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Canadian Product Liability Law

Sunday, June 25, 2017 | Ideas and resources on product liability law

An overview of: the Canada Consumer Product Safety Act

Posted in Product Safety

The Canada Consumer Product Safety Act,  (CCPSA or the Act) came into force on June 20, 2011.

Canadian manufacturers, importers, distributors, retailers and advertisers of consumer products have significant new obligations under the CCPSA. Under the old legislative regime, one could sell any product in Canada unless it was prohibited by law. In contrast, the CCPSA establishes various general prohibitions in respect of the sale of unsafe goods, and enforcement mechanisms that bring Canada’s consumer product safety regime more in line with that in the US and EU In particular, the CCPSA:

  • prohibits the manufacturing, importing, advertising or sale of consumer products that pose a danger to human health and safety (ss. 7 and 8);
  • prohibits anyone from packaging or labeling a consumer product in a manner that could reasonably be expected to create an erroneous impression that it is not a danger to human health or safety (s. 9);
  • imposes requirements for the reporting of incidents and test results to Health Canada (ss. 12 and 14);
  • imposes document retention requirements (s. 13);
  • empowers Health Canada to order recalls and impose other remedial measures (ss. 31 and 32);
  • empowers Health Canada with various inspection rights and the ability to order testing to verify compliance with the Act (ss. 12 and 21); and
  • establishes increased enforcement options in the face of non-compliance, including both criminal sanctions and administrative monetary penalties (ss. 41 to 53).

The CCPSA maintains the majority of prior Canadian safety regulations under the repealed Part I of the Hazardous Products Act, R.S.C., 1985, c. H-3. For example, regulations concerning toys, children’s sleepwear and car booster seats have now been transferred to the CCPSA. Other than Part I, the Hazardous Products Act remains in force and effect to provide a legislative and regulatory scheme for “controlled products.”

Retailers will find themselves on the front line in dealing with the CCPSA but others in the chain of distribution will have similar obligations. This article provides a comprehensive overview of the key obligations, and a summary of the penalties for
non-compliance with the CCPSA.

Products Covered by the CCPSA

Under s. 2 of the CCPSA, consumer products are broadly defined to include any product (including its components, parts, accessories and packaging) that could reasonably be expected to be obtained by an individual for non-commercial purposes, including domestic, recreational and sports purposes.

There are exceptions. Consumer products do not include products that are governed by other federal legislation, such as food, drugs, natural health products, medical devices, cosmetics, pest control products, animal feed, seeds, fertilizers, explosives, firearms, ammunition, motor vehicles (including integral parts), airplanes, ships and animals (CCPSA, Schedule 1). The CCPSA applies to tobacco products but only in respect of their flammability properties (CCPSA, section 4(2)). But it is important to note that there may be situations in which the packaging of an exempt product is considered to be a consumer product, but the contents of such package are not.

Health Canada has advised that it will be working with the provincial electrical safety authorities to streamline the process for handling consumer electrical product safety issues. In the meantime, however, affected persons must be cognizant of the overlapping jurisdiction of provincial electrical safety authorities and Health Canada under the CCPSA. For example, in Ontario, manufacturers, importers, distributors and retailers of electrical products will continue to be subject to the mandatory reporting and approvals regime of Ontario’s Electrical Safety Authority, and there are some differences in products covered, reporting obligations and definitions of serious injury.

General Prohibitions

The CCPSA includes express prohibitions against the manufacture, importation, advertisement or sale of consumer products that are a “danger to human health or safety,” or that are the subject of a recall (voluntary or mandatory), or that are subject to another measure ordered by the Minister in respect of such products (ss. 7 to 8). There are also a number of specifically prohibited products listed in Schedule 2 of the CCPSA, as was the case under Part I of the Hazardous Products Act (s.5) and no one is permitted
to manufacture, import, advertise or sell a consumer product that does not meet the requirements set out in the regulations (s.6). In addition, no one can package or label a consumer product in a manner that creates an erroneous impression that the product is not a danger to human health or safety, or that falsely describes its certification status or compliance with a safety standard or regulation (s. 9). Furthermore, no one can sell consumer products that they know do not comply with obligations in respect of misleading advertising, packaging or labeling (s. 10).

As might be expected, the phrase “danger to human health and safety” is broadly defined to include any existing or potential unreasonable hazard posed by the normal or foreseeable use (and even foreseeable misuse) of a consumer product that may reasonably be expected to cause death, injury or an “adverse effect” on an individual’s health, whether immediate or chronic.

