McMillan’s Timothy Cullen, Rachel Cooper and Adelade Egan discuss the complexities of Canada’s dual regulatory framework for product and vehicle recalls, key jurisdictional grey zones, and what manufacturers, distributors and importers need to know to ensure compliance.
Q: Can you give readers "the lay of the land" on this topic?
A: Most vehicle and product manufacturers operate in both Canada and the United States, which means they must navigate overlapping, and sometimes divergent, reporting obligations with the Canadian regulators Health Canada and Transport Canada, and the American regulators the Consumer Product Safety Commission and the National Highway Traffic Safety Administration. Understanding which Canadian regulator and which Canadian law applies to your product is critical for compliance.
Don’t assume that Canada takes the same regulatory approach as the United States in all cases. It is potentially a costly first mistake. The regulatory frameworks differ, and the Canadian and American approaches do not always align. Canadian regulators take their mandates seriously. Canadian regulators don’t like to feel like an afterthought to their American counterparts, and manufacturers who treat Canadian reporting obligations as secondary or derivative of their U.S. processes risk regulatory scrutiny, enforcement action, and reputational harm.
Complicating matters further, the jurisdictional line between Health Canada and Transport Canada is not always clear. Manufacturers, distributors and importers may be uncertain about which regulator oversees their product, particularly when dealing with emerging technologies or hybrid products that don’t fit neatly into traditional categories. Getting this wrong can result in missed reporting obligations, delayed recalls, and potential liability.
Q: What are the principal statutory and regulatory instruments governing recalls for consumer products and motor vehicles in Canada? How do Health Canada and Transport Canada delineate their respective regulatory authority in the context of consumer product and automotive recalls?
A: Health Canada oversees consumer products under the Canada Consumer Product Safety Act (CCPSA). The CCPSA and its regulations apply to all products used for non-commercial purposes, including domestic, recreational and sports purposes, and also captures any components, parts, and accessories. The CCPSA contains several exclusions to its applicability listed in Schedule 1, which means that outside of its scope are, for example, vehicles within the meaning of section 2 of the Motor Vehicle Safety Act and parts of vehicles that are integral to the vehicle as it is assembled or altered before sale to the first retail purchaser, including replacement or alteration parts. Other Schedule 1 exclusions include items such as cosmetics, medical devices, drugs, and food.
Transport Canada oversees vehicles under the Motor Vehicle Safety Act (MVSA), which are broadly defined as “any vehicle that is designed to be, or is capable of being, driven or drawn on roads by any means other than muscular power exclusively, but does not include any vehicle that is designed to run exclusively on rails.” The MVSA and its regulations also apply to “equipment” which includes “tires” and “equipment for use in the restraint of children and “disabled persons.” In practical terms, Canada’s motor vehicle safety regime regulates equipment like infant car seats and booster seats, and a range of vehicle types including passenger cars, trucks and SUVs, motorcycles and mopeds, recreational vehicles, heavy-duty trucks, trailers, school and transit buses.
The jurisdictional divide between Health Canada and Transport Canada becomes particularly important because Canada and the United States differ in how they categorize certain items as being either “consumer products” or “vehicles.” For example, Canada regulates restricted use vehicles (side-by-sides and four wheelers) and snowmobiles as “vehicles” such that Transport Canada is the regulatory body with oversight, whereas these products are considered “consumer products” in the United States. This distinction sometimes leads to regulatory oversights when selling these products in Canada, such as failures to ensure that these vehicles meet required motor vehicle safety requirements and equipment requirements in Canada. In particular, Transport Canada has noted the need for regulatory change to address the common issue of manufacturers failing to apply VINs to these types of products when sold in Canada.
Understanding these definitional boundaries is essential for manufacturers to ensure they are reporting to the correct regulator and complying with the applicable recall and reporting requirements.
Q: What are examples of legal “grey zones” that have given rise to jurisdictional ambiguity between Health Canada and Transport Canada?
A: The most prominent example of a legal grey zone between Health Canada and Transport Canada is electric bicycles or “e-bikes.” After certain 2021 amendments removed the definition of a “power-assisted bicycle” from the Motor Vehicle Safety Regulations, e-bikes fell into a regulatory vacuum.
