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Bruce McNeely, partner, Cassels Brock & Blackwell LLP.
In response to recent consumer product failures (baby and sports products, in particular) and to the shift of consumer product manufacturing to places outside Canada, the Government of Canada is about to enact the Canada Consumer Product Safety Act, replacing Part I of the federal Hazardous Products Act. Once the Act is passed by the Senate and proclaimed in force (mid-2010), it will have a significant impact on manufacturers, importers/exporters, advertisers and sellers (at wholesale or retail) of consumer products. The Act prohibits the manufacture and importation of consumer products, and the advertising, packaging and sale of consumer products, in Canada which represent a danger to human health or safety.
Conducting Tests
The Minister of Health can order a manufacturer or importer of a consumer product to conduct tests on such product and to compile information and documentation necessary for the Minister to determine that the product is in compliance with the Act. Suppliers will also be required to maintain certain documentation relating to the identity of the person from whom the product was obtained and (except at retail) the person to whom it was sold.
Broadly Cast Incident Reporting Obligation
The Act imposes duties on manufacturers and importers/exporters regarding any incidents involving consumer products - an "incident" includes a recall of a consumer product by a regulatory body, or an occurrence or defect in a particular (or like) consumer product in Canada or anywhere else in the world that resulted, or may reasonably have been expected to result in, an individual's death, serious injury or other serious adverse effects on their immediate or long-term health. Where a manufacturer or importer (if the manufacturer is outside Canada) becomes aware of an incident it must provide the Minister with all of the information in its control regarding the incident within two days of becoming aware of the incident. It must then provide a written report to the Minister setting out certain information relating to the incident, and to any other consumer product that could have been the subject of a similar incident, and details of the measures it proposes to take with respect to the product within 10 days of becoming aware of the incident.
Inspector Authority
The Act confers broad discretionary powers upon inspectors appointed by the Minister to administer and enforce the Act. Inspectors may for the purposes of determining compliance (or preventing non-compliance) with the Act "at any reasonable time" enter any place where they have reasonable grounds to believe that a consumer product is being manufactured, imported, packaged stored, advertised, sold, labelled, tested or transported. Other than in respect of a dwelling-house, no search warrant is required.
An inspector has the authority to issue various orders, including an order requiring the manufacturer, importer or seller to recall a consumer product or to stop the manufacture, importation or sale of a consumer product. If a person subject to an order to recall a consumer product does not comply with the order, the Minister may issue a recall order and manage the recall process at the expense of the non-compliant person.
Penalties
For those who are convicted of breaching the Act, fines ranging from up to $250,000 for first offences and up to $5,000,000 and prison sentences of up to two years. Each day of non-compliance is a new offence under the Act. There are three possible approaches the Minister can take: (a) charge a person with a violation (lower fines, no threat of incarceration and no criminal record); (b) charge a person with an offence and proceed by summary conviction (lesser fines and shorter sentences); or (c) charge a person with an offence and proceed by indictment (greater fines and longer sentences).
What You Should Do
You should review all consumer products currently in inventory. Revise budgets to allow for record-keeping and other compliance costs. All labels and advertising materials should be inspected and non-compliant input inventories depleted. You should appoint a credible employee to assist with appropriate procedures and to monitor employee compliance.
The Act is going to change, in a material fashion, the way every company now conducts its consumer product business in Canada.
Bruce McNeely is a Partner in the Business Law Group at Cassels Brock & Blackwell LLP and the editor and primary author of the firm's well-regarded publication, Carrying on Business in Canada. In his 35 years of practicing in all aspects of corporate and commercial law, Bruce has developed significant expertise in the areas of mergers and acquisitions, financing, and energy law and has considerable experience with cross-border and international issues. He can be contacted at 416-869-5399 or bmcneely@casselsbrock.com.
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