President Bush Signs Consumer Product Safety Commission Reform Bill, Compelling Sweeping Changes and Increasing Risks for Manufacturers, Importers, Distributors and Retailers
President Bush signed the Consumer Product Safety Improvement Act of 2008 on August 14, 2008, following approval by the House on July 30 by a vote of 424-1 and by the Senate on July 31 by a vote of 89-3 of the most sweeping set of legislative changes since the enactment of the Consumer Product Safety Act in 1972.
Manufacturers, importers, distributors and retailers will all face new compliance requirements, increased civil penalties, more aggressive enforcement action by the Consumer Product Safety Commission and a heightened risk of litigation. Imported products, in particular, are likely to face greater scrutiny under the new requirements and procedures, as will products intended for use by children.
As a result, companies should be attentive to the evolving regulatory landscape and should take steps to ensure that their product safety compliance programs, as well as those of their suppliers, are appropriately designed and up-to-date.
Among other things, the legislation signals a significant shift away from industry and company self-regulation and towards greater government reliance on mandatory standards and rulemaking proceedings.
Other potential consequences of the Consumer Product Safety Improvement Act of 2008 include: (i) a loss of uniform safety standards as states gain authority to interpret and enforce the Consumer Product Safety Commission’s regulations and to adopt their own, more stringent, safety standards; and (ii) a heightened risk of litigation resulting from the anticipated proliferation of state-level enforcement activities and from changes in the Consumer Product Safety Commission’s procedures and authority.
These consequences and others are discussed in more detail below, following a brief summary of several key provisions of the legislation.
Key Legislative Provisions
Expanded Consumer Product Safety Commission Resources. The Consumer Product Safety Commission’s budget authorization will double over the next six years to $136 million, enabling the agency to increase substantially its enforcement staff and to expand and upgrade its information systems and its product testing and evaluation facilities.
Increased Civil and Criminal Penalties. The maximum civil penalty for violations of Consumer Product Safety Commission requirements will rise from $5,000 to $100,000 per violation, and from $1.8 million to $15 million for a related series of violations. Forfeiture of assets involved in a violation will be a potential criminal penalty for knowing violations of Consumer Product Safety Commission requirements.
Broader Duty to Report Potential Hazards. The product hazard reporting requirements found in Section 15 of the Consumer Product Safety Act will now apply to violations of any rule, standard or ban under the other statutes enforced by the Consumer Product Safety Commission, including the Federal Hazardous Substances Act, the Poison Prevention Packaging Act, and the Flammable Fabrics Act.
Enhanced CPSC Authority to Mandate Recalls and Notices. The Consumer Product Safety Commission will gain the authority to mandate the nature and scope of corrective actions it determines to be necessary regarding any product it deems “imminently hazardous” or for which it has issued an order declaring the product to be a “substantial product hazard.” Although not directly affecting voluntary recalls negotiated between companies and the Consumer Product Safety Commission, this change may alter the Consumer Product Safety Commission staff's enforcement evaluation of whether to seek a mandatory order in lieu of negotiating a voluntary corrective action plan with a company.
Expanded State-Level Authority. State attorneys general will gain the authority to seek injunctive relief to enforce Consumer Product Safety Commission product safety standards and certification requirements. Also, the legislation bars the Consumer Product Safety Commission from preempting state product liability law and protects from preemption state product warning requirements, such as those in California’s Proposition 65, that were in effect as of August 31, 2003.
Heightened Protections for Children’s Products.
- Lead Content Restrictions. Lead content limits for children’s products will be reduced over three years and will be subject to future Consumer Product Safety Commission evaluation and rulemaking to ensure that the lead limit is set at its lowest technologically feasible level. The lead content limit will be set at 0.06% by weight 180 days after the Consumer Product Safety Improvement Act of 2008’s enactment, and will be reduced to 0.03% after one year and 0.01% after three years. Exceptions will be permitted for products with lead content that is not accessible to a child through normal and foreseeable use and abuse of a product and for products exempted by Consumer Product Safety Commission rule. Within one year after enactment, paint and other similar coatings must contain no more than 0.009% lead content by weight.
- Phthalate Restrictions. Effective 180 days after enactment, children’s products containing more than 0.1% of certain phthalates (DEHP, DBP and BBP), substances used in plastics as softening agents, will be permanently banned. Three other phthalates (DINP, DIDP and DnOP) will be subject to a similar, interim ban, pending a safety review by the Consumer Product Safety Commission.
- Mandatory Toy Safety Standards. The Consumer Product Safety Commission is required to adopt by rule mandatory toy safety standards within two years after enactment of the Act. The ASTM F963-07 voluntary standard will be used as an interim mandatory standard (with certain sections exempted), beginning 180 days after the Consumer Product Safety Improvement Act of 2008’s enactment, until a formal rule is adopted.
- Testing and Certification of Imported Children’s Products. Effective 90 days after enactment of the Consumer Product Safety Improvement Act of 2008, manufacturers and private labelers will be required to certify, based upon a reasonable product testing program, that imported children’s products comply with all applicable rules, bans and standards. The required testing must be performed by accredited third-party or proprietary laboratories prior to importation. The Consumer Product Safety Commission will establish accreditation requirements for testing laboratories within ten months after the Consumer Product Safety Improvement Act of 2008’s enactment.
