Resource: Dealer's Guide to the CPSIA

admin
Last Updated: Aug. 11, 2009

The Consumer Product Safety Improvement Act (CPSIA) of 2008 affects your business in many ways. Not only has it banned the selling of many children’s vehicles, but it also mandates extensive standards for all ATVs imported or distributed on April 13 and afterward. And did you know that the act has it made it illegal for you to sell a recalled product?

To help you keep track of the new regulations, Dealernews presents this outline of the main issues from a dealer’s perspective. (Also see the timetable at the end of the guide.) We’ve culled information from the website of the Consumer Product Safety Commission (CPSC) — the agency charged with enforcing the act — as well as from other sources. We’ve made every effort to be accurate, but errors may exist. This guide is not a substitute for legal advice. If you see anything that’s wrong or missing, please contact Arlo Redwine at aredwine@dealernews.com, or call him at 949-954-8657.

Paint Lead Limits, Required Certificates
The CPSIA creates new lead standards for all products intended primarily for kids 12 and younger (dubbed “children’s products”). Many dealers have stopped selling these products until their manufacturers give them the OK.

There are two separate lead limits, one for paint and coatings, and one for content.

The lead limit for paint and coatings (a certain percentage by weight) has been the law for a long time. Since last November, however, manufacturers have had to test and certify all painted/coated children’s products (including vehicles). The limit drops to an even lower concentration on Aug. 14. When the standard drops, testing and certification to the new standard won’t be required for products already in inventory.

According to a Q&A on the CPSC site, certification is required for products made after Nov. 12, 2008, “based on a test of the product or a reasonable testing program for products.” Accredited third-party testing is required for products made after Dec. 21, 2008. Either way, the manufacturer or distributor must furnish a “general certificate of conformity” for each product, in paper or electric form. You may not actually possess an electronic certificate, but the supplier must give you a “reasonable means to access the certificate.”

So basically you should have a certificate for any children’s product that has paint or a coating and was made after Nov. 12.

Foreign manufacturers may submit samples of products for testing in the U.S. without certifying them. But before shipping any products other than these samples, the products must have the required certifications.

What if you know the product was made before Nov. 12? Can you safely assume it complies with the lead paint limit and sell it without a certificate? Seemingly yes, but we’re still trying to confirm this.

Lead Content Limits, Required Certificates
The lead content limit is the same concentration as the one for paint. On Aug. 14, the limit drops to a lower concentration. On Aug. 14, 2011, the limit drops yet again for all products for which it is “technologically feasible.” The limit applies only to accessible components. Internal engine parts, for example, are excluded.

This lead content limit is in effect now, but manufacturers don’t have to test and certify until Feb. 10, 2010. (This is due to a postponement issued by the CPSC. Note that the Q&As regarding this on the agency’s website are outdated.) When the standard drops in 2011, testing and certification to the new standard won’t be required for products already in inventory.

So right now manufacturers could just inform their dealers that it’s safe to keep selling, with no certificates.

The content limits apply to all products, not just those with metallic parts. Lead-containing ink, for example, is often injected into plastic, and manufacturing processes can add lead to nonmetallic components.

The CPSC has exempted certain materials such as leather and textiles, but only if “they have not been treated or altered or undergone any processing that could result in the addition of lead.” So you’d still need an OK from the maker.

The CPSC has created an exclusion process for products containing too much lead in accessible components. But as explained in the next section, obtaining an exemption seems impossible. Even CPSC staff has noted that it is not aware of any product that qualifies.

Ban on Selling Most Youth Vehicles
Many youth vehicles can’t be sold because they contain accessible parts that violate the lead content limit. Note that Y-12 vehicles are exempt from the content and paint limits because they are not intended primarily for kids 12 and younger. But these Y-12 quads must meet the new ATV standard, starting with those imported or distributed on April 13 (see below).

As mentioned, the CPSIA mandated that the CPSC create a process for excluding some harmless products from the lead content limits (but not the paint limits). Unfortunately, though, if a product contains an accessible component that exceeds the limit, its manufacturer has to prove that a child could not absorb “any” lead from it.

Well, motorcycle and ATV parts like valve stems and brake levers often contain lead above the allowed concentration. And because there is some hand-to-mouth exposure, kids could ingest a harmless amount of lead. But the act says “any,” so vehicle manufacturers probably couldn’t get an exemption.

Now U.S. Congress must enact a bill that either strikes out the word “any” or exempts youth vehicles. Such bills have been introduced, but it may be some time before President Obama signs off on one. For one thing, Congress may want to craft one large bill to amend all the other unintended consequences of the CPSIA.

Ban on Selling Recalled Products, Including Those for Adults
It is now against the law to sell a recalled product under the jurisdiction of the CPSC. Dealers should monitor the list of recalled products on the agency’s website (www.cpsc.gov).

