California Chemical Warning Rules Cause Headaches for Promo Firms

New chemical warning regulations for consumer products in California are drawing criticism from promotional product companies that assert they present onerous challenges and make companies vulnerable to lawsuits.

While the new rules don’t take effect until August 30, 2018, promotional product companies are already grappling with them as they create catalogs for next year and prepare for the coming changes, which some industry pros panned as potentially detrimental to sales and ineffective at achieving their aim of educating and protecting consumers.

“I am all for regulation and safety, but some of this stuff is excessive,” said Harry Ein, owner of San Francisco-area Perfection Promo, an affiliate of Top 40 distributor iPROMOTEu (asi/232119). “I think it’s going to be tough on our industry.”

The focus of the angst is updates to the Safe Drinking Water & Toxic Enforcement Act of 1986, commonly called Proposition 65. The updates dictate more rigorous warnings for products available in the Golden State that contain chemicals California has deemed to cause cancer or reproductive toxicity.

In a potentially befuddling twist, the new warnings are not mandatory and are intended for businesses with 10 or more employees. However, California officials say that using the so-called “safe harbor warnings” is an effective way for businesses to protect themselves against Prop 65 enforcement actions. And, businesses hope, potential lawsuits. “You can apply a (warning) label, or not label and play a game of legal roulette,” said Emily Grier, global compliance and import manager at Los Angeles-based distributor Jack Nadel International (asi/279600).

 

Prop 65 Challenges

Still, ensuring that warnings will meet the new state-approved criteria can be daunting, some promo pros say.

For instance, Ohio-based Kaeser & Blair (asi/238600), which conducts business in California, wants to include warnings on products in its annual 2018 catalog that conform to the updated Prop 65 regulations. But to do that, the Top 40 distributor needs suppliers with products in the catalog to share if their items contain any of the more than 850 chemicals on California’s list of carcinogens and reproductive toxicants. Containing even one of the chemicals can trigger the need to provide a warning in order for a business to protect itself against Proposition 65 enforcement actions and possible lawsuits. In addition to catalogs, there is legal language that stipulates how to apply warnings on labels, directly on products, for online purchases and more. 

So far, Kaeser & Blair says it has received no feedback from suppliers, which is complicating the creation of a catalog that needs to make it to the printer this autumn. “I don’t think our industry necessarily understands how important it is to comply,” said Gregg Emmer, vice president and chief marketing officer at Kaeser & Blair, who pointed out that fines for violations can run up to $2,500 per violation per day. “You open yourself up to be sued by virtually anyone in California if you’re not doing this the right way.”

For its part, Jack Nadel International is also being proactive about the updated warnings. The Top 40 distributor is communicating with manufacturers and suppliers about the changes, discussing with industry experts and partners how best to proceed, and developing a policy for how to handle warnings on labels, said Grier.

Even so, Grier, like other promo pros, was critical of the Prop 65 warning rules. Financial and logistical challenges related to adequately testing for potential Prop 65-listed chemicals is one major concern, she said. Among other issues, there is worry that a Prop 65 label on a product outside California can unduly worry consumers and lead to lost sales. California-based companies could, it was pointed out, have to bog down the order flow process to remove labels on products heading out of state. Additionally, the fact that rules allow for only one chemical to be listed in a warning is problematic on a number of levels, said Grier. For starters, it doesn’t give the consumer much information. Plus, it creates a quandary for companies: A product could have multiple listed chemicals, so which one should be highlighted in the warning? And if a company lists one but not another, is the firm really protected against penalties and lawsuits?

“Proposition 65, while having great intentions, has unfortunately morphed into a rather ineffective, red tape-fueled litigation gold mine,” said Grier. “There was no reasonable way for manufacturers to comply previously and despite all the effort that was put in I see no evidence of a gain in any direction with this labeling change.”

Despite the outcry from some in the ad specialty industry, other promotional product firms say they’re not especially concerned because dealing with Prop 65 is nothing new, even if warning criteria is changing. “Since nearly all the SKUs we carry are Prop 65 compliant and do not require a Prop 65 label when shipping to California, our concerns are minimal,” said Melissa Ralston, vice president of Marketing at Florida-based Top 40 supplier BIC Graphic (asi/40480). Ralston noted that there are minor exceptions for BIC in which products inherently require a label due to the material used in the construction of the item (e.g., lead crystal). However, she said, BIC has a long-standing compliance program, including Prop 65, to make certain it is able to deliver a safe, compliant product. “We are already working to modify our Prop 65 warnings to ensure we adhere to these new regulations, but again, this only impacts a very minute portion of our SKUs that require it when shipping to California,” Ralston said. 