The definition of “sell” is defined so as to include leases, donations and sales for no consideration, which encompasses loyalty programs.

Mandatory Incident Reporting

While there is a general prohibition on manufacturing and distribution of consumer products that are known to be unsafe, mandatory incident reporting (s. 14) applies only to incidents concerning “serious adverse effects” on health. Health Canada interprets a serious adverse health effect as being an illness or injury requiring medical treatment such as a burn, a laceration, internal bleeding, a fracture, poisoning, loss of function, loss of consciousness, inability to breathe, etc. Health Canada’s goal in requiring
incident reporting is to address unreasonable hazards and help prevent serious injuries and other adverse health effects on people by observing and responding to trends that are revealed in reports.

Manufacturers, importers and sellers must report any incidents involving consumer products (whether they occurred in Canada or elsewhere) to Health Canada. “Incident” is defined in the Act to include any occurrence that resulted (or may reasonably have been expected to result) in death or a serious adverse effect on an individual’s health, including a serious injury (s. 14(1)(a)). “Incident” is also defined to include a defect or characteristic, or an incorrect, insufficient or missing label or instructions, any of
which may reasonably have been expected to result in death or a serious adverse effect on someone’s health (again, including a serious injury) (s. 14(1)(b) and (c)). Examples of incorrect labels could include a picture that shows unsafe use, or inadequate instructions that might result in someone incorrectly assembling a product that creates a hazard. Importantly, an injury does not have to have occurred in these cases. Finally, recalls or any other measure instituted for human health or safety reasons by a foreign entity, a provincial government or other provincial government body or institution, or an Aboriginal government or institution, are also considered to be incidents that must be reported (s. 14(d)).

Under the strict language of the Act, once a manufacturer, importer or seller learns of an incident, it has two days (not including holidays) to provide a report to Health Canada and the person (if any) from whom they received the consumer product (e.g., the importer or distributor in the case of a retailer) containing all the information about the incident within their control (s. 14(2)). However, Health Canada has stated that the clock only starts to run once it is determined that there has been an incident. This means that once a manufacturer, importer or seller becomes aware of the event or the relevant information, it can take a reasonable amount of time to evaluate it to decide whether such event constitutes a reportable incident under the Act. Insights into Health Canada’s interpretation of the CCPSA can be found in its Frequently Asked Questions for the Canada Consumer Product Safety Act and its presentation to industry.

Health Canada’s guidance document on incident reporting includes a decision tree to assist in determining whether something is a reportable incident. Guidance on Mandatory Incident Reporting under the Canada Consumer Product Safety Act –Section 14 Duties in the Event of an Incident can be found here. The questions the document poses are: Is this a consumer product that I manufacture, import or sell in Canada? Is the consumer product connected to the event? Does the event meet the criteria of an incident? Does the event indicate an unreasonable hazard posed by the normal or foreseeable use of the product or the foreseeable misuse of the product?

Only if the answer to each of those questions is yes, and only once that determination is made, can one conclude that there is a reportable incident (note that the event may occur in a commercial setting, but involve a consumer product and therefore be reportable). At that point, the clock begins to run on the reporting obligation. It is also possible that while an individual event may not rise to become an incident, a string of similar events may lead to the conclusion that there is something that requires reporting.

If a manufacturer, importer or seller has determined that there has been an incident, it can complete the online incident reporting form developed by Health Canada .

If the report contains confidential business information (defined in s. 2 as information that is not publicly available, that has been protected to remain confidential, and that has economic value by virtue of it not being publicly available) or personal information, that fact should be indicated at the time the report is provided to Health Canada. Generally speaking, before disclosing such information the Minister requires the consent of the person to whose business or affairs the information relates. However, there are exceptions to this.

The Minister may disclose a reporting entity’s confidential business information without first obtaining the consent of that entity: to a person or government that carries out functions relating to the protection of human health or safety or the environment (in relation to a consumer product), provided that person or government agrees to maintain the information in confidence and to use it only for the purpose of carrying out its functions (s. 16); or to anyone, including the public, when there is a serious and imminent danger to human health or safety or the environment, if the disclosure of the information is essential to address the danger (ss. 17(1) and 18). In the latter case, the person to whose business or affairs the information relates is to be notified by the Minister of the disclosure within the next business day (s. 17(2)). “Serious and imminent danger” is a very high threshold and it is unlikely the Minister would exercise this power absent extreme circumstances. However, it is also notable that the Act does not address what a party may do if it believes the Minister has improperly disclosed confidential business information.

