1. Consumer Product Safety Improvement Act of 2008 December 4, 2008 Alan R. Klestadt, Esq. Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP 399 Park Avenue, New York, N.Y. 10022 Tel.: 212-973-7722 Fax: 212-557-4415 e-mail: aklestadt@gdlsk.com

2. CPSC Background Independent Federal agency established by Congress in 1972 Charged with reducing unreasonable risks of injury/death with consumer products. Administers the following statutes: –Consumer Product Safety Improvement Act –Consumer Product Safety Act –Federal Hazardous Substances Act –Flammable Fabrics Act –Poison Prevention Packaging Act –Children's Gasoline Burn Prevention Act –Virginia Graeme Baker Pool and Spa Safety Act

3. Consumer Product Safety Improvement Act of 2008 New Legislation (8/14/08) –New Certification Requirement –Defines “children’s product” (12 years or younger) –Decreases current lead paint limit –New Lead Substrate Standard –New Phthalate Standard –Accredited 3 rd pty testing for children’s products –New tracking label required for children’s products

4. Consumer Product Defined An article or component of an article which is customarily produced or distributed for sale to or for the personal use, consumption or enjoyment of consumers in a residential, school, recreational or other environment. Definition does NOT include a product intended for commercial, or industrial use UNLESS it is sold to or used by consumers more than occasionally.

5. Compliance Certification Required for Goods Manufactured on or after 11/12/08 The importer Must Certify –Test labs cannot issue certifications. Certification must be based on a test of the product or a reasonable testing program.

6. Compliance Certification (cont.) Covers any product which is subject to any consumer product safety rule. –General flammability standard (all wearing apparel) –Children’s Sleepwear Flammability –Total Lead In Paint and Surface Coatings (paint, children’s products, furniture) –Total Lead Content (children’s) –Sharp Points/Edges (children’s) –Phthalates (children’s) –Small Parts (children’s) –Bicycles –Bicycle Helmets –Bunk Beds –Carpets and Rugs –Contact Adhesives –Cribs –Fireworks –Infant Cushions –Walk-Behind Power Lawn Mowers –Cigarette Lighters –Mattresses and Mattress Pads –Multi-Purpose Lighters (e.g., grill lighters, fireplace lighters) –Pacifiers –Rattles –All-Terrain Vehicle Standard

7. Compliance Certification (cont.) Availability of Certificates: Certificates must “accompany” the shipment and must be made available to the CPSC and Customs upon request. Can be paper certificate or electronic copy A copy of the certificate must be “furnished to each distributor or retailer of the product” Currently no requirement to file a certificate with Customs or any government agency as part of entry process. Form of Certificates: Unless prescribed by regulation, can be: –A label on the product –An attachment on the shipping container –A separate document, or included in another document such as an invoice, bill, statement, or bill of lading. Failure to Certify Imports – CPSC can refuse admission

8. Compliance Certification (cont.) Content of Certificates: Must specify the following, in English: 1.Identify the product 2.Cite to each applicable CPSC product safety regulation 3.Identify the U.S. importer or domestic manufacturer 4.Contact information for the individual maintaining records of test results 5.Date and place where the product was manufactured 6.Date and place where the product was tested for compliance with the regulation(s) cited above 7.Identification of any third-party laboratory on whose testing the certificate depends

9. Compliance Certification (cont.) Basis of Certification Must be based on a test of the product or a reasonable testing program Must provide reasonable assurance that the product meets all requirements of the applicable standard(s). The type and frequency of tests are currently up to the issuer of the certificate. Not necessary to use the exact test procedure prescribed by the regulations (it may be advantageous to use stricter test). Test should be stringent enough to detect variations that would cause a product to fail.

10. The General Wearing Apparel Flammability Standard (16 CFR 1610) All wearing apparel is subject to the general wearing apparel flammability standard as set forth in 16 CFR 1610 Textiles fall under one of three classes of flammability based on the time of the flame spread. –Class 1 - normal flammability - acceptable for use in clothing; –Class 2 - applicable only to raised fiber surfaces - intermediate flammability - may be used in clothing; –Class 3 - rapid and intense burning and are dangerously flammable. These textiles cannot be used in clothing. The use of such textiles can result in civil and criminal penalties.

11. The General Wearing Apparel Flammability Standard (16 CFR 1610) (cont.) Exemptions from the Standard: Hats Gloves Footwear Certain Fabrics Exempt from Testing (but still must certify) –Plain surface fabrics, regardless of fiber content, weighing 2.6 ounces per square yard or more; and –All fabrics (both plain surface and raised-fiber surface) regardless of weight, made entirely from any of the following fibers or entirely from a combination of these fibers: acrylic, modacrylic, nylon, olefin, polyester, and wool.

