTS INDUSTRY

PROMOTIONAL PRODUCTS ASSOCIATION INTERNATIONALLAS VEGAS, NEVADA

January 14, 2010

Eric RubelArnold & Porter LLP

[email protected]

Rick BrennerPrime Resources [email protected]

Objectives

1. Provide an overview of product safety standards and reporting requirements applicable to the promotional products industry

2. Explain how these requirements have been affected by groundbreaking legislation – the Consumer Product Safety Improvement Act of 2008 (CPSIA)

3. Provide the latest updates on some key federal and state safety requirements applicable to premiums

4. Identify actions that suppliers and distributors can take to reduce regulatory and liability risks

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Introduction U.S. Consumer Product Safety Commission

– Federal agency with jurisdiction over the safety of 15,000 types of “consumer products”

– CPSC interprets “consumer products” broadly to include products that “affect” the safety of consumers

– Statutory exclusions (e.g., food, drugs, medical devices and cosmetics) CPSC’s authority includes setting and enforcing product standards,

seeking to require product recalls, and collecting and disseminating product safety information

Very small, but growing– About 500 employees; about half its peak level– $118 million budget for FY2010 (almost 50% more than its $80 million

budget two years ago in FY2008)

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CPSC Jurisdiction Over Consumer Products

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Most, but not all, CPSC standards relate to toys and other children’s products – e.g., standards for: – Lead substrate (new under CPSIA)

• Applies to “children’s products” -- consumer products intended “primarily” for children 12 years of age and younger

• Limit of 300 ppm as of 8/14/09; applicable to inventory • Drops to 100 ppm in 2011 unless CPSC determines that level is

impracticable

– Lead paint• Applies to toys, other consumer products intended for use by

children, and furniture (whether for adults or children)• CPSC staff claim this standard may apply even to products for

children over 12 years of age – e.g., a Cuervo tequila basketball hoop • Limit of 90 ppm as of 8/14/09; applicable to inventory

CPSC Jurisdiction Over Consumer Products

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CPSC standards: toys and other children’s product (continued)

– Phthalates (new under CPSIA)• Applies to “toys” for children 12 and younger and to “child care”

articles designed to facilitate sleep or feeding of children 3 and under, or to help such children with sucking or teething

• Limit of 0.1% for specified phthalates; applicable to inventory

– ASTM F963 (new under CPSIA)• Applies to “toys” for children under 14 years of age

• Includes a wide range of standards that were previously voluntary and are now mandatory

– Small Parts• Applies to toys and other consumer products intended for children

under 3 years of age

• Bans products that contain small parts either as packaged or after use and abuse testing

CPSC Jurisdiction Over Consumer Products

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CPSC standards: toys and other children’s product (continued)

– Cautionary Labeling• Applies to toys and games with small parts (for ages 3 to 6), marbles

and small balls (for ages 3 to 8), and balloons

• Warnings also required for print and internet ads (new under CPSIA)

– Tracking Labels (new under CPSIA)• Applies to “children’s products”

• Manufacturers must place “permanent” marks on the product and its packaging, “to the extent practicable,” to permit consumers to identify:

• the manufacturer or private labeler;

• the place and date of production; and

• “cohort information (including the batch number, run number or other identifying characteristic)”

• Effective to products manufactured on or after 8/14/09

CPSC Jurisdiction Over Consumer Products

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Some CPSC standards apply to adult or general use products, for example:

– Clothing flammability • Applies to clothing, regardless of age of user

• More stringent standards apply to children’s sleepwear

– Bicycle helmets• Applies to bicycle helmets, whether for children or adults

– Cigarette Lighters• Applies to “disposable” and “novelty’ cigarette lighters

• Separate standard for utility lighters

– Furniture: lead paint• Applies to non-metal furniture, regardless of age of user

Determining Which Standards Apply to Children’s Products/Toys

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A product’s age grade establishes the applicable standards and not vice versa

In determining a product’s age grade, CPSC considers:

– A manufacturer’s statements about the intended age grade for the product (e.g., on labeling), if reasonable;

– Whether the product is represented in its packaging, labeling or advertising as appropriate for children of a certain age;

– Whether the product is commonly recognized as for such children; and

– CPSC Age Determination Guidelines

Determining Which Standards Apply to Children’s Products/Toys (continued)

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When is a product intended “primarily” for children 12 and under (lead substrate standard, tracking labels, certification based upon third party testing)?

– CPSC Pen Decision, June 2009• “The vast majority of pens” and “most novelty pens” are not

“primarily” intended for children, even if decorated with a cartoon character or embossed with the name of a school

• Consider whether a pen’s design, price point and marketing suggest that it is intended both for adults and children and not “primarily” for children

Applicability of the pen decision to other products?

