Guide To Product Safety, Social and Environmental Standards

1. Guide To Product Safety, Social and Environmental Standards Presented by: Michael Lara, President Brandango Incorporated Authored by: John Satagaj Attorney at Law

2. Can you answer these questions? • Do your promotional products meet all: • Product safety standards? • International labor standards? • Environmental and social expectations?

3. If not… • Do you know what to do? • Do you know where to start?

4. Product design and evaluation Standards and tests Independent testing and certification Social standards Environmental standards Age Grading Conformity assessment Federal regulation and enforcement Company code of product responsibility conduct Product liability laws, contracts and insurance Resources Product safety and responsibility A to Z

5. Product design and evaluation • How will the product be used? • What are the potential risks? • Are there specific standards and tests? • Are there specific labeling requirements?

6. Standards and tests • There is rarely “the standard” for a particular promotional product • There may be multiple standards that apply to a promotional product, some for performance and some for design

7. Standards and tests • According to the National Institute on Standards and Technology (NIST), there are approximately 30,000 voluntary standards • Who makes standards? • ISO (www.iso.gov) • ANSI (www.ansi.org) • ATSM (www.astm.org)

8. Can you test the product or process yourself? • In theory, yes, since conformity with standards is not generally required as a matter of law • In some cases, the end buyer or federal or state regulations may require third party certification

9. Finding an accredited laboratory • The American Council of Independent Laboratories (ACIL) offers a ListServe that can assist you in identifying an appropriate laboratory. http://www.acil.org • Most accreditation bodies offer a list of accredited laboratories on their websites.

10. Social Standards • Generally, social standards refer to labor standards or working conditions

11. No child labor No forced labor Comply with health and safety rules Freedom of association and collective bargaining No discrimination No inappropriate discipline Fair working hours Fair compensation Management systems to ensure above Social Standards For more on these recommendations, visit www.sa-intl.org

12. Environmental Standards • No specific standard addresses this as a product category • Generally, end buyers want environmentally or ecologically friendly products and packaging: • Made from recycled material • Energy-efficient production • Carbon neutral • Bio-based

13. Environmental Standards • The Federal Trade Commission (FTC) issued its Environmental Guides in 1992 and revised them in 1998. • www.ftc.gov/bcp/grnrule/guides980427.html

14. Age grading • The CPSC classifies toys by children’s age categories: “Age Determination Guidelines: Relating Children’s Ages to Toy Characteristics and Play Behavior.” The guide can be found at www.cpsc.gov/businfo/corrective.html • The industry standard, ASTM F963, “Standard Consumer Safety Specification on Toy Safety,” includes information on age grading toys

15. Conformity Assessment • Conformity assessment consists of product testing and factory audits • It enables companies to know what policies and procedures must be implemented to ensure the production process meets all applicable standards for qualify, safety and societal concerns

16. Conformity Assessment • PPAI’s Global Strategy Council Guide offers a number of checklists and resources including: • Factory Audit Self-Assessment Checklist • Social Standards Factory Audit Checklist

17. Code of Product Responsibility Conduct • The Code of Product Responsibility Conduct is a statement of principles • It is what suppliers hand to distributors, and what distributors hand to end buyers • It is your commitment

18. Code of Product Responsibility Conduct • Typically, the code includes a statement on environmental, safety and quality commitments • At the end of the day, it is up to you to decide what to include

19. Most codes address the following topics: Product safety No abuse of labor No child labor Freedom of association No discrimination Hours and wages Workplace conditions Environment Absence of applicable laws and regulations Subcontractors and sources Code of Product Responsibility Conduct

20. Code of Product Responsibility Conduct

21. Code of Product Responsibility Conduct

22. Federal Regulation and Enforcement • The CPSC has jurisdiction over about 15,000 types of consumer products • It draws its authority from: • The Consumer Product Safety Act (CPSA) • The Federal Hazardous Substances Act (FHSA) • The Flammable Fabrics Act (FFA) • The Poison Prevention Packaging Act (PPPA) • The Refrigerator Safety Act (RSA)

23. Federal Regulation and Enforcement • The CPSC publishes a handbook on recalls and identifies potential problems and actions a company might want to take on a voluntary proactive basis when a potential problem has been identified www.cpsc.gov/businfo/8002.html • The CPSC also has a checklist of suggestions for undertaking a recall www.cpsc.gov/businfo/corrective.html click on “Recall Check List”

24. Product Liability Law • Generally, product liability claims are based on negligence, strict liability or a breach of warranty of fitness • Most often, product liability claims are based on a defective product, and that could be a design defect or manufacturing defect or sometimes a marketing defect (improper instructions or failure to warn)

25. Product Liability Contracts • An agreement “to defend” means one party agrees to pay the fees the other party incurs against claims and lawsuits • An agreement “to indemnify” means one party agrees to pay for the other party’s financial losses such as settlement costs, court awards and other specific expenses • An agreement “to hold harmless” means one party agrees that the other party will be freed of any liability resulting from the sale or use of the products

26. Product Liability Contracts Example (not a recommendation) of a contract: “X shall defend, indemnify and hold harmless Y from and against any and all demands, claims, actions, legal proceedings, damages, liability, costs and expenses of whatsoever kind and nature (including reasonable attorneys’ fees) arising out of or related to sale or use of the promotional products.”