12. Definition of “Children’s Product”” A consumer product designed or intended primarily for children 12 years of age or younger. The CPSC will consider the following factors to determine whether a consumer product falls under this definition: –A statement by a manufacturer about the intended use of such product, including a label on such product if the statement is reasonable. –Whether the product is represented in its packaging, display, promotion, or advertising as appropriate for use by children 12 years of age or younger. –Whether the product is commonly recognized by consumers as being intended for use by a child 12 years of age or younger. –The Age Determination Guidelines issued by the CPSC staff in September 2002, and any successor to such guidelines.

13. Mandatory Third Party Testing for Certain Children’s Products Any children's product that is subject to a children's product safety rule must be tested by a third party accredited testing lab –Each product safety rule will have a specific effective date

14. Mandatory Third Party Testing for Certain Children’s Products Effective Dates : 90 days after the CPSC has published notice of the requirements for accreditation of third party testing labs. –Lead Paint : The CPSC published notice for lead paint 3rd party testing on 9/22/08. Therefore, any children’s product manufactured after 12/22/08 must be tested by an accredited third party lab and the importer must issue a certificate of compliance with the lead paint ban based on that testing. –Small Parts: Notice was published on 11/17/08. Any children’s product manufactured after 2/15/09 must be tested by an accredited third party lab. –Children's Metal Jewelry : Notice must be published by 12/12/08. If published on or around that time, the certification requirement will take effect around 3/12/09. –All Other Children’s Product Safety Rules : Notice must be published by 6/14/09. If published on or around that time, the certification requirement will take effect around 9/14/09.

15. Mandatory Third Party Testing for Certain Children’s Products Retroactive Applicability to Products in Inventory : No. Third-party testing requirements do not apply to inventory that was manufactured before that time. Compliance; Continuous Testing : The CPSC is required to publish regulations by 11/14/09 which will establish protocols and standards: For periodic testing for current and redesigned products when there has been a material change in the product's design or manufacturing process, including the sourcing of component parts; For testing of random samples to ensure continued compliance; For verifying that a children's product tested by a 3rd party lab complies with the applicable safety rules; and For safeguarding against the undue influence on a third party lab by a manufacturer or importer.

16. Lead in Children’s Products There are two different lead standards that must by complied with: (1) The General Lead Ban (New Standard) limits the amount of lead in all children’s products, and (2) The Lead Paint Ban (Current Standard) lowers the limit with regard to lead in paint as well as certain consumer products containing lead paint.

17. Lead in Children’s Products General Lead Ban (Lead in the substrate) –New Standard – Effective 2/10/09 –Rule: Any children's product that contains more lead than the established limit is a banned hazardous substance under the Federal Hazardous Substances Act. –Lead Limits: The total lead content by weight for any part of the product cannot exceed: –600 Parts per Million - Effective date: 2/10/09 –300 Parts Per Million - Effective Date: 8/14/09 –100 Parts Per Million - Effective Date: 8/14/11

18. Lead in Children’s Products General Lead Ban: Exceptions: –Inaccessible Component Parts - these limits do not apply to any component part of a children's product that is not accessible to a child through normal and reasonably foreseeable use and abuse, as determined by the CPSC. –A component part is not accessible if it is not physically exposed due to a sealed covering or casing and does not become physically exposed through reasonably foreseeable use and abuse of the product. Reasonably foreseeable use and abuse includes swallowing, mouthing, breaking, or other children's activities, and the aging of the product. Paint, coatings, or electroplating are not considered barriers that would render lead inaccessible to a child. The CPSC is required to issue rules by 8/14/09 which will provide guidance as to what types of components will be considered to be inaccessible. Retroactive Applicability to Products in Inventory: Yes! Products that contain lead above the limits set forth in P.L. 110-314 cannot be sold from inventory or on store shelves after February 10, 2009. Third Party Testing Requirement: If required, will probably not take effect before September 2009. Certification must be based on testing by an accredited 3rd party testing lab.

19. Lead in Children’s Products Lead Paint Ban (16 CFR 1303) –Currently 600 ppm and covers the following products: Lead Paint and Similar Surface coatings for consumer use Toys and other articles intended for use by children that bear lead containing paint Furniture articles for consumer use that bear lead containing paint. –Effective 8/14/09 - The allowable lead limit is lowered from 600 ppm to 90 ppm of the weight of the total nonvolatile content of the paint or the weight of the dried paint film. –Retroactive Applicability to Products in Inventory: Yes. Bans the sale of any product containing amounts over the new lead paint limit of 90 ppm in inventory or on store shelves as of August 14, 2009. –Composite Testing Cannot combine different paints; Can combine like paint from several parts to obtain a sufficient sample size –Mandatory 3 rd Party testing: any children’s product manufactured after 12/22/08 must be tested by an accredited third party lab for lead paint.

