When The Safe Drinking Water & Toxic Enforcement Act of 1986 was on the ballot in California, Kim Bakalyar says she probably voted for it. If only she knew then what the legislation would come to mean for the promotional products industry over 30 years later.

The legislation – commonly called Proposition 65 – lists chemical warning regulations for consumer products in California. Starting August 30, Prop 65 will require more rigorous warnings for products that contain chemicals the state has deemed to cause cancer or reproductive toxicity. California’s Office of Environmental Health Hazard Assessment (OEHHA) has adopted new regulations in an effort to provide more meaningful and useful information about chemical exposure to the public.

“I never even noticed these signs until I got involved in compliance in 2008,” says Bakalyar, the chief compliance officer at Los Angeles-based Top 40 distributor PromoShop (asi/300446).

The new warning labels will be hard to ignore as they’ll feature a triangular yellow warning symbol with an exclamation point. “It’s going to make it a lot worse looking,” Bakalyar says. “A little tweak of labeling is huge.”

In addition, the new warnings will say a product “can expose you to” a Proposition 65 chemical rather than saying the product “contains” the chemical. Other guidelines include having the name of at least one chemical of the more than 850 listed by California that prompted the warning, and the internet address for OEHHA’s Proposition 65 warnings website, www.P65Warnings.ca.gov, which includes additional information on the health effects of listed chemicals and ways to reduce or eliminate exposure.

“Because the warning hadn’t changed in so long, people were ignoring it,” says Marcia Kinter, vice president of government and business information at the Specialty Graphic Imaging Association (SGIA). “Whereas it was meandering before, now it’s really making sure you’ve included the necessary information, especially on your internet sales and catalogs.”

In addition to facing financial and logistical challenges, these new guidelines force promotional products companies to increase their due diligence. In order to comply with these regulations and avoid vulnerability, manufacturers, suppliers and distributors have to communicate with each other to make sure all parties are on the same page. Los Angeles-based Top 40 distributor Jack Nadel International (asi/279600) has reached out to partners on how best to proceed with the changes.

“We’re in the process of adapting and providing education,” says Debbie Abergel, chief strategy officer of marketing, sourcing and compliance at Jack Nadel. “We had education sessions at our annual conference in April updating both sales and support on the upcoming reform. We’ll also be in close contact with our vendors and keeping an eye on how our industry and retail responds to the reform.”

Ripple Effect
Education is crucial, but smaller and mid-size companies may not have the resources to teach staff, salespeople and clients about the changes. Suppliers have to handle labeling issues, determining which products need it, which chemicals should be highlighted and then potentially removing labels for products not heading to California. Meanwhile, distributors have to gather information from suppliers regarding which products contain listed chemicals so they can inform the end-user. A concern, of course, is that the end-user may be scared away from purchasing a product with a hazardous warning, leading to a decrease in sales.

“I think distributors will be forced to streamline their vendors and supply chain or even product offerings because end-users wouldn’t want these labels,” says Shamini Peter, COO of New York City-based Top 40 distributor Axis Promotions (asi/128263). “As for suppliers, the reformulation of product will increase their prices and may even limit suppliers on their product offering. Suppliers who don’t have any compliance programs will find it harder and harder to compete in the market at the same pace and level they have in the past.”

Bakalyar says PromoShop is working with preferred suppliers and asking what products aren’t compliant with Prop 65. “It makes it easier for the sales team to go out and sell to clients when they can show the bulk of what they have and exclude those noncompliant items,” she says.

Despite the strict requirements, there are a couple strange hiccups in the new guidelines: The new warnings are only intended for businesses with 10 or more employees, and most surprisingly, the new warnings aren’t mandatory. According to California officials, they’re simply “safe harbor warnings” for businesses to protect themselves against Prop 65 enforcement actions, most notably of which are lawsuits.

“The penalties are generally done through bounty hunters’ fines extrapolated through civil cases,” Kinter says. “Law firms are looking for violators and usually find them when people are brought to their attention.”

Although California states that manufacturers have the primary responsibility for providing Prop 65 warnings, everyone in the supply chain is liable, from supplier to distributor to buyer. When catalogs are mailed to clients in California, warnings must be included for products containing listed chemicals. When clients are searching for products online, some companies have enabled warnings to pop up when a California ZIP code is entered.

“We make every effort to mitigate risk,” says Jessica Wray, compliance manager for San Fernando-based Pinnacle Designs (asi/78140). “Our approach in complying with Prop 65 regulations has always been to only sell products that we’re confident fall within the safe harbor limits.”

To ensure compliance, Wray says Pinnacle Designs requires its factories to regularly provide third-party testing for all raw materials and components. The factories also test in-line and finished products with their in-house XRF machine. Pinnacle tests the finished product in-house as well with its own XRF machine. “The update in regulation is a sign of changes to come,” Wray says. “We will remain vigilant in ensuring we always comply with the safe harbor limits of Prop 65, and will continue to look at trends in regulations for steady improvement.”

Sections 25602 and 25603 of the legal text detail important current rules, including where/how warnings must be conveyed. In catalogs, for example, “the warning must be provided … in a manner that clearly associates it with the item being purchased.” When it comes to on-product cautions, “the entire warning must be in a type size no smaller than the largest type size used for other consumer information on the product,” the rules state. “In no case shall the warning appear in a type size smaller than 6-point type.”

“Companies must come up with a game plan as to how they’ll re-label,” Kinter says. “It’s very important to have a strategy in place.”

John Corrigan is a staff writer for Advantages. Tweet: @Notready4Radio. Contact: jcorrigan@asicentral.com