Anatomy of a Recall: When Consumer Products Threaten Public Safety and Health

The U.S. Consumer Product Safety Commission (CPSC) works to protect consumers from harm caused by consumer products. These consumer products may pose fire, electrical, chemical or mechanical hazards or cause injury to children. The CPSC determines whether a product poses a hazard to consumer safety and provides a mechanism for the voluntary recall of unsafe products. The CPSC derives its authority from the Federal Hazardous Substances Act (FHSA), which gives the CPSC authority to ban products containing hazardous substances where the issuance of warnings would be insufficient to protect consumers.

You are the owner of Widget Co., a small business that imports and distributes toy widgets intended for children ages 3 and under. You have seen the recent news coverage regarding the discovery of hazardous substances in consumer products, particularly toys. Last year, toy giant Mattel recalled millions of toys in just four weeks. These popular recalled toys — which included some modeled after “Sesame Street” characters and Nickelodeon’s “Dora the Explorer” — were removed from consumers’ homes and the marketplace due to the excessive amounts of lead-based paint used on the toys. And lead-based paint is not the only concern for toy distributors. Recently, horrified parents discovered that the popular toy known as Aqua Dots is coated with a chemical that, when metabolized, turned into GHB, better known as the “date rape drug.”

Amidst the warnings and recalls, how do you, a toy distributor, make sure that your customers are safe? Further, how do you protect yourself from liability while continuing to run a profitable business? And if you must initiate a recall, at times a highly publicized event, what then happens to the recalled products?

The U.S. Consumer Product Safety Commission (CPSC) works to protect consumers from harm caused by consumer products. These consumer products may pose fire, electrical, chemical or mechanical hazards or cause injury to children. The CPSC determines whether a product poses a hazard to consumer safety and provides a mechanism for the voluntary recall of unsafe products. The CPSC derives its authority from the Federal Hazardous Substances Act (FHSA), which gives the CPSC authority to ban products containing hazardous substances where the issuance of warnings would be insufficient to protect consumers.

Many recent recalls have resulted from the presence of lead in children’s toys. According to the Centers for Disease Control and Prevention (CDC), lead exposure and ingestion produce a wide range of adverse health effects in children, including learning disabilities and behavioral problems, and can be fatal at high levels. CPSC regulations ban toys and other articles coated with lead-containing paint and intended for use by children. But while the regulations provide a fairly clear pathway for sellers of children’s toys coated with lead-based paint, sellers of products on the fringes of these regulations face harder recall decisions. Problems arise when a product is not a toy but is intended for use by children, or when a product contains lead from a source other than paint. The CPSC regulates these other potentially hazardous products on a case-by-case basis by examining the total amount of lead in the product, the bioavailability of the lead, the accessibility of the product to children, the age and foreseeable behavior of the children exposed to the product, the duration of exposure, and the marketing of the product. To date, the CPSC has identified particular products, such as vinyl mini-blinds and metal jewelry, as presenting a risk of lead poisoning to children from sources other than paint. Some of these products are not specifically intended for use by children, but are common household objects to which children are exposed. Sellers of such products must analyze the above-mentioned factors and past decisions of the CPSC to determine the level of risk posed by their products.

While recalls are not performed on CPSC-regulated products alone, if a manufacturer/distributor/retailer is concerned about whether its product complies with CPSC regulations, the first step is to turn to the CPSC Web site for guidance.

To date, the CPSC has identified particular products, such as vinyl mini-blinds and metal jewelry, as presenting a risk of lead poisoning to children from sources other than paint. Some of these products are not specifically intended for use by children, but are common household objects to which children are exposed.

Fearing that Widget Co. could be exposed to liability, you decide to test the toy widgets for the presence of lead-based paint. The tests come back positive for the presence and bioavailability of lead in the yellow paint coating the toy widgets. Given the test results and the widgets’ intended use (by children), Widget Co. stops selling the toy widgets and decides to voluntarily recall them from the marketplace.

When structuring a voluntary recall, a company must look to the CPSC regulations. The goal of a voluntary recall is to get as many products out of the marketplace as possible to minimize danger to the consumer as well as to minimize the company’s exposure to future lawsuits. When deciding how to structure a recall, the seller is not alone and can work with the CPSC to structure the recall. No two recalls are the same. The parameters of the recall depend on the severity of the hazard posed by the product.

The most drastic recalls reach through the entire distribution chain and into the consumer’s home, requiring the consumer to return the product to the manufacturer/distributor or to the merchant. This type of recall requires the seller to immediately stop selling the product, contact retailers and advise them to stop selling the product, identify all customers or customer bases that potentially purchased the item, draft a press release, and set up a toll-free number for consumer questions. It also requires the seller to address the logistics of retrieving and disposing of a mass of unusable products from the marketplace.

Now that you have decided to recall the Widget Co. toy widgets from the marketplace, you must decide how Widget Co. will gather and dispose of the recalled widgets.

No matter what regulatory body (if any) has jurisdiction over a product’s configuration or formulation, recalled products often become waste and due care must be paid to whether disposal of the waste may cause environmental risks.

Before implementing a recall plan, a seller should study the hazardous waste management regulations promulgated by the U.S. Environmental Protection Agency (EPA) pursuant to the Resource Conservation and Recovery Act (RCRA). The hazardous waste management regulations will inform the
decisions a seller should make in structuring a recall.

The most drastic recalls reach through the entire distribution chain and into the consumer’s home, requiring the consumer to return the product to the manufacturer/ distributor or to the merchant.

While federal law sets forth the framework, most states develop and manage their own hazardous waste programs. The goals of hazardous waste regulations are to reduce or eliminate the generation of hazardous waste. When a recall involves hundreds of thousands or more products containing lead-based paint or other hazardous substances, EPA’s goal is often in tension with CPSC’s goal, which is to pull as many products back from the marketplace as possible.

