Lead and Now Cadmium: More Trouble for American Retailers

On December 29, 2009, the Consumer Product Safety Commission (“CPSC”) announced its unanimous vote to impose a $1.25 million civil penalty on RC2 Corporation for selling products that contained lead that exceeded the allowable limits. Federal regulations governing lead levels in children’s products have been in effect since 1978. These regulations prohibit children’s products from containing more than 0.06 percent lead by weight in paint or surface coatings.

On September 26, 2007, RC2 Corporation recalled a number of toys in the Thomas & Friends Wooden Railway product line after it discovered that the surface paint contained lead in excess of the 0.06 percent limit. These toys were imported from China and distributed by RC2 Corporation for sale to individual consumers. This recall of more than 1.5 million toys “spawned numerous class-action lawsuits in state and federal courts, alleging the company marketed and advertised the toys nationwide as safe for kids.” 20 No. 12 ANPRODLLR 3. These actions were settled in 2008 for $30 million, “providing eligible class members with cash refunds or replacement toys.” Id.

This recall also led to the CPSC imposing a $1.25 million civil penalty on RC2. CPSC Commissioner Anne M. Northup recently commented [PDF] on the imposition of this civil penalty stating that “it is entirely appropriate for the agency to assess civil penalties against companies that mistakenly import products in violation of the federal safety standards.” Further, Northup stated this type of penalty is intended to serve as a “financial deterrent against companies taking a casual approach toward their product safety compliance responsibilities” and to “serve as a further reputational disincentive.” Interestingly, Northup also opined that the agency must clarify its application of the statutory definition of “knowing” in 15 U.S.C. § 2069(d) used by the agency to impose such penalties before the standard is challenged by manufacturers. Clarification of this term might be a fertile field for litigation.

Finally, as a result of this recall, Congress passed the Consumer Product Safety Improvement Act, which reduced the allowable lead limit to 0.009 percent. The aim of stricter regulations on lead levels was to protect the safety of children. However, it appears that Chinese manufacturers may have just found a replacement for lead—a known carcinogen, cadmium. The Associated Press reported on January 11, 2009 that Chinese manufacturers have been substituting cadmium for lead and that “U.S. product safety authorities say they are launching an investigation into the presence of the toxic metal cadmium in children’s jewelry imported from China after disclosure of lab tests showing that some pieces consisted primarily of the dangerous substance.” (See this site’s previous coverage of this issue here.). While the CPSC has not recalled an item with cadmium, the CPSC has already stated that it is “moving swiftly to deal with the replacement of lead with cadmium in certain children’s products imported from China.”

As with the highly publicized recall of the Thomas & Friends Wooden Railway project line, the public can expect that the anticipated recalls of cadmium containing products sold throughout the United States will spawn litigation by consumers, further regulation by the CPSC of the consumer market, and the imposition of large civil penalties on American retailers. American retailers should be aware of this shift to the use of cadmium and have measures in place to protect themselves, as it appears that Chinese manufacturers are continuing to expose American corporations to liability in the millions of dollars.

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