Facing California's Prop 65, DMI Companies is setting an example for companies to follow
Before new regulatory updates to California’s Proposition 65 law took effect on Aug. 30, 2018, DMI Companies formed an internal research team to gain a broad understanding of the law’s requirements and impact on business. With four brands under its umbrella (Ductmate, Aire Technologies, GSI and Linx Industries) specializing in manufacturing products for HVAC professionals, the company is more than accustomed to navigating codes and standards.
“DMI Companies works with code and standards orga-nizations such as UL (Underwriters Laboratories), AMCA
(Air Movement and Control Association International, Inc.) and the ICC (International Code Council) to understand and comply with the changing requirements within the indus-try,” explains Mark Smith, director of sales and marketing at DMI, headquartered in Charleroi, Pennsylvania.
Realizing the complexity of the law, DMI turned to the supply chain data management company Assent Compliance for help.
“Assent Compliance has helped us understand and fulfill the requirements of Proposition 65,” Smith says. “They are also a resource for our organizations when fielding questions regarding the particular requirements of Proposition 65.”
According Proposition 65’s requirements, businesses with more than 10 employees must provide WARNINGS on all products to Californians about “significant exposures to chemicals that cause cancer, birth defects or other repro-ductive harm.” In requiring that this information be pro-vided, the hope is to give Californians the information they need to make informed decisions about their health.
Regulations around Proposition 65 originally stemmed from the Safe Drinking Water and Toxic Enforcement Act of 1986. And, as its name suggests, the law was meant to protect the state’s drinking water from toxic substances. In order to help manufacturers and businesses comply, California must publish an updated list of cancer causing chemicals once a year.
“When the original list debuted in 1986, there were 31 chemicals,” explains Bruce Jarnot, senior manager, product compliance at Assent Compliance. “Now the list contains more than 950 different chemicals.”
As a manufacturer of sealants and adhesives, DMI is required to put WARNING labels on these products in accordance with the Proposition 65 law. Penalties for not doing can be as high as $2,500 per violation. Because products shipped to California cannot easily be separated from orders to other areas, many manufacturers like DMI are choosing to label all products in accordance with Proposition 65. “This is a costly and time consuming endeavor for any organization,” says Smith. For consumers outside of California, the WARNING labels have been an unexpected cause for concern.
“Although the organization is not aware of any con-tractors cancelling orders for our products, it has cer-tainly resulted in concern outside of California, where contractors are not familiar with these warnings through constant market exposure,” Smith explains. “Those con-tractors have been very comfortable about their ability to continue using DMI Companies products once they have received information regarding the source and requirements of Proposition 65.”
WHAT’S IN A WARNING
As well-intentioned as the regulations around Proposition 65 are, the main complication in the law’s chemical expo-sure WARNING is that labels simply state that a product contains something that could cause cancer or affect repro-duction. Labels do not disclose what substance it is, its risk level quantities, where it is in the product and how to reduce exposure.
Part of Assent Compliance’s practice is to attain these details for its clients and create documentation to support labels, which can then be used to pass on to inquiring consumers.
“For Proposition 65 specifically, our experts will often go on-site with a customer to evaluate their products, look-ing at their fit, form and function of parts and various com-ponents,” explains Jarnot. “We do this to evaluate where exposures may come from. We then intake bills of materials (BOMs) to create detailed part and substance hierarchies for products and assemblies. Assent automates the acquired data to show compliance status on parts and materials, and rolls it up to declare compliance at the product SKU level.”
Ironically, companies that were quick to follow the law’s regulations have been negatively impacted because of a stigma surrounding products carrying the warning labels.
Meanwhile, companies whose products do not carry (or are exempt from carrying) the warning labels have benefitted.
“If two competing products are side-by-side — one with a Proposition 65 warning, and one without — which one are con-sumers more likely to choose? That said, Proposition 65 certain-ly has its benefits,” Jarnot says. “Lead is a potent carcinogen that causes reproductive harm, so we don’t want to expose our kids to lead. Similarly, we don’t want kids exposed to plasticizers, so there is definitely a big upside to Proposition 65.”
As far as health and environment regulations at the fed-eral level, the United States is behind other countries and regions, including Canada and the European Union, Jarnot explains. Prop 65 is the result of individual states taking matters into their own hands.
“The State of California is more on par with Europe. They have many regulations that focus on air quality, water quality, land, things that have to do with recycling and reuse of plastic containers,” says Jarnot. “They have many regu-lations around keeping things out of landfills. California is really making an effort to do the right thing for the environ-ment and human health.”
THE ROAD FORWARD
California could be on to something. Recently, New York Gov. Andrew Cuomo proposed a regulation that appears substantially similar to Proposition 65 in his executive budget, which would impact the vast majority of companies that manufacture consumer products.
One key takeaway for California suppliers and contrac-tors when navigating Prop 65 is that third-party supplier documentation is critical, says Jarnot.
“Companies cannot over or under-warn, lest you vio-late Article 6 on ‘Clear and Reasonable Warnings’ and face financial penalties and litigation. Over-labelling is now considered the same violation as not providing a warning at all. There is no legal precedent for this yet, since August 30th 2018, but we’ve heard this loud and clear from the state and regulators,” he explains. “They haven’t given a set timeframe, but we are expecting activity from the state attorney general’s office to make an example of a company violating the new rules. So that’s why it’s so important for companies to substantiate their labels, collect this informa-tion, and be safe.”
As demand for LEED certifications and sustainable building increases in the building trades, Mark Smith is positioning DMI Companies to be a leading manufacturer of green building products.
“As a nation, we are more aware of the chemicals we are coming into contact with on a daily basis and their potential impact on our lives,” he says. “I believe this will have a pos-itive impact on the HVAC industry as it continues to focus on Indoor Air Quality (IAQ).”
By focusing on ways to improve IAQ in its products and instilling those values in company culture, Smith says it has only fueled DMI’s growth.
“It has help the organization anticipate trends which may impact our market while also leading to the develop-ment of products, such as low VOC duct sealants and adhe-sives as well as revolutionary new duct liners.”