Determining Which Standards Apply to Children’s Products/Toys (continued)

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Examples

– Pens

– String backpacks

– Key Chains

– Stress Balls

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Reebok Settlement – Lead Poisoning From Charm Given as Premium

Product Certification

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The CPSIA requires issuance of a certificate of conformity for any product subject to a standard or ban enforced by CPSC

For “children’s products,” certificates must be based on third party testing by an accredited laboratory

Party responsible for issuing certificates

– Importer of record: for products manufactured abroad

– Manufacturer: for products manufactured in the US

Certificates must:

– “Accompany” each shipment upon importation or upon introduction into commerce (for domestically manufactured products), and

– Be “furnished” to distributors and retailers • Obtaining a certificate provides the distributor/retailer with a

defense to civil or criminal penalties if the product is later found to violate a CPSC standard or ban

Product Certification (continued)

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Stay of enforcement (Update: Dec. 2009)

– CPSC previously stayed enforcement of the certification and testing requirement for most standards, and has now modified the stay:

• Stayed until 2/10/2010: standards for bike helmets; dive sticks; rattles; child-resistant packaging; etc.

• Stayed until 2/10/2011: lead substrate standard

• Stayed until further notice: flammability of clothing for adults and children; flammability of children’s sleepwear; phthalates; toy standard; etc.

– But, all products must still comply with the underlying standards

– Certification is required NOW for certain standards, including:• small parts of products for children under 3 years of age

• lead paint on children’s products

• lead substrate in metal components of children’s jewelry

REALLY: Test Every Children’s Product for Lead Substrate?

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Exclusions from CPSIA testing requirements (Aug. 2009), e.g.:

– Precious gemstones, certain semiprecious gemstones and pearls• But no exclusion for crystal, glass beads or rhinestones

– Precious metals and most stainless steel

– Paper and wood

– CMYK process printing inks• But no exclusion for screen prints, transfers, decals or surface coatings

that do not become part of the substrate of the underlying material

– Natural or manufactured fiber textiles, dyed or undyed• Again, no exclusion for screen prints, transfers, decals

– Plant and animal derived materials, e.g., leather, bone, coral, animal glue

– Products must still comply with lead standard, e.g., if treated or altered

Component Testing: Life Gets Just a Little Easier

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Interim Enforcement Policy (NEW: Dec. 2009) – Lead testing of product components and paint samples (vs. testing

finished products)• Permits certification based on third party testing of product

components and paint samples, pending issuance of CPSCregulations

• E.g., testing of plastic resins before molding

• Manufacturers and importers may rely on certificates or test reports issued by another party for components and paint samples, but:

• Certification must be based on testing of representative samples of components/paint samples by an accredited lab

• Certificates should identify all components/paints samples and the corresponding test reports

• Should be able to trace each component /paint sample to its manufacturer

• Reliance on test reports and certification must be reasonable

How Often Do I Need to Test Children’s Products?

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Draft Statement of Policy (NEW and not yet adopted: Nov. 2009) – CPSC has not yet announced how often products must be tested to

support certification

– The staff’s draft provides some guidance:• Test before introduction into commerce

• Re-test at least once a year

• Small volume producers need not re-test until at least 10,000 units have been manufactured, even if more than a year has elapsed

– But, test more frequently if there has been a “material” change to the product

• Any change that could affect the product’s ability to comply

– And, regardless of how often the product is tested, it must comply with all applicable standards

Premiums and Food – Special Considerations CPSC guidance: premiums distributed or sold with food (2/27/04)

– If only one premium is offered:

• the item should meet the standards for children of all ages; or

• if the item is suitable only for children 3 years of age and older, CPSC “recommends” distributing it through a mail-in, telephone or Internet program, rather than directly with food

– If multiple premiums are offered:

• at least one item should be appropriate for children of all ages;

• the item for younger children should have comparable play value to the item for older children;

• inform consumers (e.g., through advertising or store signs) and employees of the availability of a premium for younger children; and

• ensure that premiums for children 3 to 6 years of age meet the small parts warning requirements

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Duty to Notify CPSC A manufacturer, retailer or distributor must “immediately” report to

CPSC upon receipt of information “which reasonably supports the conclusion” that a product:

– Violates an applicable consumer product safety rule or a standard or ban under any law enforced by CPSC (e.g., lead paint or lead substrate standards),

– Contains a defect which “could create a substantial product hazard,”– “Creates an unreasonable risk of serious injury or death,” or– Violates a voluntary standard upon which CPSC has formally relied

Exception only if the company has actual knowledge that CPSC already knows all of the pertinent information

Other reporting requirements apply to lawsuits and choking hazard reports

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Duty to Notify CPSC (continued) Key Points:

– The duty to notify CPSC applies to any entity in the chain of distribution: manufacturers, importers, distributors, retailers

• CPSC typically looks only to entities with a US presence

– The duty to report is “immediate” – within 24 hours

• CPSC allows time for an internal investigation, but presumes it can be completed in 10 working days

– There is a significant risk of being second-guessed as to the need to report or the timing of reporting

• “Subject firms should not delay reporting in order to determine to a certainty the existence of a reportable noncompliance, defect or unreasonable risk.” 16 CFR § 1115.12(a)

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Duty to Notify CPSC (continued)CPSC’s Position: – There can be a duty to notify even absent a recall

• Information that “reasonably supports the conclusion” that a product “contains a defect which could create a substantial product hazard”

– There can be a duty to notify even absent a product defect

• “an unreasonable risk of serious injury or death” (e.g., severe burns or electrical shock, lacerations requiring sutures, injuries requiring someone to miss more than one day of school or work, etc.)