Similarly, records may contain personal information about an individual. The Minister may disclose personal information to a person or government that carries out functions relating to the protection of human health or safety, without the consent of the individual to whom the information relates, if the disclosure is necessary to identify or address a serious danger to human health or safety (s. 15(1)).
There is no requirement for the Minister to notify the individual concerned.

In considering the effect of these provisions, it should be noted that Health Canada routinely shares information with the US Consumer Product Safety Commission (US CPSC), pursuant to a 2005 Memorandum of Understanding regarding cooperation related to the safety of consumer products.

In addition to the incident report, Canadian manufacturers and importers of products manufactured outside Canada must also provide Health Canada with a second report within 10 days of becoming aware of the incident (or within the period that the Minister specifies by written notice). This report must include information about the incident and the product involved, and identify any other products they manufacture or import that to their knowledge could be involved in a similar incident (for example, because they share the particular component that is at issue) (s. 14(3)). This report must also set out any measures the manufacturer or importer proposes to take with respect to those products. Health Canada’s online incident reporting form has been designed to permit a manufacturer or importer to simply update the initial two-day report with the additional information required for the 10-day report.

For a particular product, all parties in the chain of distribution must consider whether they need to submit an incident report. If a retailer submits an incident report to Health Canada, the manufacturer or importer concerned may also have to submit an incident report if it determines, independently of the retailer, that there has been a reportable incident. As well, there could be two or more manufacturers that need to report — the manufacturer of a component and the manufacturer that assembles the finished product (and the manufacturer of any intermediate assembly).

While Health Canada recognizes that there may be a reasonable period of time between learning of an event and having to report an incident, it will be important for retailers to ensure that their frontline retail staff obtain information from consumers regarding any events and pass that information along to supervisors who can inform the organization’s responsible person. However, there are many ways to learn of an event, including notification from a standards body or from the entity from whom a product has been sourced, or receiving a test report or a scientific or epidemiological study. Procedures need to be established to ensure that such information reaches a responsible person within the organization in a timely fashion, to allow for a determination to be made whether an incident report is required.

It is also important to evaluate whether the triggers to report in Canada are different from those in other jurisdictions. Just because a report is made to the US CPSC does not necessarily mean that an incident report must be made to Health Canada, and vice versa. However, if Health Canada inquires as to why it did not receive an incident report (after learning of a report made to the US CPSC), one would be advised to have a reasoned analysis for that decision available.

Document Retention and Disclosure

The CCPSA requires parties in the chain of distribution to maintain various documents and keep them available for inspection. According to Health Canada, these requirements were implemented to ensure consumer products (and their components, given the definition of consumer products) can be traced back through the supply chain to their origin in the event a danger must be addressed, by, for example, instituting a recall (Health Canada, Guidance on Preparing and Maintaining Documents under the Canada Consumer Product Safety Act (CCPSA) – Section 13,  can be found here.

Anyone who manufactures, imports, advertises, sells or tests a consumer product must now maintain records of names and addresses of persons from whom they obtained the consumer product (s. 13(1)(a) (i)) and (with the exception of sellers) to whom they sold it (s. 13(1)(a)(ii)). While sellers (i.e., principally retailers) do not need to keep a record of each sale and the identity of their customers, they must retain records of the location where and period during when they sold the product (s. 13(1)(a)(i)). Health Canada is considering regulations to exempt certain classes of persons (e.g., those who obtain consumer products for sale through donations) from these obligations.

Any records prescribed by regulation (such as records required under the Consumer Chemicals and Containers Regulations, 2001 (SOR/2001-269)) must also be kept by anyone who manufactures, imports, advertises, sells or tests a consumer product (s. 13(1)(b)). In the case of importers of consumer products for commercial purposes, the prescribed records must be provided to the Minister no later than at the time of importation (s. 13(5)). These records must be kept until the end of the sixth year after the end of the year to which they relate. So if the record is made in February 2012, it must be kept until the end of December 2018 (unless a regulation prescribes otherwise) (s. 13(2)).

All records must be kept at the person’s place of business in Canada or any prescribed place (unless the Minister exempts them from doing so on the basis that it would be unnecessary or impractical to do so) (ss. 13(3) and 13(4)). However, electronic documents do not need to be kept on servers in Canada, as long as such records are accessible from a computer terminal in Canada. In the case of retailers, the documents in question may be located at the corporate head office rather than an individual retail location. (For more information, see Health Canada, Frequently Asked Questions for the Canada Consumer Product Safety Act )

These documents must be provided to the Minister upon request. The time period within which to provide the documents will depend on the circumstances and in some cases is prescribed by regulation (for example, documents regarding the specification of child-resistant characteristics of a container under s. 10 of the Consumer Chemicals and Containers Regulations, 2001 must be provided within 15 days).