- Tracking Labels for Children’s Products. To facilitate product recalls, manufacturers will be required to place distinguishing marks on children’s products and their packaging, to the extent practicable, that enables the purchaser to determine the manufacturing source, date and production run. This requirement will go into effect one year after enactment of the Consumer Product Safety Improvement Act of 2008.
- Warning Statements in Advertisements. Warning statements will be required in advertisements for certain toys and games containing small parts when the advertisements provide a direct means for the purchase or order of a product (e.g., internet or catalog ads).
- Expanded Definition of “Children’s Product.” The term “children’s product” is redefined to include products designed or intended for use by children 12 years old or younger.
Reduced Confidentiality Protections. The amount of time given to companies to object to the Consumer Product Safety Commission’s release of information submitted to it will be reduced from 30 days to 15 days. The Consumer Product Safety Commission will be required to notify a company only five days prior to releasing information the company contends is inaccurate or protected.
Public Database of Product Safety Reports and Incidents. A searchable public database will be created by the Consumer Product Safety Commission containing reports of injuries, illness, death or safety risk received from consumers, companies, health care professionals and government agencies, among others. Upon receiving a complaint or report, the Consumer Product Safety Commission will have five days to submit the information to the product manufacturer, and the manufacturer would then have ten days in which to respond or object to the report’s inclusion in the database. The Consumer Product Safety Commission will have the authority to remove a complaint if it is found to be inaccurate.
Whistleblower Protection. Employees of manufacturers, distributors or retailers who report information about product defects or violations will be given whistleblower protection against wrongful termination or discrimination. Employers will be entitled to receive attorneys’ fees of up to $1,000 from employees that file whistleblower claims that are deemed frivolous or in bad faith.
Improved Import Safety Management and Coordination. The Consumer Product Safety Commission will be required to create a risk assessment system, in cooperation with the U.S. Customs and Border Protection, to identify import shipments of non-compliant consumer products. The Consumer Product Safety Commission will be allowed (i) to designate specific characteristics for classes of consumer products as indicative of a substantial product hazard, and (ii) to condition the manufacture, importation, distribution or sale of a product on a company’s compliance with the Consumer Product Safety Commission’s inspection and recordkeeping requirements.
Other Provisions. Other significant provisions in the legislation include (i) prohibitions against the sale or export of products that fail to comply with a Consumer Product Safety Commission standard or that are subject to mandatory or voluntary recalls, unless the importing country has notified the Consumer Product Safety Commission that it will accept importation of the non-complying products; (ii) adoption of a mandatory safety standard for all-terrain vehicles (ATVs); (iii) a consumer registration card requirement for durable nursery products; and (iv) Consumer Product Safety Commission studies of the use of formaldehyde in textiles and the effectiveness of import safety authorities.
Consequences for Manufacturers, Importers, Distributors and Retailers
The expanded resources and enforcement authority provided to the Consumer Product Safety Commission by the Consumer Product Safety Improvement Act of 2008, combined with burgeoning state-level activism and expected continued congressional scrutiny of Consumer Product Safety Commission performance, are likely to alter significantly many of the compliance and litigation risks faced by manufacturers, importers, distributors and retailers of consumer products.
For example, given the dramatic increase in the potential size of Consumer Product Safety Commission's civil penalties for non-compliance, companies have an added incentive to update and maintain their systems for identifying, responding to and reporting possible safety risks. However, the Consumer Product Safety Improvement Act of 2008’s weakening of certain procedural protections for information submitted to the Consumer Product Safety Commission could affect the amount and types of information that companies are willing to share with the Consumer Product Safety Commission in the future.
Companies will also likely face heightened litigation risks resulting from this legislation. Internal and external pressures at the Consumer Product Safety Commission may increase the likelihood that the agency will be willing to litigate the necessity and scope of a recall or the public disclosure of company information. Actions by state legislatures, attorneys general and courts that supplant Consumer Product Safety Commission authority and erode existing uniform safety standards could result in increases in both government and private litigation. Likewise, the Consumer Product Safety Commission's new database of reported product safety incidents may be used by plaintiffs’ attorneys to identify potential class actions, to obtain evidence about alleged product defects, and to demonstrate that companies were or should have been on notice of potential hazards.
The outcome of this year’s presidential election will also likely have a profound effect on the Consumer Product Safety Commission’s enforcement efforts and future rulemakings, including those necessary to implement the Consumer Product Safety Improvement Act of 2008, as the incoming administration is expected to appoint a new chairman for the agency and possibly fill two more vacant seats on the five-person commission.
Consequently, companies should assess their existing product safety compliance programs to ensure that they are well-designed and up-to-date. The strong emphasis on import safety in the legislation, including the new product testing and certification requirements, should also encourage companies to focus on their suppliers’ compliance procedures and to consider random compliance audits or self-examinations for themselves and their suppliers. In the emerging regulatory environment, companies that import, distribute or sell consumer products in the U.S. should monitor carefully the safety awareness and compliance programs of product manufacturers and suppliers. A proactive approach to product safety that seeks to prevent safety hazards from arising in the first place, while establishing clear and effective procedures for responding to hazards that do occur, will be the most prudent strategy for companies in the new regulatory environment.
If you have questions about this article or about other product safety issues, please contact: Christopher ‘Kit’ Smith at (202) 408-9231 (kitsmith@sonnenschein.com), Belinda May at (314) 259-5847 (bmay@sonnenschein.com), or Brett Crawford at (202) 408-9238 (bcrawford@sonnenschein.com).
