DOS-02-12-00001-A Children's Product Safety and Recall Effectiveness Act

10/3/12 N.Y. St. Reg. DOS-02-12-00001-A

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 40

October 03, 2012

RULE MAKING ACTIVITIES

DEPARTMENT OF STATE

NOTICE OF ADOPTION

 

I.D No. DOS-02-12-00001-A

Filing No. 948

Filing Date. Sept. 18, 2012

Effective Date. Jan. 31, 2013

Children's Product Safety and Recall Effectiveness Act

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Action taken:

Addition of Part 4607 to Title 21 NYCRR.

Statutory authority:

General Business Law, section 490-h

Subject:

Children's Product Safety and Recall Effectiveness Act.

Purpose:

Implement the Children's Product Safety and Recall Effectiveness Act.

Substance of final rule:

Section 4607.1 describes the purpose and scope of Article 28-E of the General Business Law and the adopted regulations.

Section 4607.2 defines the following terms: children's product, commercial dealer, defect, defective, durable juvenile product, initial consumer, knowledge, person, recall, retailer, and secondhand dealer.

Section 4607.3 describes the obligation of durable juvenile product manufacturers to provide owner safety cards and maintain any returned owner safety cards for a period of six years. The regulation also explains the obligation of durable juvenile product manufacturers to file disclosure forms with the Department of State.

Section 4607.4 sets forth the responsibilities of commercial dealers to properly label products placed for sale or distribution in New York. The regulation also sets forth the notification procedure which must be followed by commercial dealers upon receiving notice that a product is defective and a recall or warning issued. Finally, the regulation explains the procedure to be followed by commercial dealers upon receiving recalled products back from consumers.

Section 4607.5 describes the responsibilities of retailers to not take delivery of, or introduce for sale, any product that is not properly labeled in accordance with the regulations. The regulation further describes the procedure which must be followed by retailers upon receiving notice of the issuance of a recall or warning regarding a children's product or durable juvenile product.

Section 4607.6 describes the responsibilities of persons engaged in non-retail sales of children's products and durable juvenile products including secondhand dealers and those who operate or manage a website that serves as a platform to facilitate competitive bidding between third parties.

Section 4607.7 sets for the penalties which may be imposed for violations of the regulations and the procedure to be followed to adjudicate disciplinary matters.

Final rule as compared with last published rule:

Nonsubstantive changes were made in sections 4607.2(e)-(l), 4607.4(b)(4), (c)(2), (4), 4607.3(c)(1), (2) and (3).

Text of rule and any required statements and analyses may be obtained from:

Whitney Clark, NYS Department of State, Office of Counsel, 1 Commerce Plaza, 99 Washington Avenue, Albany, NY 12231, [phone], email: [e-mail]

Revised Regulatory Impact Statement

The non-substantive revisions made to the text of the proposed rule do not necessitate a revision to the previously published Regulatory Impact Statement. Specifically, as proposed the rule required manufacturers of durable juvenile products to maintain consumer product safety owner cards for a period of six years, after which time the cards and related information had to be destroyed. Based on comments received, the Department eliminated the destruction requirement so as to permit manufacturers to maintain data for longer periods of time, if so desired. This revision does not require a revision to the previously published Regulatory Impact Statement.

Revised Regulatory Flexibility Analysis

1. EFFECT OF RULE:

The proposed amendments will have no effect on local governments and will not impose reporting, record-keeping or other compliance requirements on local governments. The basis of this finding is that these proposed new regulations are directed at businesses that are engaged in the manufacture, remanufacture, retrofitting, importing, distribution or sale of products for children under 12 years of age.

The proposed additions will have an effect on small businesses, which are defined as business which employ 100 or fewer individuals (SAPA § 102(8)). Small businesses within the durable juvenile products and children's products manufacturing, distribution and sales industries are required to comply with Article 28-E of the General Business Law and will also be required to comply with the proposed rules.