27. Product Liability Contracts • A “waiver” or “release of liability” is the opposite side of the coin. One party gives up the right to pursue the protections afforded by the duty to defend, indemnify and hold harmless • Technically, the waiver is an agreement not to pursue a right, while the release is giving up the right, but they are essentially equivalent

28. Product Liability Contracts Example (not a recommendation) of a waiver: “Y hereby releases X from any liability from demands, claims, actions, legal proceedings, damages, liability, costs and expenses of whatsoever kind and nature (including reasonable attorneys’ fees) arising out of or related to sale or use of the promotional products.” “Y hereby waives its right to any and all demands, claims, actions, legal proceedings, damages, liability, costs and expenses of whatsoever kind and nature (including reasonable attorneys’ fees) arising out of or related to sale or use of the promotional products.”

29. Product Liability Contracts • Many agreements also have “warranties and representations” regarding a variety of concerns, from intellectual property authorization to fitness for purpose • To reaffirm the obligation of a party related to product responsibility, clauses could be added to the warranties and representations

30. Product Liability Contracts Example (not a recommendation): “X represents and warrants that products subject to this agreement comply with all applicable United States laws currently in force.” “X represents and warrants that products subject to this agreement were produced in compliance with all applicable national and local labor and environmental laws.”

31. Product Liability Insurance • Any party in the product delivery channel may want to obtain product liability insurance • Most businesses have a commercial general liability (CGL) policy. It may cover some aspects of a claim related to a product injury • A product liability policy is a separate policy or an additional endorsement on a CGL that specifically covers product-related claims

32. Product Liability Insurance • Exclusions—it is important to know what is covered and what is not covered. In product liability insurance, does the policy cover if there are violations of specific safety laws or specific risks (e.g. lead poisoning)? If it is excluded, you may need to ask for a rider for additional coverage

33. Product Liability Insurance • "Named insured," "additional insured," or "vendor endorsement" are terms used to describe when other parties are added to an insurance policy • Typically, a distributor would be added to a supplier's policy • One concern with such actions is that policies typically have aggregate limits. So if there is a claim or claims, the amount the insurer will pay on behalf of any or all of the insured is limited to one overall amount; each of the insured is not covered up to the limit of the policy

34. Product Liability and Insurance • Insurance companies now offer product recall insurance that covers expenses related to product recalls • A key issue is what constitutes a product recall? • Is it voluntary or a government mandated recall? • Whose expenses are covered? • Just the insured or other parties as well?

35. Product Liability Insurance • When working with a foreign source, consider: • Does the foreign source have U.S. insurance? An agreement could require such insurance. • If that cannot be secured, at least request a certificate of insurance from the foreign source's insurance company. This will provide you the details of their coverage. • Require the foreign source to accept the jurisdiction of U.S. courts if a claim involving its products is filed.

36. Resources • UNDERSTANDING STANDARDS AND CONFORMITY ASSESSMENT • The National Institute of Standards and Technology (NIST) http://ts.nist.gov/Standards/ssd.cfm • ABCs of Standard-Related Activities in The United Stateshttp://ts.nist.gov/Standards/Conformity/stdpmr.cfm • The ABCs of the U.S. Conformity Assessment System. http://ts.nist.gov/Standards/Conformity/primer.cfm

37. Resources • WHERE TO BUY STANDARDS • The American National Standards Institute (ANSI) http://www.ansi.org • WHERE TO FIND A TESTING LABORATORY • The American Council of Independent Laboratories (ACIL), http://www.acil.org • WHERE TO FIND INFORMATION ON SOCIAL STANDARDS • The International Labour Organization (ILO) www.ilo.org • The Social Accountability International (SAI) www.sa-intl.org

38. Resources WHERE TO FIND INFORMATION ON ENVIRONMENTAL STANDARDS • The Federal Trade Commission (FTC) www.ftc.gov issued its Environmental Guides http://www.ftc.gov/bcp/grnrule/guides980427.html • The Environmental Protection Agency (EPA) http://www.epa.gov/opptintr/epp/index.html

39. Resources WHERE TO FIND INFORMATION ON AGE GRADING • “Age Determination Guidelines: Relating Children’s Ages to Toy Characteristics and Play Behavior.” The guide can be found by going to http://www.cpsc.gov/businfo/corrective.html and selecting "Age Determination Guidelines - Relating Children's Ages to Toy Characteristics and Play Behavior (pdf)" under the "Other Guidance" subheader.

40. Resources WHERE TO FIND INFORMATION ON FEDERAL REGULATION OF CONSUMER PRODUCTS The U.S. Consumer Product Safety Commission (CPSC) www.cpsc.gov The CPSC publishes a comprehensive guide, entitled “Regulated Products Handbook.” Go to http://www.cpsc.gov/businfo/corrective.html and click on “Regulated Products Handbook.” The CPSC also publishes a helpful handbook on “Recalls.” www.cpsc.gov/businfo/8002.html The CPSC also has a checklist of suggestions for undertaking a recall go to: http://www.cpsc.gov/businfo/corrective.html and click on “Recall Check List.”

41. Note… • We are not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the service of a competent professional should be sought. • The examples provided are intended for illustrative purposes only.

42. Questions? http://www.ppa.org/Member/productsafety.aspx