Retailers Face Limits on Sale of Thermostats in California Starting July 1, 2009

Extended Product Responsibility (EPR) Programs Take Effect and Are Subject of Pending Legislation in California

The Summary: Retailers selling any thermostats to customers in California are expected to check the website of a state agency to see whether particular manufacturers have been listed as failing to comply with a 2008 state law mandating collection programs for out-of-service mercury-added thermostats. Thermostats from a listed manufacturer are banned from in-state sales (following a 120-day notice period). Violation of the sales ban is punishable as a crime, and could subject a retailer to criminal penalties under the state’s hazardous waste law. (Calif. Health & Safety Code sec. 25214.8.12(b), (d)).

Background: California banned the in-state sale of mercury-containing thermostats effective January 1, 2006. Then, following the 2007 adoption of guidance for Extended Product Responsibility (EPR) by the California Integrated Waste Management Board, the California Legislature approved, and Governor Schwarzenegger signed, the Mercury Thermostat Collection Act of 2008. California Health & Safety Code, section 2514.8.10. The new law is part of the state’s statutes governing hazardous waste. Besides requiring manufacturers to have collection programs for out-of-service thermostats, the new law also affects retailers, including retailers who offer private-label merchandise.

"Retailer" is defined in the new law as "a person who sells thermostats of any kind directly to a consumer through a selling or distribution mechanism, including, but not limited to, a sale using catalogs or the Internet."

The main thrust of the Act is to improve programs for the collection and proper disposal of mercury-containing thermostats once they are taken out of service. A retailer may contract with a manufacturer for in-store or out-of-store collection of old mercury-added thermostats. The new law encourages retailers to support and participate with manufacturers to educate consumers on the handling of such thermostats.

The enforcing agency, California Department of Toxic Substances Control (DTSC), has described the obligations of retailers as follows:

A retailer that distributes new thermostats by mail to buyers in California shall include with the sale of the new thermostat, an Internet Web site address and toll-free telephone number with instructions on obtaining a prepaid mail-in label that a consumer may use to send an out-of-service mercury-added thermostat to a collection location.

A retailer is prohibited from selling or offering for sale a thermostat that is manufactured by a manufacturer that is not in compliance with the Act. This prohibition becomes effective on the 120th day after the notice listing the manufacturer is posted on the DTSC’s Internet Web site, and continues until the manufacturer is no longer so listed.

DTSC has issued a Fact Sheet generally covering some of the Act’s highlights.

Lawmakers based the new law on findings that mercury can become toxic in the environment. EPR programs seek to have manufacturers and producers of consumer goods, including retailers of private-label merchandise, not only remain responsible for products when they are discarded, but also to design products and packaging that are less toxic and more durable, reusable, recyclable or biodegradable, in order to reduce waste.

Additional legislation aimed at instituting end-of-life management programs for many more consumer products, based on the EPR guidance, has already been introduced in the current session of the California Legislature. AB 283, the California Product Stewardship Act, is currently pending in the state Assembly. As presently drafted, the bill would amend the state’s Public Resources Code to add provisions on solid waste disposal affecting retailers and others. A version of the proposed bill is Here.

If enacted, the law would, among other things, require producers of covered goods (which would include retailers of private-label goods) to adopt a stewardship plan for the product, and to collect the covered product without charge to the consumer. Sales of covered products would be banned after July 1, 2012, unless the producer or product stewardship organization had submitted a stewardship plan to the state’s Waste Board.

Whether or not AB 283 becomes law, the trend is clearly to have more programs requiring manufacturers and retailers to handle previously sold consumer goods that have reached the end of their useful life and are ready for disposal.

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Toxics in Food: California Rulemaking Process Pushes for Warnings by Retailers

The Summary:
Who is mainly responsible for providing warnings - retailers or manufacturers – if food products expose consumers to chemicals listed as toxic under California’s Proposition 65? Grocers, members of the public, and California regulators will be discussing this topic and the proposal for new rules on the methods and content of warnings for food products in a conference call on March 14, 2009.


Under California’s Proposition 65 (Safe Drinking Water and Toxic Enforcement Act), state regulators have initiated a project to investigate amending the regulations that require warnings to be given to consumers when there are exposures from food to chemicals listed by the state as causing cancer or birth defects.