The proposed rules impose reporting, record-keeping and other compliance requirements on commercial dealers and sellers of durable juvenile products and children's products. If any such enterprise operates as a small business, the proposed rules require minimal record keeping and reporting to the New York State Department of State Division of Consumer Protection (Department). The minimal requirements include: (1) for durable juvenile products manufacturers to maintain any returned product safety owners card information; (2) for retailers to post recall and warning notices, pull recalled items from the shelves, notify initial customers of a recalled item, for whom the retailer has contact information, that such item has been recalled, and implement a mechanism to prevent the sale of a recalled item; (3) for internet platforms and secondhand stores to provide notice to buyers and sellers of the importance of checking the United States Consumer Product Safety Commission (CPSC) recall website before engaging in the purchase or sale of a durable juvenile product or a children's product; and (4) for all commercial dealers of durable juvenile products or children's products to report to the Department any recall or warning issued on a product sold in the State, and (5) report on the disposition of any such recalled product returned to the manufacturer or importer.

The proposed rules benefit affected individuals and small business by providing guidance about compliance with the Children's Product Safety and Recall Effectiveness Act, Article 28-E of the General Business Law.

2. COMPLIANCE REQUIREMENT:

This regulation requires manufacturers of durable juvenile products to provide a durable juvenile product safety owners card with each durable juvenile product distributed, sold or made available in the State. If an initial consumer responds to the manufacturer with their contact information, the manufacturer must maintain such information for no less than six years. Manufacturers of durable juvenile products must also file biennially with the Department a durable juvenile product manufacturer's product safety owner's card disclosure form, which will be prescribed by the Department.

This regulation also requires a commercial dealer of children's products or durable juvenile products, which have been subject to a recall and the dealer has accepted the return of such recalled item from the purchaser to complete a Certification of Disposition, as prescribed by the Department, and file with the New York State Department of State Division of Consumer Protection within 90 days of the date of issuance of the recall.

Secondhand dealers are required under this regulation to obtain a copy of the Department prescribed notice instructing consumers on how to obtain recall information and advisory language notifying buyers and sellers of children's products or durable juvenile products of the importance of checking recall lists before purchasing used products, and to post the notice.

3. PROFESSIONAL SERVICES:

It is not anticipated that affected small businesses will need to retain additional professional services to comply with the proposed rule additions.

4. COMPLIANCE COSTS:

(a) Costs to small businesses: There will be a slight cost to small businesses to maintain information, prepare and provide relevant information requested by the Department, and/or post and notify consumers of recalls relating to children's products. The former State Consumer Protection Board, now New York State Department of State Division of Consumer Protection (hereinafter referred to as the Department to articulate the change in law) solicited an estimated cost for implementing the proposed rules from the Toy Industry Association (TIA), the Juvenile Product Manufacturers Association (JPMA), the Retail Council of New York State (Retail Council), and eBay, all of which include small businesses within their membership. The Department was unable to obtain a contact in the secondhand dealer industry, which is comprised of many small businesses.

i. TIA was unable to provide an estimated cost for the implementation of the proposed rules. The Department estimates that the cost will not be significant as many of the requirements that affect the TIA members under the proposed rules are the same as the requirements the members are already responding too under the CPSIA of 2008.

ii. JPMA was unable to provide an estimated cost for the implementation of the proposed rules. The Department estimates the cost will not be significant as many of the requirements that affect the JPMA members under the proposed rules are the same requirements the members are already responding too under the CPSIA of 2008.

iii. The Retail Council was unable to provide an estimated cost for the implementation of the proposed rules. The Department estimates that the costs to retailers should not be significant as the ongoing requirements upon retailers include posting notice, pulling recalled items from the shelves, and if they have contact information, notifying initial consumers of a recalled item that the item has been recalled. A one-time expense will be incurred by retailers to implement a mechanism at the point of sale to prevent the sale of a recalled item.

iv. eBay was responsive and advised that it has just fewer than 3.3 million active eBay users registered in the State. "Active" is defined as one who has bought, sold, or bid on an item on eBay at least once in the last year. 98,000 of the 3.3 million active users in the State are a top seller, which means they sell at least $1,000 worth of goods per month for three or more consecutive months. Thus, these sellers make all or part of their income from eBay sales, and many of them are small businesses employing 2-4, or more to help list goods and ship to buyers. eBay furthered that for the past two years it has been prominently providing notice to prospective sellers and buyers to advise of the importance of checking the CPSC recall website prior to engaging in a transaction for durable juvenile or children's products. The cost from this undertaking has been minimal. According to eBay, it will continue to be a minimal expense and undertaking to implement prescribed language and develop a filter to flag whether a user is registered in New York State, and if that user is selling or purchasing a durable juvenile product or children's product.

v. The proposed rules seek to require secondhand dealers obtain and post an advisory sign from the New York State Department of State Division of Consumer Protection. While the Department was unable to obtain a contact in the secondhand dealer industry, it estimates that the cost imposed is a de minims one time labor cost to obtain and post the prescribed sign.

