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Manufacturing Industry Updates

Best Practices to Ease Your Compliance with California’s Proposition 65

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Manufacturers must ensure that the correct Prop 65 warning is passed on to retailers, and ultimately, to consumers.

If your company manufactures any products that ultimately reach California consumers, it is likely subject to a unique and complicated California law — regardless of whether your company is located in California or out-of-state. Proposition 65, or the Safe Drinking Water and Toxic Enforcement Act of 1986, prohibits businesses from exposing any individual in California to any one of more than 900 chemicals which the state has identified as causing cancer or birth defects and reproductive harm — unless the business first provides a “clear and reasonable” warning.

The Proposition 65 regulations call for the use of default “clear and reasonable” warnings, including a long-form and short-form warning for use on most consumer products.

Given the complex nature of the modern chain of commerce, the law was revised to try to clarify who bears the responsibility for warning, and how companies must work together — from manufacturer to retailer — to ensure that the appropriate warnings are ultimately transmitted down the line to California consumers.

Responsibility Flows Upstream

There is commonly a chain of commerce through which the product ultimately reaches the consumer — e.g., supplier to manufacturer to distributor to retailer. The new regulations place primary responsibility for providing warnings on the more upstream parties in this chain, namely, the suppliers, manufacturers, producers, packagers and distributors (collectively, “upstream parties”).

The law expressly seeks to minimize the burden on the retail seller. Despite being the party closest to the consumer (and most likely to know whether the product is being sold in California), retailers generally have less knowledge about a product’s chemical content, and are thus less likely to know if a warning is required. By contrast, the upstream parties (particularly the suppliers and/or manufacturers) are in the best position to know when a warning is required — and to provide the right warning — because they are most familiar with the product’s material composition.

Given the many hands and channels through which a product is passed as it makes its way down to the consumer, how can a manufacturer ensure that its warnings are adequately conveyed downstream? The law provides upstream parties with two options, either of which constitutes compliance with the upstream party’s responsibility to pass down the warnings:

Option A — Affixing the appropriate Proposition 65 warning label directly to the product, its label or its immediate packaging; or

Option B — Providing a written notice directly to the authorized agent for the retail seller (and/or the next downstream party, such as the packager or distributor), which:

  • States that the product may result in an exposure to one or more Proposition 65 chemicals;
  • Includes the exact name or description of the product at issue or specifying identifying information for the product (such as a UPC code or other identifying designation);
  • Includes all necessary warning materials such as labels, labeling, shelf signs or tags, and warning language for products sold on the Internet;
  • Has been sent to the retail seller, and the upstream party providing the notice has obtained confirmation of receipt electronically or in writing from the recipient; and
  • Must be renewed annually.

If an upstream party opts to pass the warnings down using Option A, the intent is that the warnings remain affixed on the product until they reach the ultimate consumer. If an upstream party opts to pass the warnings down using Option B, the retail seller becomes responsible for the placement and maintenance of the warning materials it receives.

Although either option is technically sufficient, the best practice is to do both Option A and B, and for a number of reasons:

  • First, the parties downstream are put on affirmative notice of the warning through the letter — the receipt of which they must acknowledge — and they need not seek out a sticker or warning label on products that they may receive in bulk.
  • Second, the written notice letter can be used to gently inform the downstream parties of their own obligations to pass down the warnings, further spreading awareness of the law and minimizing risk that someone skips a step as the product moves downstream.
  • Third, in the event that a downstream party fails to confirm receipt of the written notice, the on-product warning can serve as a backup method to keeping the warning flowing downstream.
  • Fourth, the amendments to the regulations now require warnings for purchases made online. The written notice can be used to alert downstream parties of the online warning requirement and simultaneously provide them with the online warning language (rather than forcing them to seek out the appropriate warning language on the product itself).
  • Finally, using both methods accounts for some of the complications that arise for manufacturers and suppliers of raw materials, ingredients or component parts. Where smaller components are incorporated into a finished product before being sold to a consumer, an on-product warning on those smaller components is particularly susceptible to being lost because it is unlikely to remain affixed to the finished product as the law intends. The written notice gives these component suppliers and manufacturers a way of notifying the subsequent manufacturers that the finished product may require a warning, which those subsequent manufacturers must pass on.

Shifting Burdens Through Private Contracts

Of course, the linear chain of commerce described above is rarely so straightforward. To meet their specific business needs and to cater to their unique relationships, the parties in the chain of commerce may enter into private contractual agreements to shift Proposition 65 liability and/or the burden of warning between them.

For example, the upstream parties may allocate (or confirm) liability as being shared between them. A distributor may have an agreement with a manufacturer that requires indemnification and/or defense in the event that a product or labeling it receives fails to comply with the law.

Practically, this means that the manufacturer would be contractually obligated to provide the appropriate warning, or to bear the cost of any Proposition 65 liability for its offending product (which may have been the case in any event). On the other hand, an upstream party may, through a private contractual arrangement, require a more downstream entity to bear the burden of providing the requisite warnings or warning materials.

Because these types of contractual provisions are increasingly common, manufacturers should review their existing contracts to determine the scope of their Proposition 65 obligations and liability with respect to each of their contracting parties, and should update those contracts as needed to meet their needs.

It’s Best to be Proactive

It is incumbent upon manufacturers and other upstream parties to ensure that the appropriate warning is passed along to retailers, and ultimately to California consumers. This can be a somewhat costly endeavor.

In addition, many companies worry about the impact on their brand if their products carry these warnings, or if they must affirmatively notify downstream parties of the need for a warning. However, while the amended law may prove burdensome and costly to manufacturers, proactive compliance is still a better option than facing a pre-litigation notice of violation under Proposition 65 — or worse, a lawsuit — and squabbling over liability as between the parties in the chain.

By doing their part to comply with Proposition 65, manufacturers can limit their own liability within the chain of commerce, protect their brand integrity, and preserve their business relationships — and perhaps pass their knowledge of the law downstream to alert others.

Ana Tagvoryan is partner and co-chair of the class action defense team at Blank Rome LLP. Erika Schulz is an associate at Blank Rome.

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