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Retailers and producers tussle over Prop 65 obligations

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A full year before they go into effect, last year's amendments to Proposition 65 regulations have changed the terms of the duel between suppliers and retailers over who will provide the required consumer warnings, and spawned confusion over what chemicals to single out, according to lawyers who advise businesses on Prop 65 compliance.

California's Office of Environmental Health Hazard Assessment (Oehha) adopted amendments in September 2016 on how "clear and reasonable warning" should be provided under Proposition 65. Among the changes, this will require the warnings to contain the name of at least one substance for which notice is being provided under the law. A pictogram – an exclamation mark inside an equilateral triangle – must also be included.

The original rules said that warning materials should be provided by manufacturers, rather than retailers, "where practicable." The new regulations, which are effective from August 2018, make suppliers responsible for complying with the mandate, either by placing warning labels on products, or providing warning materials to retailers.

"Almost every single major retailer has already shifted the obligation for Prop 65 compliance onto their suppliers," said Ed Sangster, a partner at K & L Gates in San Francisco. "If somebody brings a Prop 65 claim against Target, then Target is immediately going to make an indemnification claim to their supplier.

"For smaller retailers it will be a real relief, because they didn't have the clout to do that."

The lion's share

However, retailers say they will face the lion's share of the work. "Allowing manufacturers to comply with their warning obligations by simply providing warning materials to retailers, without obtaining the consent of the retailers, has the effect of shifting the burden of compliance to retailers," the California Retailers Association said in comments last year.

"Given that Proposition 65 warnings are not required anywhere except for California, we can envision numerous manufacturers moving to signage as a warning option rather than labelling their products, or simply mailing labels to retailers and direct them to sticker products in inventory.

"A business that, for example, wants to avoid enforcement litigation over phthalates in vinyl and other soft plastics, and does not want to have to pay to reformulate those products with other plasticisers or provide on-label warnings in other states, can neatly avoid those costs and disruption to its business by directing its retailers to provide warnings through signs or stickers."

'Warning signs everywhere'

"If everybody who has a product on the shelf said 'We are going to give you a warning sign,' you would walk into Home Depot and there would be nothing but Prop 65 warning signs everywhere," said Malcolm Weiss, a  partner at Hunton and Williams in Los Angeles. Retailers "are telling everybody upstream 'Nice try, but we aren't going to do it, you figure it out and put the warning on your product.'

"There's a lot of back and forth going on between manufacturers and retailers."

Manufacturers are still in the early stages of wrestling with changes in the required warnings. The standard Prop 65 warning now reads: "This product contains chemicals known to the state of California to cause cancer and birth defects or other reproductive harm." The new rules will require labels to name at least one listed chemical contained in a product, and to specify whether it is a carcinogen, a teratogen, or both. And it does not offer any guidance on what chemical to choose.

"Having to make the decision as to what chemical to list is treacherous and nobody knows what the right basis is as to what chemical to select," said Maureen Gorsen, a partner at Alston & Bird in Los Angeles. "It opens the door to 'Why that one? What did you know about that chemical?'"

Supply chain

Manufacturers are in the process of closely examining the supply chain for each component of a product.

"It's becoming clear that people responsible for putting warnings on the product don't always know what chemicals are in their products. A manufacturer has raw material suppliers, maybe another intermediate step of assembly," said Mr Weiss. "It's difficult to know what chemicals are in the products and that can change."

"Say a company puts out a warning that this product contains chemical X which is known to cause cancer," he said. "Six months go by and what if the chemical is no longer in the product? What if a tester doesn't find that chemical, but finds another one? Is that a violation? You can't test for 900 chemicals in a product."

Ms Gorsen said this is an especially pressing issue for manufacturers that get components from China, because even though a contract specifies testing requirements, "the piece of paper they send over can be a complete lie." Some large companies, "especially those who market to children," have decided to operate their own plants in China so they can control the process, she said.

However, manufacturers do have an option to avoid naming a specific chemical if they place a "short form" warning directly on a product. Those labels simply say: "WARNING: Cancer and Reproductive Harm –".

"Seventy percent of my clients are going for the short form," said Ms Gorsen. "This surprises me because it screams CANCER! in block letters. I think the reasoning is that everybody is so used to these labels they won't be noticeable," she said.

Sam Delson, Oehha deputy director for external and legislative affairs, said the agency has no plans to issue any formal guidance but will soon post a Q&A on its website.

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