On February 5, US District Judge Paul Gardephe for the Southern District of New York ruled in favor of the Natural Resources Defense Council, Inc. and Public Citizen, Inc. (the Plaintiffs) in a lawsuit against the Consumer Product Safety Commission (CPSC) regarding the opinion letter that Cheryl Falvey, the General Counsel of CPSC, issued on the February 10, 2009 federal ban on phthalates in children’s toys and child care articles. The court found that the phthalates prohibitions specified in the CPSIA apply to existing inventory and ordered the General Counsel’s opinion letter to be set aside (e.g., overturned).

The Plaintiffs challenged the General Counsel’s interpretation of Section 108 of the CPSIA. The CPSIA bans the sale, manufacture, import, and distribution of children’s toys and child care articles containing more than 0.1 percent (1000 ppm) of the phthalates BBP, DBP, DEHP, DIDP, DINP, or DnOP. In an opinion letter to Arent Fox LLP, Ms. Falvey stated that these federal restrictions apply only to products manufactured after February 10, 2009, the effective date of the ban.

The district court’s opinion overrules the General Counsel’s interpretation and establishes that all products, including those in inventory and currently on store shelves, must comply with the phthalates ban beginning February 10, 2009, the effective date of the ban. It is important to note that the court did not rule on the stay of enforcement of testing and certification requirements that CPSC issued on January 30, 2009.

CPSC issued guidance for complying with the phthalates requirements. According to this guidance, companies must report immediately to the Commission if they learn of a children’s toy or child care article that exceeds the new phthalates limits starting February 10, 2009. The guidance also reminds companies that the CPSIA generally prohibits the export for sale of children’s products that exceed the new phthalates limits.

In its opinion, the court first considered the CPSIA’s language and whether the phthalate prohibitions apply to existing inventory. According to the court, the phthalate provisions of the CPSIA “unambiguously forbid” the sale and distribution of products that violate these limits, regardless of when they were manufactured. The court then determined that the purpose of the Consumer Product Safety Act (CPSA) and the legislative history of the CPSIA also support a finding that the phthalate prohibitions apply to existing inventory, particularly because one of the CPSA’s purposes is “protect[ing] the public against unreasonable risks of injury associated with consumer products.” Finally, the court determined that the CPSC’s opinion letter is not entitled to deference because “it is not thorough, well-reasoned or substantiated.”

Commission Denies Request for a Stay of the Effective Date for Lead Content Limits

On February 6, the Commission voted unanimously (2-0) to deny the request from the Consumer Product Safety Commission Coalition of the National Association of Manufacturers (the NAM Coalition) to stay the effective date for the lead content limits specified at Section 101(a)(2) of the CPSIA. As a result, accessible parts and components in children’s products must meet the lead content limit of 600 ppm beginning February 10, 2009. This limit will decrease to 300 ppm on August 14, 2009. In a statement released by the Commission, Acting Chairman Nancy Nord explained that “While I agree that the effective date of this provision is problematic for many, the Consumer Product Safety Commission does not have the authority to stay the effective date. Any such change must be made by Congress.”

Commission Votes on Enforcement Policy on Lead Limits

On February 6, the Commission voted unanimously (2-0) to adopt the staff’s draft enforcement policy on section 101 of the CPSIA and lead limits (Enforcement Policy). The Commission adopted the Enforcement Policy for lead effective as of February 10, 2009, in light of the fact that (i) Congress gave CPSC only limited authority to grant relief from the new lead limits and (ii) while CPSC has attempted to exercise that authority through new rulemaking, in most cases, that process cannot be completed before February 10, 2009. The Enforcement Policy is as follows:

1. Accessibility: Under Section 101(b)(2) of the CPSIA, the new lead limits do not apply to component parts that are not accessible to a child through normal and reasonably foreseeable use and abuse of a children’s product. [1] Until CPSC finalizes guidance on inaccessibility, CPSC staff will accept a manufacturer’s determination that a part is inaccessible if it is based on a reasonable interpretation of Section 101(b)(2). Otherwise, the staff will make its own determination of inaccessibility, following the approach outlined in the rule the Commission proposed on January 6, 2009 (74 Fed. Reg. 2439).

2. Electronics: Last Friday, the Commission adopted an Interim Final Rule on electronics. The limits established in this rule will apply unless and until they are revised by the Commission after consideration of all public comments. The Interim Final rule is effective February 10, 2009 to prevent the unnecessary removal from inventory of children’s products whose electronic components exceed the 600 ppm limit but not the alternative limits specified in the Interim Rule.

3. Exclusions: According to the Commission, Congress set a high standard for excluding materials or products containing more than 600 ppm of lead, and CPSC staff is unaware at this time of any substance that would qualify for such an exclusion. At this time, the Commission will follow the process described in its previous notice of proposed rulemaking unless and until it is amended by a final rule.

4. Exemption for Certain Natural Products, Metals and Alloys: CPSC will not prosecute any person for manufacturing, importing, distributing, selling, or offering for sale a children’s product on the basis that it contains more than 600 ppm lead in any material if such material is on the list of consistently low-or no-lead materials outlined in the Commission’s proposed rule, unless such person (i) had actual knowledge that the product contained more than 600 ppm lead; or (ii) continued to manufacture, import, distribute, or sell such product after being put on notice of its lead content by CPSC staff. The list of materials includes precious and certain semi-precious gemstones (except for those based on lead or found associated with lead in nature), natural and cultured pearls, wood, natural fibers (including cotton, wool and silk), coral, amber, feathers, fur, untreated leather, surgical steel, and precious metals (gold of at least 10K quality, sterling silver, platinum, and the platinum metals). In addition, CPSC staff will seek corrective action where appropriate. Finally, if any of the materials described in the proposed rule contain more than 300 ppm lead, CPSC will consider this information when developing final determinations with respect to such materials.