Dealers also are now required to inform the CPSC immediately if they learn of a children’s product that violates the law or has a defect that may cause it to do so. You can report products through the agency’s website.

Ban on Some Phthalates, Required Certificates
The CPSIA bans certain phthalates (plastic softeners) in concentrations of more than 0.1 percent in “children’s toys and child care articles.” Some of the phthalates are only prohibited in products that can be brought to the mouth and mouthed. The limit is now in effect, but the CPSC has postponed the testing-and-certification requirement to Feb. 10, 2010.

The CPSC staff has said that the phthalate limit does not apply to youth vehicles. Because the agency has also exempted sporting goods, it’s probably safe to assume powersports gear is also exempt.

The main manufacturers that need to worry about the phthalate limits are those that make actual toys. These companies may also be affected by the CPSIA’s Mandatory Toy Standard (ASTM F963), which is in effect now with certification required starting Feb. 10, 2010.

The CPSC has also stated that the phthalate limits apply to things like bibs, pajamas, crib sheets and mattresses intended for children ages 3 and younger.

In addition, toy companies could be affected by the Small Parts provisions, which are in effect and require certification now. These provisions apply only for products intended for children under 3. Dealers who sell these products may want to obtain assurances or certificates from their distributors or makers.

Metal jewelry for children also now requires certification.

Life jackets are excluded from all provisions of the CPSIA.

New ATV Standards for All ATVs, Including Adult Ones
Manufacturers and distributors have to comply with a new ATV standard for all quads imported or sold to dealers on April 13 and afterward (though this may not be entirely true — see the editor’s note at the end of this section).

The standard has been around for a couple of years. To explain: Back in the mid-’80s, after the CPSC sued the ATV makers, they each signed mandatory Consent Decrees outlawing three-wheelers and specifying several safety regulations. The Consent Decrees expired in 1998, but the manufacturers continued to follow similar rules and programs on a voluntary basis. The Specialty Vehicle Institute of America (a branch of the MIC funded by the manufacturers) started developing an ATV standard in 1985, and in 1990 the ANSI approved the first standard for quads. The SVIA updated the standard in 2001 and 2007.

Last September, new three-wheelers were officially outlawed again. Starting April 13 of this year, all ATVs imported or sold to dealers must meet the 2007 standard, which is sold on the SVIA website for $60. The standard specifies requirements concerning an ATV’s equipment and configuration (including requirements for owner’s manuals, labels and hang tags), maximum speed capabilities, age recommendations, service and parking brakes, pitch stability, electromagnetic compatibility and sound level limits. It also requires that quads have a certification label indicating that they comply with the ANSI/SVIA standard.

In addition, manufacturers and distributors must have an action plan on file with the CPSC. An action plan is a document outlining the safety-related actions the manufacturer or distributor agrees to take concerning ATVs. The major OEMs filed such action plans back in 1998, and all new plans must be “substantially similar” to theirs. Note, however, that the ANSI/SVIA standard trumps many of the provisions from the 1998 plans. Age recommendations, for example, are now based on speed rather than on engine size.

The CPSC must approve any action plan filed after Aug. 14, 2008 (the day the CPSIA was enacted).

And it’s not enough just to have a plan on file: The OEM or distributor must be in full compliance with it. This is a tall order. Action plans include advertising and POP materials, safety alerts, a toll-free ATV hotline, a safety video and free, hands-on rider training for first-time buyers and their immediate families. OEMs and distributors must also monitor compliance through dealership inspections conducted by independent inspectors, and they must take action against noncompliant dealers. Every ATV must have a label identifying the manufacturer, the importer or private labeler, and the action plan to which it is subject.

So what does this all mean for dealers? First of all, the major OEMs already have been complying with the SVIA/ANSI standard and an action plan. But now that ATVs are officially subject to a consumer product safety standard, they must issue a general conformity certificate with each quad saying that it conforms to the standard.

Many of the newer importers have a lot of catching up to do. Dealers who wish to comply with the law after April 12 should ask for confirmation from the importer or distributor that it is meeting all the requirements above. On April 13 and afterward, dealers should have access to a conformity certificate for every quad they buy.

The CPSC has posted on its site a list of all companies with an approved action plan on file. As of Aug. 11, the following companies were on file: American Honda Motor Co. Inc., American Suzuki Motor Corp., Arctic Cat Inc., Baja Inc. (doing business as Baja Motorsports), Bombardier Motor Corp. of America and Bombardier Recreational Products Inc. (formerly known as Bombardier Inc.), Cannondale Corp., Carter Brothers, Chongqing Shineray Motorcycle, Dynamoto, Kawasaki Motors Corp. U.S.A., KTM North America, KYMCO USA, L&R Racing Inc. (doing business as DRR), Luyuan, Maxtrade, Polaris Industries Inc., SunL, Tomoto, Taotao USA Inc., Wildfire Motors and Yamaha Motor Corp. USA.

