Changes to California's Prop 65 Could Increase Costs Throughout Supply Chain, Says Letter
Potential changes to labeling rules under California’s Proposition 65 would increase compliance costs for both labelers and downstream companies in the supply chain, according to a letter dated June 12 from nearly 140 companies. A “pre-draft” of proposed regulatory changes issued by the California Office of Environmental Health Hazard Assessment (OEHHA) in March would do away with standard safe harbor language that many companies use on labels, adding costs for labelers and uncertainty for downstream companies over whether a product is in compliance with labeling requirements, said the letter. And as currently written, the draft changes would also eliminate protections for upstream companies like manufacturers, which may have the effect of forcing manufacturers to label all of their products, regardless of whether they’re sold in California.
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Proposition 65 Requires Labeling of Cancer-Causing Chemicals
Proposition 65, which became the California Safe Drinking Water and Toxic Environment Act of 1986 when it was approved by voters in 1986, requires California to maintain a list of chemicals known to cause cancer or birth defects. The list has grown to over 800 chemicals since it was first published in 1987, says OEHHA (here). Companies are required to provide a “clear and reasonable” warning on the label of consumer products containing listed chemicals.
Proposition 65 sets out thresholds for determining whether a given product requires a warning level, but whether a product exceeds those thresholds can be difficult to determine. So in practice, many companies voluntarily use pre-approved “safe harbor” language to shield themselves from litigation, such as “WARNING: This product contains a chemical known to the state of California to cause cancer.”
Proposal Increases Costs of Compliance for Downstream Companies
But OEHHA’s draft changes (here) would remove the ability to use safe harbor language, instead proposing “complicated and burdensome requirements that require warnings to be tailored to specific circumstances, including specific products and their particular contents and use characteristics,” said the letter, which was signed by groups as diverse as the American Association of Footwear and Apparel, multi-level marketer Amway, and the National Shooting Sports Foundation. “Compliance with such new requirements will be infeasible or otherwise financially impossible for many businesses, it said. And even if the more complicated labeling scheme is feasible, it would open companies up to more lawsuits, not less as was cited by the proposal as a reason for the change, said the letter.
The elimination of safe harbor language from Proposition 65 regulations could add a costly burden for other companies in the consumer product supply chain, said the letter. Currently, when companies apply the generic label with safe harbor language, all other entities in the supply chain know the product is in compliance. By eliminating the standard language, the draft proposal “may impose on consumer product companies an additional burden to independently ensure that a warning affixed by any other entity in the supply chain is sufficient,” said the letter.
Draft Proposal May Require Labeling of All Products, Not Just California
Another aspect of the draft proposal that could have an “extraordinarily adverse impact” on consumer product supply chains is its lack of provisions protecting upstream companies from liability if a consumer product unknowingly ends up in California, said the letter. Under the current regulations, a manufacturer or other upstream supply chain actor is absolved of all responsibility for labeling once it tells the buyer about the presence of a listed chemical. Telling the downstream company about the chemical’s presence absolves the upstream company from labeling responsibilities. It is then up to the downstream company to label the product if it is to be sold in California.
But the draft proposal omits this provision. Instead, the way the draft proposal is currently worded would have the effect of requiring upstream companies to comply with California laws if their products are sold in California, even if they had no knowledge of where the product would end up. “In the absence of this provision, such entities remain vulnerable to Proposition 65 lawsuits unless they label their products nationwide or globally, said the letter. “The removal of flexibility regarding transmitting warnings down the supply chain will likely result in manufacturers adding warnings at the time of manufacture to all of the goods they supply globally, rather than the current practice of providing warnings only to their California distributors, it said.