An informal conference call, set for March 14, 2009, is the latest step in a rulemaking process begun over a year ago by the Office of Environmental Health Hazard Assessment (OEHHA). The agency announcement is here.

In stakeholder meetings and public workshops, various groups have offered suggestions for improvements in the food warning rules. For consumer products, including food, existing regulations under Proposition 65 place the initial responsibility of labeling products on the manufacturer. The thinking goes: Manufacturers are in the better position to know the ingredients in their products, and it is efficient for them to put labels on products if needed. (“To the extent practicable, warning materials such as signs, notices, menu stickers, or labels shall be provided by the manufacturer, producer, or packager of the consumer product, rather than by the retail seller.”) However, other businesses in the supply chain besides manufacturers have not been immune from enforcement actions where the claim is failure to warn. Retailers in particular have been targeted by private enforcers.

Retailers, who directly interface with consumers, have noted that adopting regulations for a fair and flexible “safe harbor” warning method will provide an efficient way for retailers fulfill their legal obligations. However, an association of private party enforcement groups and law firms has objected to one such “safe harbor” regulation because they think it would go too far to insulate retailers from Prop. 65 liability.

Sorting out these various interests while coming up with food warnings consistent with Proposition 65, all within in the context of difficult times for the economy, is the challenge OEHHA faces. We will be monitoring developments.

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New California Plywood/Particle Board Rule Impacts Retailers

Furniture Banned to Curb Formaldehyde Emissions

The Summary: Starting in 2009, retailers in California face unannounced visits by inspectors from the California Air Resources Board (CARB) looking for banned and unlabeled merchandise made from composite wood. Retailers, fabricators, and manufacturers of new furniture (and other goods) made from certain composite wood products are prohibited from selling such goods in the state, unless they comply with a new CARB rule limiting formaldehyde emissions.

Retailers must comply with recordkeeping requirements immediately. Retailers have 18 months (to June 30, 2010) to sell through existing inventories of non-CARB-compliant goods. Under the new rule, unlabeled, noncompliant goods cannot be sold in California beginning on July 1, 2010.

According to CARB’s January 2009 Advisory, “Retailers do not have any additional labeling requirements under the ATCM. Existing labels should not be removed from a composite wood product or finished good.” http://www.arb.ca.gov/toxics/compwood/outreach/labelingadv.pdf
However, the Advisory goes on to clarify that retailers may replace an original label with a label listing their own company name, provided "all of the other original required label information is retained on the new label."

Background on the Regulation

CARB approved a new Air Toxics Control Measure (ATCM) to reduce formaldehyde emissions from composite wood products in April, 2007. The rule applies to panel manufacturers, distributors, importers, fabricators and retailers of certain composite wood panels, and finished goods containing those products, that are sold or supplied in California. The products subject to the rule are hardwood plywood, particle board, and medium density fiberboard. The text of the rule is available at 17 California Code of Regulation, sections 93120 – 93120.12 or here:
http://www.arb.ca.gov/regact/2007/compwood07/fro-final.pdf

(Formaldehyde is used in the production of wood binding adhesives and resins. It has been classified as a cancer-causing agent in humans. In 1992, formaldehyde was designated a toxic air contaminant with no safe level of exposure.)

The rule establishes two phases for reducing formaldehyde emissions. Phase 1 takes effect on January 1, 2009. Phase 2, with more stringent emission levels, begins in January 2010. CARB has estimated the cost to the affected industries of implementing the rule at $19 million for Phase 1, and $127 million for Phase 2. Industry groups have countered that these estimates are too low. The rule has been estimated to increase the per-panel retail price of composite wood products by $3.00 to $6.00 over current prices.

Retailers should know that CARB inspectors policing stores for compliance with the new rule will look for labeling on finished goods, such as tables, cabinets, bookcases and shelving, countertops, flooring, and moldings. Labels must show that any components that are hardwood plywood, particle board, or medium density fiber board have been certified by qualified third parties as compliant with the emissions standards. Labels may also be affixed to boxes, packaging, or other goods containers. The labels should be supplied by the manufacturer or fabricator, unless a retailer has made alternative arrangements for having its own labels.