Again, for the reasons set out above, it will be important to clearly identify confidential information and personal information in any documents disclosed by the Minister.

Inspections and Orders for Remedial Measures

To verify compliance with the CCPSA, Health Canada inspectors have the power to enter, at any reasonable time, any place (or vehicle) in which they have reasonable grounds to believe that a consumer product is manufactured, imported, packaged, stored, advertised, sold, labeled, tested or transported (s. 21(1)). An inspector is permitted to examine or test anything, open packages, take samples, seize articles, search computers, copy documents and stop the activity in question (s. 21(2)). These powers are akin to thepowers that are possessed by the Canadian Food Inspection Agency, which oversees many of the types of products that are exempt from the CCPSA such as food, drugs, fertilizers and feeds. Persons in charge of the premises are required to provide inspectors with reasonable assistance and with any information that they reasonably require (s. 21(5)).

In addition, the CCPSA has provided significant new powers to the Minister. If the Minister of Health believes on reasonable grounds that a consumer product is a danger to human health or safety, the Minister can order a manufacturer, importer or seller to recall it (s. 31(1)). This is a major change in the consumer product safety regime in Canada: prior to the CCPSA, it was only possible for Health Canada to request recalls be undertaken voluntarily. However, this new power is comparable to the Canadian Food Inspection Agency’s pre-existing power to order a mandatory recall of food (or another product within its mandate) if it poses a risk to public, animal or plant health (Canadian Food Inspection Agency Act). A Minister’s recall order must include a statement of the reasons for the recall and the time and manner in which the recall is to be carried out (s. 31(2)).

Under the CCPSA, the Minister also has the authority to stop a person from manufacturing, importing, packaging, storing, advertising, selling, labeling, testing or transporting a consumer product, or to order them to take any measure that the Minister considers necessary to remedy non-compliance with the CCPSA (or its regulations), if the person fails to comply with an order regarding testing or a recall, or if there has been a voluntary recall or if the Minister has reasonable grounds for believing there has been a contravention of the CCPSA (or its regulations) (ss. 32(1) and (2)). If a party fails to comply with a Minister’s order, then the Minister can carry out the recall or other remedial measure at the party’s expense (s. 33).

There is an administrative process to review a Minister’s order for a recall or other remedial measure. However, it must be initiated within seven days of the order (or a shorter period if specified in the order), and the review is limited to questions of fact or mixed law and fact (ss. 35(1) and (2)). The review decision (which can confirm, amend, terminate or cancel the reviewed measure) must be provided within 30 days (although the officer can request a longer period) (ss. 35(7), (8) and (10)). An order continues to apply during a review unless the review officer decides otherwise (s. 35(6)). The reviewing officer has the authority to refuse to conduct a review if it is not submitted in a timely fashion, fails to state the grounds for the request, or fails to set out the evidence that supports those grounds, or is otherwise frivolous, vexatious or not made in good faith (s. 35(3)).

The Minister also has the power to seek an injunction from a court to stop someone from doing something that may appear to be directed toward committing an offense under the CCPSA or to order someone to do something that may prevent the commission of an offense under the CCPSA (s. 36). As well, the Minister has the power to make an interim order in respect of any matters within the Minister’s regulatory authority if the Minister believes that immediate action is required to deal with a significant danger to human health or safety (s. 40). In the preamble to the CCPSA, it is expressly stated that a lack of full scientific certainty is not to be used as a reason for postponing measures that prevent adverse effects on human health if those effects could be serious or irreversible.

The Minister can order manufacturers and importers to conduct tests or studies to ensure compliance with the CCPSA or its regulations; to compile information considered necessary to prevent non-compliance; and to provide the Minister with that information and any test or study results (s. 12).

