In our Bulletin in June, we advised that the federal government had just re-introduced the proposed Canada Consumer Product Safety Act (“CCPSA”) to Parliament as Bill C -36. In anticipation of the Bill’s likely passage this fall, Health Canada (“HC”) is currently conducting consultations on proposed CCPSA policies and regulations. They have published three significant consultation documents (see link below) on the following:
- mandatory reporting
- exemptions for products that will not be sold in Canada
- a new administrative monetary penalty (“AMP”) regime
We briefly summarize below the key proposals and the issues they raise for companies in the consumer product supply chain.
mandatory reporting policy (consultation deadline: October 1, 2010)
The CCPSA provides for mandatory two day and ten day reporting, by suppliers of consumer products, of product safety “incidents” (as defined) involving consumer products supplied in Canada. HC’s draft interpretation policy addresses several aspects of the new reporting requirements.
The duty to report applies to manufacturers, importers and sellers (“suppliers”). Suppliers are required to report within two days of a responsible person in their organization becoming aware of an “incident” (which is defined to include occurrences, discovered defects and recalls), whether in Canada or elsewhere. The draft policy provides guidance on who will be considered a “responsible person” and when they will be regarded as having become “aware” of a reportable incident.
Generally, HC proposes that “a responsible person is the directing mind of an organization who, through the exercise of due diligence, should become aware of an incident”. The draft policy suggests that the standard applied may be different depending on the size of the organization, its decision-making structure, or whether there is more than one responsible person. They further propose that awareness sufficient to trigger the reporting obligation may be acquired by, among others, consumer complaints, lawsuits, direct notice from NGOs, expert’s reports and news releases or media coverage.
From the industry’s standpoint, the issues are likely to be the possibility of “responsible persons” existing all over the organization and the very low threshold HC is proposing for the “awareness” trigger (such as media coverage).
An occurrence is reportable if it may reasonably be expected to have resulted in death or serious adverse health effects. Whether it actually did or not does not matter as long as it had potential to do so. In its draft policy document, HC provides examples of reportable “near miss” incidents. These include, among others, non-fatal breathing incidents such as choking, incidents giving rise to lacerations requiring sutures or visits to an emergency department, and fire and other property damage that could have resulted in death or serious injury.
The proposed policy also elaborates on the point at which product defects, inadequate labelling and recalls rise to the level of a reportable “incident”. These triggers are fairly self-explanatory and the proposed interpretation policy does not add a lot.
The CCPSA creates two separate reporting duties. Within two days of becoming aware of an incident, a supplier must report whatever information it has to its supplier and to HC. There is no time built in for confirmatory investigation. Everyone along the supply chain must do this so there may be numerous reports submitted on the same incident. Within ten days, a second more detailed report is required from the Canadian manufacturer or importer addressing risk levels and proposed corrective measures. HC has no discretion with respect to extensions of the two day deadline but does with respect to the 10 day in that, pursuant to s. 14(3), the Minister can, by written notice, specify an alternate reporting period.
In its policy document, HC invokes s. 14(3) to address the possibility of alternative reporting models for companies with experience reporting in other jurisdictions (read the US) and having the “capacity, policies, processes and procedures” for gathering incident data “and carrying out full risk assessments”.
As drafted, the CCPSA will require reporting based on incident awareness, a “catch as much as you can” approach with no evaluation component. There is concern that this will generate a surfeit of data that may or may not assist in the identification of truly dangerous products. By raising the possibility of alternative reporting models with respect to the 10 day requirement at least, HC appears to be recognizing that there are more sophisticated and well developed risk assessment models out there (particularly in the US where the Consumer Product Safety Commission uses a risk evaluation, rather than an incident awareness, model to drive reporting obligations) that may also be useful in the Canadian context.
HC has stated plans to develop criteria to assist the Minister in determining when an alternate reporting period (model) should be permitted and has asked stakeholders for their views on what those criteria should be.
confidential business information
The proposed CCPSA permits HC to disclose a company’s confidential business information, without consent, to other governments if the latter agree to maintain its confidentiality; and to anyone, without regard to confidentiality, if danger is imminent. The draft policy document does not do much more than give the somewhat cold comfort that outside of the afore-noted permitted disclosures, HC’s policy is not to disclose confidential business information absent consent or disclosure required by law (presumably a reference to, among other things, the Access to Information Act).
exemption regulations (consultation deadline: October 19, 2010)
Under the proposed CCPSA, the manufacture, importation, advertisement and sale in Canada of non-compliant consumer products is prohibited. The proposed Exemption Regulations would permit such activity in certain narrow circumstances: (i) if all of the products are to be exported for sale; (ii) if imported products are brought into compliance before their sale in Canada; and (iii) if the products are intended for testing, research or exhibition. The draft Regulations propose a process and conditions for applying for, maintaining and lifting exemptions.
administrative monetary penalty regulations (consultation deadline: November 7, 2010)
To avoid the inefficiencies of using prosecution and seizure to force compliance, the proposed CCPSA creates a new additional enforcement tool: the administrative monetary penalty (“AMP”).
HC is seeking comment on proposed regulations that will flesh out the AMP regime set out in the CCPSA. The proposed regulations identify when an AMP may be issued, the quantum of the AMP, classification of violations, payment methods and timelines.
With regard to the calculation of penalties, HC proposes that different value numbers be assigned to reflect an organization’s history of compliance and the gravity of the risk of harm posed by the offending product. The sum of these numbers would create a “Total Gravity Value” which would correspond to a particular penalty amount.
Once an AMP has been imposed, the non-compliant party can pay the penalty, enter into a compliance agreement, or request a review by the Minister. If the company decides to pay, payment would be significantly reduced if made within 15 days; otherwise, it must be paid in full within 30 days and if there is no payment after 30 days, the debt is referred to the Receiver General for collection.
Once Bill C-36 is passed and HC has completed its consultations with stakeholders, HC will finalize its policy guidelines. We will keep you advised as Bill C-36 progresses and as the new CCPSA regime continues to develop.