BIC’s commitment to staying within the lines on Prop 65 is a smart move suppliers should consider emulating. After all, California says it’s incumbent on manufacturers to provide the chemical information. “Manufacturers have the primary responsibility for providing Proposition 65 warnings,” the state says. “Manufacturers can choose whether to put warning labels on their products or to provide notices to their distributors, importers or retail outlets that a product may cause an exposure to a listed chemical that requires a warning.”

While the burden is on manufacturers and new regulations contain a caveat that says products manufactured before the August 30, 2018, effective date do not need to conform to the updated warning requirements, Emmer says that doesn’t change the situation for distributors like Kaeser & Blair who are trying to put together a catalog now. “That simply allows manufacturers to clear existing inventory and packaging,” Emmer said of the caveat. “If an industry vendor takes delivery of a full year's inventory, they can use the current warnings until that is gone. For a distributor who has no control or knowledge as to the inventory manufacture date, we have to comply with the new rules if we do an annual catalog.”

Memo Kahan can relate to Emmer’s situation.

“We will be adding warnings to our online catalog,” said Kahan, president of Los Angeles-based Top 40 distributor PromoShop (asi/300446). “Even though we do not currently transact via our online catalog, our clients are looking there first for product they may purchase. Yet more work and confusion!”

 

New Warning Rules

Since Prop 65’s original warning requirements took effect in 1988, typical warnings have related that a chemical is present that causes cancer or reproductive harm. Still, the warnings have not identified the chemical or provided specific information about how a person may be exposed to it. In an effort to provide more meaningful and useful information about chemical exposure to the public, California’s Office of Environmental Health Hazard Assessment (OEHHA) adopted new regulations that result in businesses having to provide more detailed warnings in order to comply.

For example, the new warnings for consumer products will say a product “can expose you to” a Proposition 65 chemical rather than saying the product “contains” the chemical. The warnings also must, as promo pros pointed out earlier, have the name of at least one listed chemical that prompted the warning; a triangular yellow warning symbol with an exclamation point (on most warnings); and the internet address for OEHHA’s Proposition 65 warnings website, www.P65Warnings.ca.gov, which includes additional information on the health effects of listed chemicals and ways to reduce or eliminate exposure.

On the warnings website, officials give an example of the difference between a typical currently valid warning and one that will be required after next August. The current might say, “WARNING: This product contains a chemical known to the State of California to cause cancer.” Under the new rules, that would change to a message that features a symbol consisting of a black exclamation point in a yellow equilateral triangle with a bold black outline and text that would read: “WARNING: This product can expose you to chemicals including arsenic, which is known to the state of California to cause cancer. For more information, go to www.P65Warnings.ca.gov.” If the warning only contained one such chemical, the “chemicals including” phrase could be dropped.

Among other message permutations, if the product contained chemicals known to cause both cancer and reproductive issues, the consumer cautioning would have to consist of the exclamation point warning sign and text such as: “WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer, and [name of one or more chemicals], which is [are] known to the State of California to cause birth defects or other reproductive harm. For more information, go to www.P65Warnings.ca.gov.”

To see a side-by-side comparison of the legal text detailing current rules and the forthcoming ones, head here. Pay particular attention to sections 25602 and 25603. The former section details, in part, where/how warnings must be conveyed. In catalogs, for example, “the warning must be provided…in a manner that clearly associates it with the item being purchased.” When it comes to on-product cautions, “the entire warning must be in a type size no smaller than the largest type size used for other consumer information on the product,” the rules state. “In no case shall the warning appear in a type size smaller than 6-point type.”

In Emmer’s view, even suppliers and distributors that don’t sell in California should be mindful of the new regulations. He articulates a scenario in which a distributor provides products for, say, a corporation’s headquarters in Michigan. Then the corporation sends products to its offices in California for use there. Those products, said Emmer, better contain a sufficient warning, or they risk running afoul of Prop 65. “California is making laws that the entire country has to follow, for fear that a product ends up in California,” said Emmer. “We need to be smart about how we address this.”

 

*This article does not constitute legal advice. Rather, it simply seeks to inform readers about developments in the marketplace.