On June 20, 2011, the Canadian Consumer Product Safety Act (CCPSA) took effect, and retailers who sell or distribute products in Canada will now need to include the CCPSA in their regulatory compliance considerations. This post offers some basic highlights of the new CCPSA for retailers facing product issues in Canada.

To Which Retailers Does The CCPSA Apply?

The CCPSA applies to individuals or organizations which sell consumer products, making it relevant for many retailers. The Act applies to “consumer products in Canada, including those that circulate within Canada and those that are imported.”

 Under the Act, the definition of “sell” includes the following:

• To offer for sale, expose for sale or have in possession for sale;
• To distribute to one or more persons, whether or not the distribution is made for consideration; and
• To lease, offer for lease, expose for lease or have in possession for lease.

Additionally, the CCPSA’s jurisdiction is limited to products it defines as “consumer products.” 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.” Notably, the CCPSA’s definition of a “consumer product” focuses upon whether consumers are likely to obtain the product. A retailer who sells a product without marketing or intending it for general consumer use, could nevertheless find their product categorized as a “consumer product” if consumers somehow obtain it.

What Are A Retailers’ Reporting Obligations Under The CCPSA?

If a retailers’ product is a “consumer product” under the act, then that retailer is under an obligation to report certain potential safety issues should they arise. The test for whether a potential safety issue must be reported to Canada’s safety agency (Health Canada) is new. In the past, the Canadian Hazardous Products Act forbid the sale or distribution of certain prohibited or unsafe products, but did not include a specific reporting obligation. Health Canada’s website provided a link for reporting incidents, and a guidance document on how to conduct recalls. But these did not legally require reporting. Indeed, the guidance document instead recommended that a company report to Health Canada as a tenth step after initiating a recall itself. Now, under the CCPSA, retailers face a specific reporting requirement with legal penalties for noncompliance. The CCPSA spells out the circumstances for obligatory reporting as follows:

Reporting Obligation Triggers under the CCPSA:

a) 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;
b) 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;
c) 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
d) 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 issues stand out here. First, 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 CCPSA 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 notably broad, as it could include health effects beyond immediate injury. For instance, long term pesticide or other chemical exposure could arguably be a trigger, or even problems from repeated use over time (e.g., foot injury from high heels, carpal-tunnel syndrome from mobile device keyboards, chiropractic injury from shoulder bags, hearing impairment from home entertainment systems).

Initial Reporting Deadlines and Content

Under the CCPSA, reporting must take place within two days after becoming aware of an incident. The CCPSA also requires a company to provide “all the information in [its] control regarding any incident related to the product.” Although future guidance from Health Canada or proffered regulations might clarify this provision, as currently written the required information is quite broad. Retailers may need to evaluate whether legal or business confidentiality and privilege concerns are implicated when producing incident information for reports made pursuant to the CCPSA.

What Should Retailers Do To Facilitate CCPSA Compliance?

The implementation of the CCPSA will make it more important than ever for retailers to engage in a proactive approach to regulatory compliance and risk assessment. More detailed regulations and guidance can be expected after the CCPSA initially goes into force, but in the meantime, retailers may wish to take the opportunity to review internal incident reporting and compliance procedures. For instance, when learning of a product incident, retailers should have steps in place to immediately determine whether the product is sold in Canada (and whether that product qualifies as a consumer product under the CCPSA definition). Procedures should exist for gathering the potentially broad amount of information about the incident to submit in a report, while at the same time allowing for privilege and confidentiality considerations. The CCPSA’s 2 day reporting deadline makes the efficiency of internal procedures all the more essential. Communication between different business divisions or offices may also become more imperative because of the CCPSA’s use of other country’s recalls as a reporting trigger. Retailers may need to re-evaluate current mechanisms in place for U.S. or other compliance regimes to ensure that those procedures will also work to address the nuances of the CCPSA. At the very least, given the new reporting requirements and associated penalties for violations, retailers cannot fail to address the CCPSA and how it may impact their products.

Content for this post was provided by Laura Walther and Carolyn Wagner in the Washington, DC office of Crowell & Moring.