Preparing for the Canadian Consumer Product Safety Act

The dust has not yet settled on the U.S. Consumer Product Safety Improvement Act (CPSIA) and its implications for manufacturers and sellers of consumer products in the U.S., but there is another consumer product regime about to take force. Companies who also manufacture, sell or distribute products in Canada will soon need to add the Canadian Consumer Product Safety Act (CCPSA) to their compliance considerations. Taking effect on June 20, 2011, the CCPSA in many ways mirrors the goals and provisions of the CPSIA. But it is not identical. This article highlights a few key differences between the two consumer product safety acts and offers some basic strategies for companies facing product issues in the U.S. and Canada.

Differences in the Scope of Jurisdiction: 'Defining Consumer Products'

As a threshold matter, the jurisdiction of the new CCPSA differs from the jurisdiction of the U.S. Consumer Product Safety Act ("U.S. CPSA") -- which includes the provisions of the CPSIA -- due to differences in the definitions of a "consumer product." Under the U.S. CPSA, a consumer product is "any article, or component part thereof, produced or distributed

1. for sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise, or
2. for the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation or otherwise..."

The U.S. CPSA also explicitly states that the term "consumer product" does not include "any article which is not customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer." (emphasis added)

Like its U.S. counterpart, the CCPSA's jurisdiction is limited to products it defines as "consumer products." However, the CCPSA's definition of a "consumer product" is notably broader. A "consumer product" is defined in the CCPSA as "a product, including its components, parts or accessories, that may reasonably be expected to be obtained by an individual to be used for non-commercial purposes, including for domestic, recreational and sports purposes, and includes its packaging." The Canadian definition includes products based on whether consumers are likely to obtain the product whereas the U.S. definition includes products based on whether the manufacturer or seller intended or caused the product to be available or used by consumers. So, for example, if a consumer somehow obtains a product that is not marketed to or made available for sale to consumers, that product is likely not a consumer product under the U.S. CPSA, but may very well be a consumer product under the CCPSA and subject to all its regulatory requirements.

Differences in Agency Reporting Requirements

If a product is a "consumer product" under one or both acts, then potential safety issues may require reporting as required by each act. The tests for whether a potential safety issue must be reported to the respective country's consumer product safety agency also differ between the U.S. and Canada.

Reporting Obligation Triggers

Under the U.S. CPSA, a reporting obligation is triggered when a manufacturer or distributor obtains information which reasonably supports the conclusion that the product:

1. fails to comply with applicable safety rule or with a relied upon voluntary standard;
2. fails to comply with any other rule, regulation, standard or ban under any Act enforced by the CPSC;
3. contains a defect which could create a substantial product hazard; or
4. creates an unreasonable risk of serious injury or death.

Under the CCPSA, the triggers are:

1. an occurrence in Canada or elsewhere that resulted or may reasonably have been expected to result in an individual's death or in serious adverse effects on their health, including a serious injury;
2. a defect or characteristic that may reasonably be expected to result in an individual's death or in serious adverse effects on their health, including a serious injury;
3. incorrect or insufficient information on a label or in instructions -- or the lack of a label or instructions-- that may reasonably be expected to result in an individual's death or in serious adverse effects on their health, including a serious injury; or
4. a recall or measure that is initiated for human health or safety reasons by a foreign entity or institution (or by other specified government bodies).

Two significant differences stand out here. First, unlike the U.S. CPSA, the CCPSA treats a recall initiated by another country as a trigger for reporting in Canada, regardless of potential differences in regulation leading to such a recall. Second, the U.S. CPSA focuses on products which create an unreasonable risk of serious injury or death. The CCPSA, however, notes death, or a "serious adverse effects on their health, including a serious injury." (emphasis added) The degree of potential harm under the CCPSA that would trigger a reporting duty is arguably much broader than under the U.S. CPSA, as it could include health effects beyond immediate injury. For instance, long term chemical exposure could arguably be a trigger, or even problems from repeated use (e.g., vision impairment from video games, hearing impairment from portable audio devices).

Initial Reporting Deadlines and Content

In addition to variations in the reporting triggers, the time to report is also different. Under Section 15 of the U.S. CPSA, reporting is to take place "immediately" upon learning of information from which one could reasonable conclude that the product may contain a defect that presents a substantial product hazard or presents a risk of serious injury or death. U.S. CPSC's guidance documents have interpreted "immediately" as twenty-four hours, but with the caveats that five working days is reasonable time for information to reach the individual within a company who has reporting authority, and that when uncertainty exists about reportability, a company may reasonably spend ten working days investigating a matter. In contrast, the CCPSA specifies within the Act itself that reporting must take place within two days after becoming aware of the incident. Also, while the U.S. CPSA requires a company to "inform" the CPSC of the identified defect or risk, the CCPSA requires a company to provide "all the information in [its] control regarding any incident related to the product." Without additional guidance, this CCPSA language implicates broad disclosure that could raise discovery and privilege concerns.

Strategic Considerations

The implementation of the CCPSA this June will make it more important than ever for companies to engage in coordinated approaches to regulatory compliance. (Even now, a divided approach poses potential pitfalls because the U.S. CPSC and Health Canada already routinely share information and conduct jointly announced recalls under a 2005 Memorandum of Understanding.

Upon learning of a product incident, a company should immediately consider whether its product is sold in both the U.S. and Canada. Any reporting analysis should take into account the differences in the two regimes, as well as the practical implications of reporting in one country upon the reporting obligations for another -- including deadlines for making respective reports. To the extent a company has tasked different individuals or departments with responsibility over different geographic distribution areas, it may be advisable to implement central reporting mechanisms both internally and externally. While awaiting the promulgation of more detailed regulations under the CCPSA, companies might also take the opportunity to audit their compliance procedures before Health Canada has its first opportunities to flex its new CCPSA muscle.

Bridget E. Calhoun is a partner in the Crowell & Moring LLP's Antitrust Group and is the co-leader of the Product Risk Management practice.

Laura Jastrem Walther practices in the Torts and Product Risk Management groups with particular focus on consumer product litigation and regulatory counseling.