5. Exemption for Ordinary Children's Books and Dyed or Undyed Textiles: Until the Commission issues appropriate guidance, it will not prosecute any person for manufacturing, importing, distributing, selling, or offering for sale a children’s product (or part) that falls within one of the following classes deemed to contain less than 300 ppm lead on the basis that it contains more than 600 ppm lead:

a. Ordinary children’s books printed after 1985 [2]; and

b. Dyed or undyed textiles (not including leather, vinyl or PVC) and non-metallic thread and trim used in children’s apparel and other children’s fabric products such as baby blankets. This class does not include such products if (i) they have undergone further treatment that may impart lead; (ii) they are ornamented with metal, rhinestones or other objects; or (iii) they have plastic or metal fasteners with possible lead content (such as snaps, grommets, zippers, or buttons).

CPSC, however, will prosecute if its finds that such person (i) had actual knowledge that the product contained more than 600 ppm lead; or (ii) continued to manufacture, import, distribute, or sell such product after being put on notice by Commission staff. In addition, CPSC staff will seek corrective action where appropriate. Finally, if any of these materials contain more than 300 ppm lead, CPSC will consider this information when developing final determinations with respect to such materials.

6. Reporting Excess Lead Content in Children’s Products: After February 10, 2009, manufacturers, distributors, and retailers must report to CPSC if they become aware of a children’s product that exceeds the applicable lead limits in any accessible part (including the higher limits for certain electronic components and devices) and that is being manufactured for sale in the United States or imported, distributed, or held for distribution.

7. Exports of Children’s Product Containing Excessive Lead: Section 216 of the CPSIA generally prohibits the export for sale of any children’s product exceeding the applicable lead limits after February 10, 2009. CPSC must be notified at least thirty days in advance of exporting for other reasons, such as export for destruction, so that it can notify the government of the importing country.

8. Testing and Certification: As noted in the Commission’s recent stay of enforcement of testing and certification requirements, children’s products with painted or coated surfaces made after December 21, 2008 and children’s metal jewelry made after March 23, 2009 must be tested for lead by a CPSC-accredited laboratory. The limits for paint decrease to 90 ppm and the limits for jewelry decrease to 300 ppm on August 14, 2009. Other lead testing and certification is stayed until February 10, 2010.

Letter from Congress to Acting Chairman Nord and Commissioner Moore

In a letter dated February 4, 2009, Representatives Henry Waxman, D-Calif., and Bobby Rush , D-Ill., and Senators John Rockefeller, D-W.Va., and Mark Pryor, D-Ark., urged CPSC to take “immediate further action” and provide guidance on the Commission’s overall CPSIA enforcement policy and the application of the CPSIA to thrift stores, ordinary children’s books and libraries, and fabrics and apparel.

Letter from Congress to President Obama

In a letter dated February 6, 2009, Representatives Joe Barton, R-Texas, George Radanovich, R-Calif., Cliff Stearns, R-Fla., and Ed Whitfield, R-Ky., sent a letter to President Obama urging legislative action to correct certain deficiencies related to effective dates and agency discretion in the CPSIA. In sharp contrast to previous letters from Rep. Waxman and Rush and Sen. Rockefeller and Pryor, the letter strongly supports the activities of Acting Chairman Nord and CPSC staff and their efforts to provide as much guidance as possible on the requirements of the CPSIA. This letter requests “quick legislative fixes” to the CPSIA, such as additional implementation time for CPSC to work through exemptions and modest changes to the Commission’s exemption authority to allow the Agency discretion to exempt products where lead absorption risk is negligible.

Final Legislative Attempt to Provide Relief Under the CPSIA

On February 6, Senator Jim DeMint, R-SC, introduced a bill to reform the CPSIA (S. 374). This bill also was introduced as an amendment to the economic stimulus bill. S. 374 has several major reforms, including permitting small manufacturers to use the testing and certification that their component suppliers have done to certify that the components do not contain lead above the legal limits; exempting thrift stores, yard sales, consignment shops, and other re-sellers, such as Goodwill and the Salvation Army, from the prohibitions in the CPSIA; preventing the application of the Act to existing inventory; providing a Good-Faith Exemption for small businesses; and requiring CPSC to provide the small business community with a compliance guide.

Please contact any of the individuals below if you have any questions regarding the significant judicial, regulatory and legislative activity that has taken place over the past few days regarding the Commission and the CPSIA.

Georgia Ravitz
ravitz.georgia@arentfox.com
202.857.8939

James R. Ravitz
ravitz.james@arentfox.com
202.857.8903

Scott A. Cohn
cohn.scott@arentfox.com
212.484.3984

Robert G. Edwards
edwards.robert@arentfox.com
202.857.6346

Amy S. Colvin
colvin.amy@arentfox.com
202.857.6338

[1] A component part is deemed not accessible if it is not physically exposed by reason of a sealed covering or casing and does not become physically exposed through reasonably foreseeable use and abuse of the product; however, paint and other similar coatings or electroplating may not be considered to be a barrier that makes underlying components inaccessible.

[2] The term “ordinary book” means one that is published on cardboard or paper printed by conventional methods and intended to be read. It excludes children’s books that have plastic, metal, or electronic parts.