The testing a seller must perform to comply with the CPSC regulations differs from the testing a company will need to conduct to determine if the product is hazardous for environmental purposes. A product that is hazardous to consumers under CPSC regulations is not necessarily hazardous to the environment under EPA regulations. According to EPA, waste is hazardous if it exhibits any of the following characteristics: ignitability, corrosivity, reactivity or toxicity. For example, lead, a heavy metal, exhibits characteristics of toxicity, and thus appears on EPA’s list of common hazardous wastes.

Because the toy widgets contain lead, which is hazardous, Widget Co. must determine whether the toy widgets pose a threat to the environment. Widget Co. then must determine how to dispose
of the recalled toy widgets.

The Toxicity Characteristic Leaching Procedure (TCLP) test is the industry standard test for toxicity. The TCLP test determines the mobility of the hazardous waste in an effort to simulate the amount of hazardous waste that will leach into the environment when the products are placed in a landfill. A product failing the TCLP test is subject to regulation upon disposal.

After determining that waste is in fact hazardous and subject to regulation upon disposal, a seller must determine the amount of waste generated. In the context of product recalls, following hazardous waste regulations requires a company to enter uncharted territory. The hazardous waste regulations originally were developed in the 1970s to deal with hazardous waste by-products of industrial manufacturing processes. Before that time, the dumping of hazardous waste by-products was largely unregulated. Because of their deep roots in industry, hazardous waste regulations speak in terms of hazardous waste “generation.” But an importer or distributor of products later characterized as hazardous waste does not fit cleanly into the traditional concept of a “generator.” The question then becomes, at what point in the life cycle of a product that has been imported, distributed and later recalled is waste “generated”? The answer is unclear.

As applied to the recalling importer/distributor, generation likely occurs at the point of receipt of the recalled products. If a company generates less than 220 pounds of hazardous waste per month, it is exempt from regulation. A generator that generates between 220 and 2,200 pounds per month is a “small-quantity generator” subject to regulation. A “large-quantity generator,” also subject to regulation, generates more than 2,200 pounds per month. A large-quantity generator has to do a more thorough job of checking and inspecting the local waste storage facility before the hauler picks up the waste, as well as have a contingency plan in place for potential spill/release of the waste.

It should also be noted that an exemption exists for household waste, even if it would otherwise be considered hazardous. In other words, products already in the hands of consumers can be thrown away by the consumer because the products qualify for the household waste exclusion.

If subject to regulation, hazardous waste generators must meet specific testing, tracking and record-keeping requirements. The generator must work with an approved waste hauler that hauls the waste to a permitted treatment/storage/disposal facility (TSDF). The TSDF then chemically or physically treats the toxic waste before disposal. Additionally, the generator must fill out a one-page form to obtain a hazardous waste generator identification number and then use the number to fill out a manifest as a generator. The waste hauler will haul the waste and sign and take a copy of the manifest noting the disposal. The TSDF also signs and keeps a copy of the manifest and then mails the manifest back to the generator. This procedure is referred to as “cradle-to-grave tracking.”

Moreover, as hazardous waste generation is site specific, a hazardous waste generator cannot move waste around to “dilute” or “treat” it outside of the regulations. Thus, because “generation” likely occurs at the point of receipt of the recalled products, the recalling generator should consider where its recalled products will be received.

Widget Co. has two warehouses, one located in the Southeast and the other in the Midwest. Widget Co. also determines that, during the recall period, it will receive 40,000 widgets per month from consumers’ homes located throughout the United States. The widgets weigh 0.1 pounds each, so the total weight of recalled widgets equals 4,000 pounds. You decide that Widget Co. should structure the recall to avoid receiving high volumes of products at any one location. Instead of directing consumers to mail the widgets back to its Midwest warehouse only, Widget Co. decides to make the addresses of both of its warehouses available to consumers.

In the foregoing example, if Widget Co. receives half of its recalled widgets at its Southeastern warehouse and half at its Midwestern warehouse every month, Widget Co. will be a small-quantity hazardous waste generator at each of those locations, receiving 2,000 pounds of widgets at each location. Otherwise, if Widget Co. decided to receive recalled widgets at its Southeastern warehouse only, Widget Co. would receive 4,000 pounds of widgets per month at that warehouse and qualify as a large-quantity hazardous waste generator at that location. In smaller volume recalls, structuring a recall as in the foregoing example could make the difference between total exemption from, and mandatory compliance with, the hazardous waste regulations and the burdensome cost and paperwork associated with treatment and disposal.

Charles MacPherson, owner of Atlanta-based Peachtree Environmental, a hazardous waste engineering and consulting firm, encourages creativity when dealing with the intersection between consumer products and hazardous waste laws. A consumer product may still have value even though not fit for its intended use. MacPherson encourages companies with consumer products waste to look for the “reclamation value” of the product. For example, companies can derive monetary value from recycling the materials or components within a product. Most importantly, MacPherson urges these companies
to entertain opinions about environmental stewardship in all sectors of the business.

Planning Ahead

Today’s consumers are sophisticated enough to know that a recall is not necessarily a “bad” thing, nor the seller of a recalled product a “bad” company. Sellers should be aware that recalling a product does not just mean complying with CPSC guidelines. If a product is recalled due to some problem with its formulation, or due to contamination, as opposed to a hazard caused by its configuration, sellers should look at the potential for environmental pollution issues to arise in the disposal process and account for compliance with environmental regulations on the front end when structuring a
voluntary recall.

The authors wish to thank SGR attorney Phillip Hoover for his contribution to this article.