(b) Costs to local governments: No additional costs to local governments.

5. ECONOMIC AND TECHNOLOGICAL FEASIBILITY:

The proposed additions do not impose new technological changes.

6. MINIMIZING ADVERSE IMPACT:

By working with and seeking input from industry participants in drafting these rules, any adverse impact to small businesses has been minimized, if not completely eliminated. There is no adverse impact to local governments.

In contemplation of the proposed rules, the Department met several times with the Toy Industry Association (TIA), which is based in New York City with 550 members, of which twenty percent are based in New York State. The TIA advocated for, and the Department agreed to provide for, a narrower definition of recall, and passive enforcement of the requirements upon such commercial dealers to provide appropriate tracking labels on the products, and notification to the Department of any recall or warning within twenty-four hours of issuance. The TIA explained that the definition of recall being used was so broad that it may be interpreted to include any items recalled from the distribution chain due to a packaging error or any other concern not related to a defect in the operation of the item. It was clearly not the intention of the Act or the Department to engage in regulating non-dangerous, administrative errors. Likewise, the Department agreed to passive enforcement of the commercial dealer requirements because it was the most efficient and cost-effective means for the Board to enforce the Act.

The Department also met with the Retail Council of New York State, whose membership includes nearly 5,000 stores ranging in size from sole proprietor businesses to national retail chains throughout the Empire State. The Retail Council advocated for the conspicuously posted recall notice requirement to include a computer kiosk where a consumer could find the most recent CPSC recall information. Target stores currently provide for such an electronic recall and warning information portal. In recognizing the advancement of technology in the retail sector, the Department agreed to permit such kiosks. However, any retail outlet utilizing an electronic kiosk shall post signage at each store entrance used by the public and prominently at the customer service area advising consumers that recall information can be found at the electronic kiosk and where such kiosk is located in the store. Any retailer utilizing an electronic kiosk shall provide direct customer assistance for any consumer who needs assistance operating the electronic device.

The Department also considered prescribing the size and color of the recall or warning notification sign, along with the font size used therein. However, upon discussion with the Retail Council, the Department learned that retailers as part of their unique branding are adverse to such requirements. Thus, the Department deferred on this point as to not overburden retailers. However, retailers must use a standard of reasonableness in their conspicuous posting signage and font size.

In addition, the Department met on several occasions with eBay, an international California based third-party internet sales and auction platform that is a fee-based service provider, to discuss the conspicuous internet resale notification advisory language requirement under the Act. eBay provided the advisory language it currently used to inform both bidders and sellers of the importance of checking the United States Consumer Product Safety Commission website for recalls. The parameters of this language is included in the Department's proposed rules, along with an additional requirement that such advisory language be provided before a bidder or seller engages in the actual entering of any personal or financial information to prepare a bid or sale.

While the Department was unable to solicit the input of the secondhand dealer industry, the proposed rules pose no foreseeable adverse impact to secondhand retailers.

7. SMALL BUSINESS AND LOCAL GOVERNMENT PARTICIPATION:

The proposed additions have no unique features which would require the participation of local governments. As indicated previously, the Department solicited participation from affected industry participants.

8. OPPORTUNITY FOR AMELIORATIVE ACTION:

The proposed additions do include the establishment of violations and penalties. The Department did consider including a cure period or other opportunity for ameliorative action to prevent the impositions of penalties on small businesses subject to enforcement. However, it was determined that the current enforcement procedures used at the Department provide for enforcement discretion. And, given the statute's specific requirements for swift 24 hour action to remediate the marketplace from dangerous children's products, it is imperative that the statute's violations and subsequent penalties remain unaltered to ensure a safe marketplace for the State's children.