Recordkeeping Requirements for Retailers

Retailers can be required to show records indicating the source of their stock, indicating the name of the manufacturer and the date of manufacture. Records must be maintained for a minimum of two years, in both hard copy and electronic form. Retailers are not, however, required to conduct product testing. Manufacturers of composite wood panels, and manufacturers of furniture and other products using composite wood covered by the new rule, have the burden of obtaining third-party certification. Online and catalog sellers of wood products delivered into California are also subject to the new rule. Civil penalties may be assessed for noncompliance. The fines can range from $1,000 to $10,000 per day for violations.

In informational workshops about the new rule, CARB has recommended that retailers insist that their suppliers provide CARB-compliant goods. Retailers can demonstrate their good faith efforts to comply with the new rule by having explicit written agreements with their suppliers.

According to CARB staff, the rule does not apply to antiques and used furniture.

Variance Procedure

CARB acknowledges that it has a procedure for issuing variances. Retailers who may want to explore obtaining a variance should contact their legal advisor. Some groups affected by the rule have sought to extend the compliance deadlines, expressing concerns about a number of problems they anticipate in implementing the rule. To date, CARB has expressed the view that delaying implementation is not warranted because progress is being made in qualifying the third-party compliance certifiers and because it has conducted outreach efforts with industry groups.

Other Regulatory and Enforcement Actions for Formaldehyde

Efforts have also been made to expand to the national level the California rule limiting formaldehyde emissions in composite wood products. For example, the U.S. Environmental Protection Agency in 2008 considered a petition to adopt the California ATCM under the federal Toxic Substances Control Act (TSCA) and to extend the scope of the regulation to manufactured housing. EPA rejected adopting the ATCM, but indicated that it would further study both cancer and non-cancer health risk concerns associated with formaldehyde in composite wood products. See http://www.epa.gov/fedrgstr/EPA-TOX/2008/June/Day-27/t14618.htm

Retailers have also been targeted with Notices of Violation under California’s Proposition 65 based on allegations that certain furniture, including baby cribs, release formaldehyde from composite wood components.

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Retailers Prohibited from Selling in California Athletic Shoes Made with Kangaroo Hide from Australia

Case: Viva! Int'l Voice for Animals v. Adidas Promotional Retail Operations, Inc., No. S140064 (Cal. Sup. Ct. 7/23/07)

The One Sentence Summary: California Supreme Court rejected Adidas' argument that federal law not prohibiting importation of kangaroo products preempted California's ban on products made from any part of a kangaroo.


What They Were Fighting About: California Penal Code section 653(o) prohibits the importation into or sale within the state of products made from kangaroo. Defendants Adidas Promotional Retail Operations, Inc., Sports Chalet, and Offside Soccer (collectively Adidas) are California retailers that sell athletic shoes made from the hides of three kangaroo species that exist only in Australia: the red kangaroo, the eastern grey kangaroo, and the western grey kangaroo. Plaintiff Viva! International Voice for Animals sued Adidas for engaging in an unlawful business practice under Business & Professions Code section 17200, by importing and selling athletic shoes made from kangaroo leather in violation of Penal Code section 653(o). Both the trial court and court of appeal ruled in favor of Adidas, concluding that federal law preempted California's statutory ban.

Court Holdings:

• In a unanimous decision, the California Supreme Court held that the federal Endangered Species Act of 1973 did not preempt California's ban on products made from any part of a kangaroo.


• The court's opinion discussed four types of preemption and found that none existed in this case: express, conflict, obstacle, and field preemption.


• The Endangered Species Act of 1973 established a cooperative federal-state approach to wildlife preservation. Section 6(f) of the Act contains a preemption clause and a savings clause that allow states to enact more stringent regulations regarding endangered or threatened species. The only exception to the preservation of state power is for activities specifically "authorized" by the Act or its implementing regulations.


• California Supreme Court rejected Adidas' argument that the 1995 removal of the three kangaroo species from the Endangered Species Act's list of endangered or threatened species established a federal policy against state regulation. The Act does not preempt state efforts to protect the three kangaroo species by prohibiting importation of kangaroo products. Section 6(f) of the Act only preempt states from prohibiting what is "authorized" under the Act or its regulations, not anything that federal law has failed to prohibit.

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