Ninety days after the CPSC publishes accreditation requirements for labs that will test conformity to the ATV standard (was scheduled for mid-June, but hasn't happened yet), the agency will require third-party testing for all ATVs intended primarily for children 12 and younger. Why? Because eventually all children’s products subject to a product safety rule will require third-party testing. Luckily, the agency will allow manufacturers to continue to use in-house testing for certifying adult ATVs.

(Editor’s note: The “Final Rule: Standard for All Terrain Vehicles” published by the CPSC in the Federal Register on Nov. 14, 2008, is ambiguous. In reference to the new ATV standard, it states, “This means that ATVs manufactured on or after the date [April 13] must comply with the standard. They also must meet additional requirements related to action plans.” But immediately following this, the agency quotes the actual law: “After the standard takes effect [April 13] it shall be unlawful for any manufacturer or distributor to import into or distribute in commerce in the United States any new assembled or unassembled all-terrain vehicle …” unless it meets the requirements. The actual statute seems to say that the standard applies to new ATVs made before April 13 but not yet imported or distributed in commerce. And the CPSC rule gets even more confusing. Later in the regulation, the commission states that the requirements “apply to new assembled or unassembled ATVs manufactured or imported on or after that date.” So according to this statement, the standards apply to ATVs made in a foreign country before April 13 but not yet imported into the U.S. We have contacted the CPSC for clarification.)

Tracking Label Requirements
All children’s products manufactured on Aug. 14, 2009, and afterward will require a permanent tracking label. The CPSIA requires that the label provide “to the extent practicable” marks that will enable your customer to ascertain the manufacturer or private labeler, the location and date of production of the product and other information.

It doesn’t seem as if dealers will be responsible for ensuring all children’s products contain tracking labels. But they will be required to tell the CPSC of any products that don’t seem to be properly labeled, when they notice.

These new labeling requirements may contribute to an increase in prices.

Requirements for Catalogs, Websites
Dealers who sell certain children’s products through catalogs or websites will want to become familiar with new advertising rules. These requirements are for only toys and games intended for children ages 3 to 6 that pose a choking hazard (not typically found in powersports stores). So basically, if the product has a warning label, the catalog or website page will need a similar one. The supplier is required to inform you of all required cautionary statements. Otherwise, you’re required to inquire for the information, but you won’t be held liable if the supplier lies to you or won’t provide the information.

Catalogs published before Feb. 10, 2009, are exempt until Aug. 9, 2009.

Possible Penalties
So what could happen to you if you don’t comply with the CPSIA? From the agency’s small-business guide: “The Commission’s response to a violation of the law varies depending upon the circumstances, including the nature of the product defect, the number of products, the severity of the risk of injury associated with the product and the type of violation. The Commission’s goal is to help you to avoid future violations and protect your customers, not to put you out of business.”

Lawyer Mark Bennett has written about the criminal penalties here. Bennett says that while the CPSC has decided to forgo enforcing the CPSIA, the CPSC is not the agency that decides whether to prosecute felonies. That’s the responsibility of the Department of Justice.

There are also hefty civil penalties. Under the law, any person or entity may sue to enforce a consumer product safety rule. Also, the CPSIA authorizes state attorneys general to enforce the act. Two partners of the law firm Nixon Peabody have written about this aspect of the law here.

Effect on Pricing of Children’s Products and All ATVs
Manufacturers and distributors will have to pay for all the testing and programs mentioned above, and they may increase prices to cover those costs.

CPSC staff has estimated that the cost of third-party testing of products for lead and phthalates would range from several hundred dollars to several thousand dollars per product tested, depending on the number of components requiring testing. Only one of each product needs to be tested, but if any change is made in the product’s design or in the manufacturing process, it has to be tested again.

Bicycle industry representatives have said that testing the 233 components of a bicycle for lead content cost one of their members about $14,000.

And remember that all children’s ATVs eventually will have to undergo third-party testing to certify they comply with the new SVIA/ANSI standard. Prices may rise, and some of the smaller importers may have trouble being compliant.

Compliance and Testing Timetable

When do products need to comply?When should I start receiving certificates?
*Lead in Paint NowNow
*Limit dropsAug. 14, 2009 Aug. 14, 2009
*Children’s Metal JewelryNowMarch 20, 2009 (Now)
*Total Lead Content LimitNowFeb. 10, 2010
*Limit DropsAug. 14, 2009Feb. 10, 2010
*Limit Drops (if feasible)Aug. 14, 2009Aug. 14, 2011
*ATV Standard (including actions plans)April 13, 2009 April 13, 2009
*Certain phthalates in toys and child care productsNowFeb. 10, 2010
*Mandatory toy standard (see above for its limited applicability to the industry)Now (for new production only)Feb. 10, 2010
*Small Parts (see above for its limited applicability to the industry) NowNow