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By: Emilija Rasinskaite and Chris Mermigas – USA Legal Team
New changes to California’s Safe Drinking Water and Toxic Enforcement Act of 1986, more commonly referred to as “Proposition 65” or “Prop 65,” has had a ripple effect from retail sellers all the way back to manufacturers and component suppliers such as Valid. Valid, like other manufacturers and suppliers, produces finished goods for their clients, which are then resold and/or distributed throughout the country, and even globally. The new Prop 65 warning labels requires Valid, and manufacturers and suppliers to more fully grasp the environmental and safety impacts of their products or how their components may impact a finished good, with the assumption that they might end up for sale in California.
Prop 65 was enacted to identify chemicals found in products and materials sold in California (CA) that could lead to cancer, birth defects, or reproductive harm. Prop 65 requires companies (specifically product manufacturers, suppliers, packagers, producers, or distributors) doing business in CA, or selling products to residents of CA, to provide a warning label if their products contain any of the 950 identified chemicals that exceed safe harbor levels. With recent additions to the regulations in 2018, the responsibility to provide a warning has shifted from retail sellers to the suppliers and manufacturers. However, retail sellers remain responsible for the placement and maintenance of the warning labels.
Compliance with Prop 65 can be achieved in one of three ways:
- The materials or products supplied to the retail seller do not contain chemicals that are on the Prop 65 list.
- None of the chemicals used in materials or products supplied to the retail seller exceed California’s Safe Drinking & Toxic Enforcement Act of 1986 (“Act”) safe harbor levels, including the No Significant Risk Levels (NSRLs) and Maximum Allowable Dose Levels (MADLs).
- The materials and/or products supplied to the retail seller contain chemicals on the Prop 65 list that exceed safe harbor levels. In this case, the manufacturer or supplier must provide a warning label.
For more information about Prop 65, please visit the CA website at: https://oehha.ca.gov/proposition-65.
The following are several tricks and potential traps that all companies should watch out for:
- Manufacturers and suppliers commonly look to Safety Data Sheets (“SDS”) for chemical or toxic information. However, SDS are not sufficient to determine whether or not a finished product either has one of the listed chemicals present, or if the levels of the chemical are within the safe harbor levels. SDS are essentially ingredients lists, and without further testing it is difficult to assume if the finished product contains traces of the Prop 65 chemicals. Also, SDS which do not contain 100% of the chemical composition, may only identify a chemical compound as proprietary material, and are only required to communicate hazardous chemical products. The classification of hazardous chemical products does not match the list of chemicals identified under Prop 65. This creates a risk of missing a chemical identified under Prop 65 but is not present on the SDS.
- For products below safe harbor levels, warning labels are optional. Manufacturers and suppliers delivering products to the retail seller do not dictate specifications and artwork, or if a warning label will be utilized. For instance, a client provides artwork and design specifications, and the manufacturer produces the product with the artwork according to the specifications. The manufacturer cannot unilaterally change the artwork to include a Prop 65 warning if no warning is required under the law. Hence, it would be the client’s decision to include a Prop 65 warning for chemicals under the safe harbor levels.
- A company would have to send the finished product to a lab so that specific tests can be performed to determine the toxicity, if any, of the finished product. The key take-away here is that the ingredients that go into making a finished product may have traces of the listed chemicals which are no longer detectable in the final product. This is because as the product goes through different stages of production, chemicals get burned off and/or sealed away; therefore, decreasing or eliminating exposure. Companies who are unaware or inexperienced with Prop 65 may mistakenly assume that because their product has trace amounts of Prop 65 chemicals, that they are not compliant. This leads to another potential trap: the false-positives.
- False-positives assume Prop 65 chemicals exist in the materials or products without proof or confirmation. False-positives can be mistakenly assumed when a manufacturer or supplier does not want to do lab testing to determine the levels of toxicity, but rather save the money and provide the Prop 65 warning. The Company is potentially assuming liability where there may be none. To overcome a false-positive in the supply chain, the retail seller would need to send every end product for testing and determine what levels of Prop 65 chemicals exist. For lab results where no Prop 65 chemicals are present, the false-positive warning may expose the manufacturers or suppliers to contractual liability to their retail sellers. The cost of lab testing and the time it takes to do it is miniscule compared to the potential liability and other expenses that could be incurred without it.
- Manufacturers and suppliers do not control how the products migrate through the marketplace. Manufacturers and suppliers are merely responsible for the creation and production of an end-product, but not the sale to the end user. That being said, manufacturers and suppliers may be located outside CA and may have no relations with CA. They may want to restrict where the finished end-product is ultimately sold and shipped, but there is no guarantee that the product won’t be sold in CA. The restriction would merely be a contractual obligation that a retail seller has with its manufacturers or suppliers. In the event that the end-products do end up being sold in CA, the retail seller would only have a contractual liability to indemnify the manufacturers and/or suppliers. Bottom line is that the finished end-product may end up in CA where it must comply with laws there. A simple example of this includes items manufactured in Florida, purchased on the internet and shipped to CA. This situation really is a no-win scenario for manufacturers and suppliers because it forces them to comply with Prop 65 based on an assumption that an end product may end up in CA.
Ultimately, taking steps to comply with Prop 65 should be determined by each company individually; each assumes the risk of non-compliance or being ignorant of it. Complying with Prop 65 is not mandatory, but facing the music when something happens should be expected. It is better for manufacturers and suppliers to prepare for the worst, and to do the appropriate lab testing in order to know and address their liability, rather than be surprised by a lawsuit or violation fines down the line.