As the August 14, 2009, deadline for compliance with the Consumer Product Safety Improvement Act’s (“CPSIA”) tracking label requirement looms, recent developments indicate that the Consumer Product Safety Commission (“CPSC” or “Commission”) and Congress are not likely to provide any relief from enforcement. On May 13, 2009, the CPSC announced that the vote on a petition to stay enforcement ended in a tie, meaning that the requirement will take effect as dictated by the CPSIA. Although the CPSC staff is working on guidance it hopes to submit for Commission review in June, and some members of Congress have indicated support for changes to the CPSIA, because of manufacturing lead times, many companies cannot wait for such relief if they expect to comply by August 14.

Tracking Label Requirement

Section 103 of the CPSIA requires that all children’s products manufactured after August 14, 2009, bear, “to the extent practicable,” a tracking label that enables the manufacturer and ultimate purchaser of the product to ascertain: 1) the manufacturer or private labeler, 2) the location and date of production, and 3) the cohort information (including batch number, run number, or other identifying characteristic). The provision covers a wide range of products, including items such as clothing or shoes, not just toys and other regulated products, intended for children twelve and younger. The labeling information is intended to help consumers and sellers identify affected products in the event of a recall.

Request for Stay of Enforcement

The CPSIA dictates that the tracking label requirement will become effective on August 14, regardless of any rulemaking or other guidance from the Commission. In March 2009, the National Association of Manufacturers’ CPSC Coalition asked the CPSC to stay enforcement of the tracking label requirement for one year, stating that the additional year would allow sufficient time to develop “clear and understandable rules” and an orderly approach to the new requirement.

Acting Chairman Nancy Nord voted in favor of the stay, stating that the application of tracking labels across the board would not necessarily improve the recall process enough to justify the burden that the requirement would place on manufacturers. She stressed the magnitude of that burden for small companies, given the long lead times needed for the implementation of such labeling requirements. In addition, Acting Chairman Nord emphasized that, with more regulatory flexibility, the CPSC could focus on products with a history of recall issues and use the tracking label development for those products when evaluating labels for additional products. Based on over 130 comments the Commission has received regarding tracking labels, it has learned that:

There is significant confusion about the meaning of the statutory requirements;
There seems to be consensus that “one size does not fit all” and that companies need the flexibility to develop labels that work for their individual products and situations;
Lead time is critical to implement guidance from the Commission; and
A period of time is necessary to educate those affected by the new requirements.

Acting Chairman Nord stated that the staff is working hard to complete proposed tracking label guidance for Commission consideration. The aggressive target date for such consideration is June. The guidance “will assure companies that they should reasonably exercise the judgment anticipated by the loose language of the statute.“

Commissioner Thomas Moore voted against the stay because he believes the Commission does not have the authority to postpone a statutory effective date. He stated that, although manufacturers “want complete certainty as to what they can or cannot do under [Section 103],” the statute requires manufacturers “to exercise sound judgment in meeting its requirements.” He stressed that, as long as the information required on the tracking label is ascertainable, there is no need for a particular format. In addition, Commissioner Moore explained that the CPSC does not intend to punish those companies diligently trying to comply with the requirement and will work with those that, despite their best efforts, miss the mark on compliance. He also noted that regulations regarding the requirement will be prospective.

CPSC Forum

On May 12, 2009, the CPSC staff held a forum regarding tracking labels. The purpose of the meeting was for the staff to collect information from interested parties, not to provide specific guidance, although the staff did provide some insights. Addressing concerns about the format, cost, and practicality of the implementation of tracking labels, the staff stated that it does not expect in the near future to proscribe a specific format for the labels or to exempt products not deemed as “high-risk” for recall. The staff also affirmed the belief that the labels will help in the event of a recall.

House Subcommittee on the Impact of the CPSIA on Small Businesses

On May 14, 2009, Acting Chairman Nord and several small business representatives testified before the U.S. House of Representatives Small Business Committee’s Subcommittee on Investigations and Oversight regarding the impact of the CPSIA on small businesses. Acting Chairman Nord highlighted some of the compliance burdens for small businesses, such as the retroactive lead provision and the lack of flexibility granted to the CPSC to regulate, and described steps the Commission has taken to ease this compliance burden. Additionally, she stated that the component certification program and prospective application of the lead and phthalate provisions would benefit small businesses and ease their compliance with the CPSIA. Small business representatives characterized the CPSC’s guidelines for product testing as inadequate and criticized the Commission for not quickly exercising its authority to grant exemptions for products that do not pose a threat to consumers.

Democrat and Republican members of the Subcommittee agreed that changes to the CPSIA are necessary to reduce the burdens on small businesses, although they provided no details about potential changes or the timing for their implementation.

Kelley Drye & Warren LLP

Kelley Drye & Warren’s Consumer Product Safety practice group is experienced in providing advice on the difficult issues of how and when potentially hazardous consumer products must be reported to the CPSC. If product recalls are necessary, we work with our clients and CPSC staff to quickly develop and implement cost-effective communications programs that satisfy product liability concerns and minimize potential penalties. When the CPSC threatens or brings enforcement actions, we advise our clients on appropriate strategies.

For more information about this Client Advisory, please contact:

Christie Grymes Thompson
(202) 342-8633
cgthompson@kelleydrye.com

Compliance with CPSIA Tracking Label Provision Required by August 14, 2009 — Relief from CPSC or Congress Not Likely