Consumer Product Safety Improvement Act and Resale Shops

Operators of resale shops should be aware of the Consumer Product Safety Improvement Act (CPSIA).  The CPSIA, enacted in 2008, makes it illegal to sell any recalled product or any children’s product that contains lead or phthalates exceeding certain limits. Under CPSIA, a children’s product includes any consumer product designed or intended primarily for children aged 12 years of age or younger.  Numerous products could fall within the scope of CPSIA, such as toys, furniture, clothing, jewelry, and books.  Provisions of CPSIA lower allowable levels of lead and phthalates in children’s products in 2009 and 2010.  In August 2011, the total allowable lead content of children’s products is scheduled to become even more stringent.  This standard is subject to change every five years based upon available technology.

Violating CPSIA could be disastrous to a resale shop.  Any party violating CPSIA could be liable in damages of up to $100,000 per violation or $15 million per series of violations.  To minimize the risk of violating CPSIA, resale shops should verify that inventory is not listed in the Consumer Product Safety Commission’s database of recalled products.  This is a relatively easy measure that shops can implement in order to attempt to comply with CPSIA.  Ideally, resale shops should do this before accepting any product from a donor, but existing inventory should also be evaluated.  Any product that has been recalled should be discarded.  The more difficult step is to determine whether or not a product violates the lead or phthalate standards.  The only way to know definitively that a product complies with CPSIA standards is to test it.  Testing can be expensive and thus cost-prohibitive for resale shops.  While not providing the certainty of testing, a less expensive strategy could be to contact the manufacturer or avoid products that commonly contain lead or phthalates.  Accepting products without testing creates a risk that the shop is violating CPSIA.  If this level of risk is unacceptable, the resale shop should discontinue selling all children’s products.

If the organization that operates the resale shop is unaccustomed to the risks presented by CPSIA, the organization may want to create a separate entity to operate the resale shop.  Using a separate entity to operate the resale shop could protect the parent organization’s assets from the resale shop’s liabilities.  If the parent organization is exempt from income tax under section 501(c)(3), the new entity would have the parent’s tax-exempt status if the new entity is structured properly.

The attorneys of David L. Bea & Associates are experienced in matters relating to CPSIA and resale shops.  If you have any questions regarding CPSIA, resale shops, or other corporate matters, please do not hesitate to contact us.

The foregoing article was provided for general information.  Seek legal advice for your specific situation.

© 2011 David L. Bea & Associates