Mr Joern, is based in our Chicago office.

On August 14, 2008, President Bush signed the Consumer Product Safety Improvement Act of 2008 (the Act) into law. Also known as the CPSIA, it is a wide-ranging and complicated revision of United States consumer protection laws. The Act is Congress' response to a wave of product recalls in 2007, the most highly publicized being recalls of imported toys containing lead paint. Various provisions of the Act took effect beginning on August 14, 2008. Other key sections of the Act affecting retailers become effective on February 10, 2009.

Resellers, thrift, and consignment stores (Resellers) fear they will not be able to comply with the new regulations and will be forced to close their businesses. The Consumer Product Safety Commission (CPSC) recently interpreted the requirements of the new children's product regulations in a news release issued on January 8, 2009. The release gives clarity to some but not all of the Act's regulations as they apply to Resellers.

The Resellers' Dilemma

Thrift and consignment stores typically resell used goods. These often include toys, clothing and other products used by children. Certain provisions in the Act require that "children's products" be tested and certified for compliance with lead, phthalates (chemicals used to make plastics flexible) and other standards. "Children's products" include clothing, toys, and other consumer products designed for children 12 years of age or younger. Under the Act, these products may not be lawfully sold if they contain more than 600 parts per million (ppm) of lead. Similarly, children's products may not be sold if they contain more than 0.1 percent of certain phthalates or if the product fails to meet new mandatory standards for toys.

The General Counsel of the CPSC issued an advisory opinion stating, "[P]roducts that contain lead above the limit set in the [Act] cannot be sold from inventory or on store shelves after February 10, 2009."1 Most children's products in the inventory of Resellers are used and, as such, do not have a certificate of compliance. The cost of testing for lead and phthalate limits exceeds the financial capacity of nearly all Resellers. Does the Act therefore force Resellers into the choice of discarding their inventory, paying for tests they cannot afford or closing their doors?

The CPSC's Clarification

The January 8, 2008, news release from the CPSC's Office of Information and Public Affairs stated:

  • Children's products with more than 600 ppm total lead cannot lawfully be sold in the United States on or after February 10, 2009, even if they were manufactured before that date.
  • [D]omestic manufacturers and importers [must] certify that children's products made after February 10 [2009], meet all the new safety standards and the lead ban.
  • Sellers of used children's products, such as thrift stores and consignment stores, are not required to certify that those products meet the new lead limits, phthalates standard or new toy standards (emphasis in original).
  • The [Act] does not require resellers to test children's products in inventory for compliance with the lead limits before they are sold.
  • However, resellers cannot sell children's products that exceed the lead limit ..., [and] [t]hose resellers that do sell products in violation of the new limits could face civil and/or criminal penalties (emphasis in original).

The clarification restated the Act's requirements. Those requirements provide answers to certain basic questions affecting Resellers.

Who Is Regulated Under the Act?

The Act regulates foreign and domestic manufacturers of consumer products as well as importers, private labelers, distributors and retailers of consumer products. The obligations of a particular business differ significantly depending on their respective role in the chain of commerce. For example, retailers, including Resellers, have fewer obligations under the Act than do manufactures and importers. Retailers do not have to test consumer products in order to certify their compliance with consumer product safety rules. However, while Resellers do not have to test for compliance under the Act, they may not lawfully sell recalled products or any other products that are in violation of any consumer product safety rule.

WHO HAS TO CERTIFY COMPLIANCE?

Section 102(a)(2) of the Act requires manufacturers, private labelers and importers of a "consumer product"2 to certify that the product has been tested or is subject to a reasonable testing program and complies with all applicable consumer product safety rules.

In response to earlier confusion, on November 10, 2008, the CPSC promulgated a Final Rule that clarified exactly who had to issue a conformity certificate. The Final Rule provided:

  • If the product is manufactured outside of the United States only the importer – and not the foreign manufacturer or private labeler – must provide the certificate of compliance for imported products.
  • If the product is manufactured inside the United States, only the domestic manufacturer and not the private labeler must provide the certificate of compliance.
  • Retailers do not have to issue certificates of compliance under Section 102 of the Act.

Are Certificates Of Compliance Furnished To Resellers?

Section 102(g) (3) of the Act requires that a copy of the certificate of compliance "shall be furnished to each distributor or retailer of the product [by a manufacturer or importer]." Further, the revised Consumer Product Safety Act provides that Resellers (and any others) who hold a certificate that a particular consumer product conforms to all applicable consumer product safety rules have a defense if they unknowingly sell a barred product. Resellers (and others) who hold a certificate of compliance properly issued by a manufacturer or importer will not be considered to have committed a "prohibited act" by selling a product that is in violation of consumer product safety rules (unless the person knows the product does not conform with the rules).3

Can A Reseller Lawfully Sell A Consumer Product Without A Compliance Certificate?

Resellers are unlikely to have certificates of compliance for the vast majority of their goods, as most of their goods are used and often donated. The Act does not require a Reseller to possess a certificate of compliance in order to sell a product. However, the Act bars retailers from selling recalled or banned children's products. Section 101(a)(1) of the Act declares that any children's product containing lead in excess of the allowable limits will be considered a "banned hazardous substance." The sale of a banned hazardous substance is a prohibited act that can result in civil and/or criminal penalties. Resellers therefore still risk violating the Act if they sell a barred product.

What Should A Careful Reseller Do?

The CPSC news release suggested Resellers take particular care when determining what products to take into inventory and sell. The CPSC reminded Resellers that:

  • After August 14, 2008, it became unlawful to sell a recalled product.
  • Resellers should check the CPSC Web site (www.cpsc.gov) for a current list of recalled consumer products.
  • Resellers should pay special attention to "certain product categories," including:

    • recalled children's products such as cribs and play yards
    • children's jewelry, painted wooden or metal toys or other children's products that may contain lead
    • flimsily made toys that are easily breakable into small parts
    • toys without required age warnings
    • dolls and stuffed toys that have buttons, or other small parts that could come loose and present a choking hazard for young children

Summary

The chairman of the Consumer Product Safety Commission has described the Consumer Product Safety Improvement Act of 2008 as "incredibly complex" and "long on confusing statutory language." The actual application of the Act to businesses large and small has resulted in much confusion. Resellers, thrift, and consignment stores are the most recent examples of American businesses who want to comply with a law but do not understand what the law requires.

The CPSC has and will continue to address compliance dilemmas through formal rulemaking and more informal staff interpretations of the Act's application. However, the CPSC can only go so far in construing the Act's provisions. Ultimately Congress will likely have to act and revisit the Act in order to protect consumers while not destroying businesses in an already weakened economy.

In order to properly comply with the Act, Resellers and others therefore must pay careful attention to the rapidly changing developments that affect this wide-ranging law.

Footnotes

1. Consumer Product Safety Commission Office of General Counsel Advisory Opinion No. 317 , Retroactive Application of the CPSIA to Inventory, September 12, 2008.

2. Consumer products are defined as any article or component part which is produced or distributed for sale to a consumer for use in or around a household, residence or school, or in recreation. Consumer products do not include tobacco products, motor vehicles or motor vehicle equipment, pesticides, firearms and ammunition, aircraft, boats, drugs, medical devices, cosmetics, or food. 15 U.S.C. 2052.

3. Section 19(b) "Prohibited Acts." 15 U.S.C. 2068.

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