Penalties Under the CCPSA

Offenses
The most serious penalties are reserved for circumstances in which someone advertises or sells a product they know is a danger to human health or safety; is the subject of a recall because it is a danger to human health or safety; or is the subject of a Minister’s order under s. 32 for remedial measures (e.g., stopping its importation). Similarly serious penalties face those who knowingly or recklessly contravene the CCPSA (including knowingly providing the Minister with false or misleading information), or contravene any CCPSA regulations or a Minister’s order. In such circumstances, the person can be indicted and subject to an indeterminate fine or imprisonment of up to five years, or both. Or, if the Crown proceeds by way of summary conviction, a person convicted of a first offense is subject to a maximum fine of $500,000 or a maximum imprisonment of 18 months (or both). Subsequent convictions face maximum fines of $1 million or maximum imprisonment of two years (or both) (s. 41(3)).

For other contraventions of the CCPSA, its regulations or a Minister’s order, the penalties for conviction on indictment include a maximum fine of $5 million or a maximum imprisonment of two years (or both). On summary conviction for a first offense, penalties include a maximum fine of $250,000 or maximum imprisonment of six months (or both). Subsequent convictions risk a maximum fine of $500,000 and a maximum imprisonment of 18 months (or both) (s. 41(1)). Due diligence is a defense for these other contraventions (s. 41(2)).

In sentencing, the court is directed to take into account the harm or risk of harm caused by the commission of the offense and the vulnerability of the individuals who use the consumer product (s. 41(4)). Children, for example, would be considered more vulnerable than adults. It is important to note that if an offense is committed or continued on more than one day, it constitutes a separate offense for each day on which it is committed or continued (s. 44). However, proceedings by way of summary conviction have to be instituted within two years after the Minister becomes aware of the acts or omissions that constitute the alleged offense (s. 46).

Directors, officers, agents or mandatories who directed, authorized, assented to, acquiesced in, or participated in the commission of an offense, are considered a party to the offense and if convicted are liable to the above penalties (s. 42). It is sufficient proof of an offense to establish that it was committed by an employee, agent or mandatory of the accused (s. 43).

Violations
The CCPSA also provides for the imposition of administrative monetary penalties (AMPs) where persons are found to have committed violations by contravening a Minister’s order to conduct recalls or a Minister’s order to take other remedial measures to remedy non-compliance with the CCPSA or its regulations. Due diligence is not a defense to a violation; neither is a reasonable and honest belief in facts that, if true, would exonerate the person (s. 59(1)).

The exact manner in which an AMP will be calculated is to be laid out in a regulation that is expected to be enacted in 2012. In its 2010 consultation paper, Health Canada proposed a points system based on the gravity of the violation, including the number of prior violations a party had and the risk of harm from the acts or omissions in question. However, the Act provides that the maximum penalty for a violation is $5,000 in the case of a non-profit organization (or any other person acting for non-commercial purposes) and $25,000 in any other case (s. 50(2)).

If someone receives a notice of violation, then rather than pay the proscribed penalty they may ask to enter into a compliance agreement with the Minister, which could include a reduction of the penalty (in whole or in part), or they can request a review of the acts or omissions at issue. If a compliance agreement is entered into, the Minister may require reasonable security to be given pending compliance with the agreement. If a compliance agreement is not complied with, the security shall be forfeited to the Crown and the penalty that was set out in the notice of violation is doubled. On a review, which is to be
done in writing only, the Minister can determine, on a balance of probabilities, whether or not the violation was committed, and has the ability to alter the penalty (ss. 56, 60).

If a violation is continued on more than one day, it constitutes a separate violation for each day on which it is continued (s. 63). Proceedings by way of summary conviction have to be instituted within six months after the Minister becomes aware of the acts or omissions that constitute the alleged violation (s. 66).

Directors, officers, agents or mandatories who directed, authorized, assented to, acquiesced in, or participated in the commission of a violation are considered a party to and liable for the violation (s. 61). A person is liable for a violation committed by any employee, agent or mandatory acting in the course of their employment or scope of their authority (s. 62).

Conclusion
The CCPSA imposes many new obligations on a vast number of entities that until now have not had to be concerned with a specific product safety regime, beyond basic common-law obligations like the duty to warn. Health Canada now wields powers much like the US CPSC, but how it will exercise such powers remains to be seen.

In advance of the CCPSA coming into force, Health Canada doubled the number of inspectors nationwide to 90. The Director General of the Consumer Product Safety Directorate has stated publicly that Health Canada will use targeted oversight, focusing on protecting vulnerable populations such as children from serious injury, and will try to head off potential problems by working with the higher levels of trade (i.e., manufacturers and importers) and with the Canadian Border Services Agency. As well, Health Canada has advised that it expects to engage in step-wise enforcement practises, seeking voluntary compliance before resorting to making orders and commencing prosecutions.