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Stiff new rules planned for importers

|Written By Kelly Harris

Sweeping new product safety rules expected to be fast-tracked through the House of Commons will place significant burdens on importers, say lawyers working in the areas of product safety and international trade.

The proposed rules require importers to track any product recalls by foreign governments or safety-related incidents, and report those to Canadian authorities.

Once in force, non-compliance with the rules can carry maximum fines of $5 million, up to two years in jail, or both. A summary conviction for a first offence is subject to a maximum fine of $250,000, six months in jail, or both. The penalties can become stiffer for those who knowingly or recklessly contravene the act.

Bill C-6, “an act respecting the safety of consumer products,” is essentially a revamp of bill C-52, the products safety act, with 65 minor changes, says Peter Braund, a product liability litigation lawyer with Borden Ladner Gervais LLP.

While the new legislation makes a number of changes and places significant responsibilities on importers, the more stringent regulations are a long time coming, Braund says.

“I’ve always thought that Canada should step up to the plate more than it has in terms of product safety like the Consumer Product Safety Commission in the United States does,” he says.

“We don’t have a CPSC in Canada and this legislation in my view goes a long way to doing that, given the powers that inspectors have to order a recall and given the obligations to report incidents, given the penalty provisions that are pretty stiff.”

Bill C-52 was introduced last April, but was never proclaimed into force and died on the order paper with last year’s federal election.

In a previous article, (“Recalls lead to stiff trade rules,” Canadian Lawyer InHouse, Dec. 2008), it was predicted the legislation would find its way back into the House of Commons. Bill C-6 received first reading Jan. 29, 2009.

John Boscariol, head of McCarthy Tétrault LLP’s international trade and investment law group, says there are two main issues in-house counsel need to be watchful for with the new legislation.

The first key area is new obligations for importers to track related product recalls from foreign countries. If a product being imported into Canada is subject to a health and safety-related recall in another country, the Canadian importer must report it to the Canadian government within two days. The original report must be followed up by a more detailed full incident report within seven days.

“They now have this comprehensive regulatory regime that is going to impact their supply chain right from supplier to retailer, in terms of documentation, record keeping, general compliance, it covers advertising, manufacturing selling,” he says.

Boscariol says the new legislation may also raise the spectre of protectionism. Given political and economic times, countries may attempt to use similar legislation to protect domestic manufacturers. This makes another case for tracking and keeping detailed records on products being imported.

While it may seem like common practice, Boscariol says currently Canada does not require detailed information on many imported products, but has the right to do so.

“Governments have the right and obligation to regulate this,” he says. “To make sure products are safe for consumption and human use.”

Boscariol and Ottawa-based colleague Brenda Swick will be in Washington, D.C., this week to discuss the proposed new rules along with counterparts from the United States and Mexico as part of an American Bar Association conference on international trade.

In the earlier article, Boscariol and Swick promoted the idea of a corporate compliance officer to make sure importers are in line with the new rules.

Braund, who is a director with Yamaha Motor Canada and the company’s lead outside counsel for the past 30 years, predicts because as bill C-52 was already scrutinized and aims to protect Canadian consumers, the new bill is likely to be fast-tracked.

He says in-house counsel for companies relying on imports should appoint a compliance officer to track the goods they are bringing into Canada. The compliance officer should also continue to monitor the product both at home and abroad given new requirements on importers to report product safety recalls from outside Canada

“There is something new called reporting of incidences,” says Braund. “And it’s not just incidents in Canada it’s incidences involving similar products abroad which you know about.

“So if you’re part of an international chain of companies that make and distribute the same products, you should have somebody within the organization that is attuned to what is going on in the foreign countries.”