We have previously blogged about the sometimes difficult decision that companies face when classifying their products as “children’s” or “general-use” products and the uncertainty of predicting whether the Consumer Product Safety Commission (“CPSC”) will agree with their classification. Although companies who sell personalized products have different business models, most will encounter this potential dilemma and an even more fundamental question with significant ramifications under federal and state product safety laws: whether the company is a “manufacturer” or “retailer” — or both — under the Consumer Product Safety Act (“CPSA”).
While manufacturers and retailers of consumer products are both responsible for ensuring that their products are safe and meet mandatory safety standards, manufacturers (which include importers by definition) have additional responsibilities under the law. Some of those responsibilities include ensuring compliance with federal testing, certification, tracking label, and other related safety requirements for children’s products. Companies in the personalized products industry should be acutely aware of these added responsibilities.
Under the CPSA, the term “manufacturer” means any person who manufactures or imports a consumer product and the term “manufactured” means to manufacture, produce or assemble. A “retailer,” on the other hand, is a person to whom a consumer product is delivered or sold for purposes of sale or distribution. But how does the CPSC view companies who receive product from a supplier and then tailor or alter the product before final sale to consumers? Do companies who personalize children’s products procured from third-party manufacturers become “manufacturers” themselves simply because they add a name or logo to a product? Can a company personalize a “general-use” product in a manner such that it becomes a “children’s” product?
The answers may very well be yes depending on the type of change made to the product and need to be examined on a case by case basis. Many of the changes made by a personalized products company in the context of children’s products would constitute material changes to the product, meaning the company would then be responsible for testing, certification, tracking labels, compliance with the lead limits, and potentially compliance with the phthalates limits as well. The CPSC considers a “material change” to be one that could affect the product’s ability to comply with applicable product safety standards (such as a change in design, alteration to the product, or sourcing of a component part).
For example, if a company buys a children’s product from third party manufacturers and then personalizes it, say by painting a name or adhering the image of a popular cartoon character, that company is now responsible for testing and certifying that the product meets applicable children safety standards. The company will be required to do this even though the company is not technically the true “manufacturer” of the original product. In essence, in this particular case, a personalized products company is both a retailer and manufacturer for purposes of complying with the requirements of the CPSA. The CPSC’s component part testing rule may afford some relief to companies finding themselves in this situation, but it also imposes a duty of due care before companies may reasonably rely on the test report or certificates from suppliers.
In sum, although companies in the personalized products area may traditionally think of themselves more as retailers, the types of changes they make to a children’s product could significantly their responsibilities under the law.