After this regulatory change, it seemed that e-bikes should have been regulated by Health Canada under the CCPSA. However, Health Canada has generally refused to assume jurisdiction, reasoning that because e-bikes could conceivably be used on roadways, they qualify as ‘vehicles’ under the MVSA and are therefore exempt from the CCPSA by virtue of Schedule 1.
In the current state of affairs, e-bikes are unregulated vehicles not subject to Transport Canada’s jurisdiction under the MVSA, and yet often still considered a “vehicle” by Health Canada and therefore unregulated under the CCPSA. In recent months, Health Canada has shown a willingness to “assist” companies with e-bike recalls, with recall posting titles such as “The Government of Canada is assisting [Company Name] in communicating the e-bicycle recall” while still not formally taking jurisdiction over the recall. This new approach by Health Canada suggests some acknowledgement that no regulator is taking full jurisdiction, but that informing the public of safety risks and recalls remains important.
Other items that bridge the grey zone include aftermarket accessories or add-ons that can be installed by an original equipment manufacturer or dealer before delivery of a vehicle to the first retail customer, such as seating and interior safety equipment, cargo accessories, and aftermarket driver assistance and camera systems.
When a product falls into a regulatory grey zone, certain best practices remain important. Even without a reporting obligation or regulatory oversight, companies should still follow normal recall and corrective action protocols: posting the recall on social media and the company’s website, tracking consumer interactions, and tracing impacted products. These practices can protect companies from potential product liability claims and class actions.
Companies can also report incidents to Transport Canada and Health Canada with the sole purpose of obtaining written confirmation from the regulators that the product falls outside their regulatory purview. As is often the case, being a corporate good citizen will pay off in the long run.
Q: What compliance protocols and documentation practices should be implemented to satisfy the requirements of both Health Canada and Transport Canada in the event of a recall?
A: A robust compliance program is essential for any manufacturer or importer selling products or vehicles in Canada. Companies should develop standard operating procedures and checklists for reporting and ensure company policies prevent information siloing within the company. It is critical to ensure that customer service calls and warranty claims information are assessed for potential systemic safety issues.
Reporting and communication across divisions within a company and across international divisions is also important. Health Canada and Transport Canada monitor international recalls and, if they believe a product or vehicle recalled abroad is sold in Canada but was not recalled, they will follow up with the company. Manufacturers should have systems in place to track recalls of their products or vehicles in other jurisdictions and assess whether those recalls should be extended to Canada.
Companies should create a culture of compliance and encourage employees to speak up when they identify a safety concern. This means providing clear channels for reporting potential issues, ensuring that employees understand the importance of product safety, and protecting those who raise concerns from retaliation.
Q: What are the potential civil, regulatory, and criminal liabilities for non-compliance with recall obligations under the respective regimes of Health Canada and Transport Canada?
A: The consequences of non-compliance can be serious. Under the CCPSA, criminal offences carry a maximum penalty of $5 million, while the MVSA provides for criminal penalties of up to $2 million. With respect to administrative monetary penalties, the CCPSA permits fines of up to $25,000, and the MVSA up to $200,000, with both statutes allowing penalties to be levied for each day a violation continues. That said, Health Canada and Transport Canada have not frequently exercised these punitive measures.
Beyond regulatory and criminal liability, manufacturers face potential civil liability from consumers injured by defective products or vehicles. A failure to conduct a timely and effective recall can be used as evidence of negligence in product liability litigation and can significantly increase exposure to damages.
Reputational harm should not be underestimated. In an era of social media and instant communication, news of regulatory enforcement action can spread quickly and cause lasting damage to a brand. Manufacturers who demonstrate a commitment to safety and compliance, on the other hand, can build trust with consumers and regulators alike.
Q: Any final thoughts?
A: Consumer product and vehicle recalls in Canada require careful navigation of a complex regulatory landscape. Manufacturers must understand which regulator has jurisdiction over their products, comply with distinct reporting and recall obligations, and prepare for jurisdictional grey zones where regulatory authority may be unclear. By implementing robust compliance protocols, fostering a culture of safety, and maintaining open communication with Canadian regulators, manufacturers can manage these challenges effectively and protect both consumers and their businesses.
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Timothy Cullen and Rachel Cooper are partners at McMillan LLP, and Adelaide Egan is an associate in the Litigation and Dispute Resolution practice. Their expertise focuses on regulatory compliance and product safety matters, including consumer products and automotive recalls.