20. Phthalates What is it? A chemical compound added to plastics to increase their flexibility. Effective Date: 2/10/09 Permanent Ban: Any children's toy or child care article that contains concentrations of more than 0.1 percent of the following substances is banned from manufacture for sale, sale, distribution in commerce and importation into the United States: di-(2-ethylhexyl) phthalate (DEHP) dibutyl phthalate (DBP) benzyl butyl phthalate (BBP) Interim Ban: Any children's toy that can be placed in a child's mouth or child care article that contains concentrations of more than 0.1 percent of the following substances is banned from manufacture for sale, sale, distribution in commerce and importation into the United States: diisononyl phthalate (DINP) diisodecyl phthalate (DIDP) di-n-octyl phthalate (DnOP)

21. Phthalates Definitions –Children's toy means a consumer product designed or intended by the manufacturer for a child 12 years of age or younger for use by the child when the child plays. –Child care article means a consumer product designed or intended by the manufacturer to facilitate sleep or the feeding of children age 3 and younger, or to help such children with sucking or teething. –Toy That can be Placed in a Child’s Mouth - A toy can be placed in a child's mouth if any part of the toy can actually be brought to the mouth and kept in the mouth by a child so that it can be sucked and chewed. If the children's product can only be licked, it is not regarded as able to be placed in the mouth. If a toy or part of a toy in one dimension is smaller than 5 centimeters, it can be placed in the mouth. –With the exception of children’s sleepwear or bibs, wearing apparel, including rainwear, is not subject to the ban on phthalates. Retroactive Applicability to Products in Inventory: No. Affects product manufactured on or after February 10, 2009.

22. Tracking Labels for Children’s Products Tracking Label Effective Date: 8/14/09 Rule: The manufacturer of a children's product must place permanent, distinguishing marks on the product and its packaging, to the extent practicable, that will enable the manufacturer and ultimate purchaser to ascertain the manufacturer or private labeler, location and date of production of the product, cohort information (including the batch, run number, or other identifying characteristic). A tracking label or other distinguishing permanent mark must be placed on any consumer product primarily intended for children twelve and younger. The CPSC has advised that this applies to all children’s products, including, but not limited to, items such as clothing or shoes and not just toys and other regulated products. “To the extent practicable”: may not be practical for permanent distinguishing marks to be printed on small toys and other small products that are manufactured and shipped without individual packaging. Requirement for Advertisements- If an advertisement, label or packaging references a CPSC rule or standard, there also must be a statement that the product conforms with the applicable safety rule or standard. Retroactive Applicability to Products in Inventory: No. Manufactured on or after 8/14/09.

23. Recordkeeping Flammability, etc. – 3 Years Should retain CPSC related documents for a 3 year period. If certificates of conformity become a Customs requirement – 5 years.

24. Penalties –Civil Penalties are increased to $100,000 (up from $5,000) for each violation, with a maximum of $15,000,000 in total violations (up from $1,250,000). The CPSC will take into account the seriousness of the violation and the adverse effect the penalty will have on small businesses when determining how large a penalty should be issued. –Effective Date: The date on which final regulations are issued, or 8/14/09, whichever is earlier. The CPSC will issue final regulations by 8/14/09 regarding how penalties will be determined. –Biggest threat for non-compliance remains a product recall.

25. Issues What is a children’s product? A general purpose item could be considered a children’s product if marketed to 12 and under. Confusion relating to certification – who needs to certify, etc. How to make certification available to the CPSC, retailers? What standards apply to my products? Retroactive inventory issue for lead standards –Will render inventory banned – financial burden –Gives retailers a reason to return goods CPSC, consulting with U.S. Customs, must recommend bond amounts for imported products with high costs of destruction Recalls – even if not subject to a specific rule, any product can be recalled under FHSA (e.g. recent recall of steel pots – burn hazard; many drawstring recalls even though voluntary standard)

26. If you have any questions, please contact: Alan R. Klestadt, Esq. Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP 399 Park Avenue, New York, N.Y. 10022 Direct: 212-973-7722 Main: 212-557-4000 Fax: 212-557-4415 e-mail: aklestadt@gdlsk.com 399979