Revised Rural Area Flexibility Analysis

The non-substantive revisions made to the text of the proposed rule do not necessitate a revision to the previously published Rural Area Flexibility Analysis. Specifically, as proposed the rule required manufacturers of durable juvenile products to maintain consumer product safety owner cards for a period of six years, after which time the cards and related information had to be destroyed. Based on comments received, the Department eliminated the destruction requirement so as to permit manufacturers to maintain data for longer periods of time, if so desired. This revision does not require a revision to the previously published Rural Area Flexibility Analysis.

Revised Job Impact Statement

The non-substantive revisions made to the text of the proposed rule do not necessitate a revision to the previously published Job Impact Statement. Specifically, as proposed the rule required manufacturers of durable juvenile products to maintain consumer product safety owner cards for a period of six years, after which time the cards and related information had to be destroyed. Based on comments received, the Department eliminated the destruction requirement so as to permit manufacturers to maintain data for longer periods of time, if so desired. This revision does not require a revision to the previously published Job Impact Statement.

Assessment of Public Comment

The Department of State received two comments in response to the Notice of Proposed Rule Making January 11, 2012 publication I.D. No. DOS-02-12-00001-P. The following is a summary of questions/concerns and the Department's response.

The Retail Council of New York State presented the following question and concerns regarding proposed 21 NYCRR 4607.4(b)(4) and 21 NYCRR 4607.4(c)(2).

"Can it possibly be that for every recall of a children's product, every "dealer" of the product must file this incident form with the Department? Department could be inundated with paper if there is no hierarchy prescribed among the kinds of dealers in the definition, from manufacturer through importer and wholesaler. Many retailers are importers, so there could be hundreds of separate "dealers" having to fulfill the requirement. It already is duplicating much of what CPSC prescribes; imagine what would happen if more states decided to require the same thing? Besides being unmanageable, how does this advance safety? How can the Department realistically perform follow-up and enforcement here? If they can't, it breeds disregard for their regulations."

The Department explained that "commercial dealer" was a statutorily defined term, which was incorporated into the proposed rulemaking. Accordingly each entity within the "commercial dealer" definition was obligated pursuant to law (General Business Law § 490-d) to provide notification to the Department. Thus, the concerns articulated would need to be addressed by a statutory change.

The Retail Council of New York also shared a concern regarding the one business day action required by retailers upon the receipt of a recall or warning. The commenter advised that it was impossible to accomplish the posting of a recall or warning in the store because "it would take time to create and post the signs."

The Department explained that retailers were obligated to perform these duties under the statute (General Business Law § 490-e) and therefore an amendment to the statute would be necessary to address this concern. The Department also explained that the recall and warning signs are often available on the Consumer Product Safety Commission's website or the manufacturer's website, and thus the retailer is not obligated to take time to create signs; only post them.

The final comments were received by the Administrative Regulations Review Commission. The Commission pointed out that the Regulatory Flexibility Analysis for Small Business and Local Governments submitted failed to provide an opportunity to cure for small businesses and local governments, or any explanation as to why such cure period was not included in the proposed rule making.

The Department explained this was an oversight as the proposed rulemaking was drafted previous to the enactment of the cure period requirement, which became effective on September 23, 2011 pursuant to Chapter 524 of the Laws of 2011. Accordingly, the Department amended the Regulatory Flexibility Analysis for Small Business and Local Governments to explain that a cure period was not being included due to the statutes requirements for swift action which impacts consumer health and safety. In addition, the Department's current enforcement mechanisms allow for discretion in enforcement.

The Commission also noted that in proposed 21 NYCRR § 4607.3(c)(3), manufacturers of durable juvenile products were required to maintain the consumer product safety owner card for a period of six years, after which time the cards and related information shall be adequately destroyed. The Commission explained that this was incongruent to comparable federal regulations adopted by the Consumer Product Safety Commission (CPSC). The CPSC advised that six years of data retention is adequate and that if "manufacturers want to keep the data for a longer period they have that option." The Commission recommended that the Department revise its data retention provisions to be consistent with Federal requirements.

The Department adopted the Commission's suggestion and accordingly deleted from proposed 21 NYCRR 4607.3(c)(3) the language, "after which time the cards and related information shall be adequately destroyed." Thereby eliminating the requirement for the product information cards, or any information gleaned from such cards, be destroyed upon the expiration of six years.