– There can be a duty to notify even absent injuries if there is a significant risk of injury

– There can be a duty to notify even if a product complies with a relevant mandatory standard

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Penalties and the Risk of Enforcement Civil and criminal penalties are available against manufacturers,

importers, distributors and retailers for various offenses, including:

– Failure to issue a certificate or issuing a false certificate (importers and domestic manufacturers)

– Importing or distributing products that violate CPSC standards– Failure to timely notify CPSC

Penalties are more severe under the CPSIA– The maximum civil penalty is now $15 million– Felony criminal penalties, with up to 5 years in jail for knowing

and willful violations by officers, directors and agents of a corporation

– Seizure of non-compliant products and forfeiture of assets

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Penalties and the Risk of Enforcement (cont.) Increased risk of enforcement

– CPSC will have an increased presence at the ports and is working in cooperation with Customs to monitor imports

– State Attorneys General now can enforce specified violations– Consumer class actions seeking recall remedies – Whistleblower protections under the CPSIA

Recent penalties include:– Mega Brands: $1.1 million for late reporting of an alleged product

hazard with magnetic building sets (2009)– RC2: $1.25 million for violating lead paint ban (2009)– Mattel/Fisher-Price: $2.3 million for violating lead paint ban (2009)– Penalties against more than 30 companies for selling children’s

outewear (e.g., jackets, hoodies) with drawstrings at the neck (’08-’09)

• Only Mega Brands involved an alleged injury or death

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CPSC is not the Only Sheriff in Town Food and Drug Administration

– Regulates food, drugs, cosmetics and medical devices

• e.g., lip gloss, hand sanitizer, first aid kits etc.

– Substances that mix with food may be deemed to “adulterate” food, e.g.:

• leachable lead in the lip and rim area of a mug or on tableware or other food contact surfaces

• a food container that can leach chemicals into food

• a candy tin or other food package from which a piece of plastic or metal breaks off and mixes with food

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CPSC is not the Only Sheriff in Town (cont.) State laws, including

– California Proposition 65 • Applicable to substances determined by CA to cause cancer or birth

defects or other reproductive harm (e.g., lead, phthalates and hundreds of other substances)

• Applicable to consumer products regardless of the age of the user

• Warnings required on product or at point of sale to consumers

• Enforceable by private bounty hunters

– Illinois lead labeling law• Requires warnings on:

– Adult products that contain more than 600 ppm lead

– Children’s jewelry, childcare articles and painted toys that contain from 40 ppm to 300 ppm lead, effective 1/1/2010

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Reducing Regulatory and Liability Risks Pre-Market

– Determine what standards apply to the product and whether certification and testing is required

• Consider both federal and state standards• Discuss the standards with your supplier, a lab, counsel or CPSC if

in doubt • Manufacturers/importers: Test and issue certificates, as required• Distributors/retailers: Obtain certificates, as required

– Develop and review instructions, warnings and labeling with care • Allow adequate time to develop warnings, labeling and instructions • Benchmark against other products, and re-evaluate over time

– Ensure that contracts allocate responsibilities and risks appropriately among business partners and customers

– Know your vendors

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Reducing Regulatory and Liability Risks (cont.) Post-Market

– Ensure that you capture the various sources of safety data, such as:• Complaints, claims and lawsuits;• Returns and other information from business partners; • Results of ongoing quality assurance testing; and• Information about related products – common parts or ingredients

– Develop and follow a process to determine when a duty to notify CPSC arises

– Ensure that adequate change controls are in place to evaluate whether re-testing is required

– Reassess what product standards apply based upon shifts in marketing and product use

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Reducing Regulatory and Liability Risks (cont.)

Coming off the Market

– Notify CPSC (or other regulatory authority)

– Keep your eye on the objective: reduce or eliminate the potential hazard

– Develop an effective corrective action plan; one size does NOT fit all

– Consider the risk of claims concerning the adequacy of the remedy being offered

– Reach out to consumers; demonstrate that you stand behind your products

– Isolate affected inventory at each stage of distribution

– Execute and track implementation

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CONSUMER PRODUCT SAFETY AND COMPLIANCE:A NEW PARADIGM FOR THE PROMOTIONAL PRODUCTS INDUSTRY

PROMOTIONAL PRODUCTS ASSOCIATION INTERNATIONALLAS VEGAS, NEVADA

January 14, 2010

Eric RubelArnold & Porter LLP

[email protected]

Rick BrennerPrime Resources [email protected]