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CPSIA – Businesses Plan for the Final Days

With the February 10th stay on testing expiration rapidly approaching, the 15-month rules due on November 14 (expected to set deadly testing frequency requirements) and absolutely no relief on the horizon from a unfeeling, uncomprehending, resolutely unyielding Democratic Congress, businesses are left to fend for themselves. Consider the calendar: February 10th is only four months and ten days away. From that day forward, every item imported must be accompanied by a super-expensive CPSIA test report. Time is running out. This is a problem. For many products, the cost of testing ALONE renders them unprofitable. And this is on top of the high cost of tracking labels and other costs associated with the CPSIA. These new costs make obsolete many business models serving specialty markets like schools. [Btw I was told yesterday to be prepared to pay $35,000 to modify our warehouse management software system to fix ONE hole in our tracking labels accountability effort. ONE hole, not ALL the holes. Ah, it's just money, and money grows on trees, right?!] If you are a maker of products rendered unprofitable by CPSIA testing, you face ugly choices. Because many businesses run on a calendar marketing cycle, you may have to drop items mid-year after testing requirements kick in. Most dealers won’t forgive you for this. What to do? At this point, with so much uncertainty, businesses are struggling to answer this question. Planning is literally impossible. How can you address this major business planning issue set to mature in only 133 days if, for instance (as is true), no phthalates testing labs have been accredited yet and no final phthalate testing standard has been announced? Good question, darned good question. A common strategy to prepare for the Final Days is to top off inventory ahead of the testing requirement. Businesses are now scouring inventory records and ordering stock ahead of time to ride out 2010. This will be a mini-stimulus bill for China factories, giving them a boost in production if the American importers can find inventory financing from tired and scared banks. The upside to all this is that businesses planning ahead in this way will not have to torch dealer relations during 2010. This buys time as Congress continues to sit on its hands after gutting the business futures of countless small businesses. The next phase will be recovering from the shock of the Section 102(d)(2)(B) 15-month rule which is expected to require at least annual testing (or, as rumored, even more frequent testing, such as once per production run). After finalization of this rule, the jig will be up, and businesses will have to finally reconcile themselves to being put out of their markets once and for all. [Notice that this has nothing to do with safety, just gratuitous, thoughtless destruction of economic value and markets.] Specialty companies will face the prospect of either abandoning their specialty markets for mass markets (with smaller, less-specialized product lines), abandonment of children’s products altogether (this has happened widely in the Donated Goods industry and in apparel already) or sale/closure. The inventory top-offs going on now will allow businesses to wind up their current business plans in an orderly fashion. At demoralizing times like this, I like to think of the comforting words of a staffer of Illinois’ own Senator Dick Durbin (whataguy!): “I think you are right that the CPSIA imposes costs on businesses, and because of economies of scale it’s the smaller businesses that will feel these costs more acutely. This is part of a larger calculation that it’s worth the costs to shift from the old system of post-market correction (once a dangerous product is out in the market and leads to sick kids, recalls, lawsuits, etc.) to a new system of pre-market testing and certification (instead of just assuming products are safe and paying the price for false assumptions).” [Correspondence dated April 16, 2009] At least we know they meant for us to die. Comforting . . . unless you thought those guys worked for you, too. It’s nice to know we are living a purpose-driven life. We get to be sacrificial lambs to Senator Durbin’s master plan to keep everyone safe. Everyone, from the Senate to Henry Waxman’s House to the caring CPSC, should be SO proud!

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CPSIA – Businesses Plan for the Final Days

CPSIA – Crain’s Says We’re About to Get Sued

In this week’s Crain’s Chicago Business, the news periodical speculate on which mass tort action could succeed asbestos as the next gravy train for plaintiff’s attorneys. And guess who makes a guest appearance??? Asbestos and the legal black hole By: Steven R. Strahler September 28, 2009 Asbestos has lived up to its Greek origin — “inextinguishable” — on legal and medical landscapes alike: Mass tort actions involving asbestos have bankrupted more than 60 makers and users of the once-widespread insulating material, starting with Johns-Manville Corp. in 1982 and claiming Chicago’s USG Corp. in 2001. Odds are, corporate defendants won’t see another mass tort topic like it: more than 700,000 claims pending against 8,000-plus defendants and estimated costs exceeding $250 billion. Because asbestos-related symptoms can take 30 years or more to manifest, the litigation is expected to last until mid-century. . . . . “No, there is no asbestos-like gravy train pulling up in front of the American Bar Assn.,” says Robert Hartwig, president of the Insurance Information Institute. Still, he says, “there are great unknowns, like climate change and latent manifestation of occupational disease.” Among the most likely post-asbestos targets for plaintiffs’ attorneys: . . . . Product liability The Consumer Product Safety Improvement Act of 2008 requires independent testing of children’s products, including cribs and metal jewelry, empowers state attorneys general to file federal actions and increases penalties, all of which will boost opportunities for mass-tort suits.

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CPSIA – Crain’s Says We’re About to Get Sued

CPSIA – Ashton Kutcher to the Rescue!

The CPSC rolled out its latest weapon in the war on safety two days ago – CELEBRITIES! Yes, rather than focus its energies on consideration of the issues present by its regulated community or devote its limited resources and energy to identifying real threats to safety, the CPSC is instead reaching out to Ashton Kutcher to lend a hand with its Internet strategy. After all, who would know better than Ashton, he of the Blah Girls fame ( http://www.blahgirls.com/ ). Ashton, known as ” aplusk ” on Twitter (3.7 million followers – you, too?), is a renowned expert on safety and the perfect ally for the CPSC. Anything to avoid dealing with its role in driving small businesses serving the children’s market into the tank. . . . Apparently, Scott Wolfson has been given the chore of mining the Hollywood connection. In a tweet two days ago , Scott rang up his bud’ Ashton perhaps in the hope that Ash’ would retweet his words of wisdom: Scott_wolfson: @aplusk ashton – federal gov. just launched @OnSafetyto help keep children and families safe in their home. Thx. Ashton is certainly the right place to turn for an ally in safety. Check out the description of his new characters/series Blah Girls: “Meet…”The Blah Girls!” BlahBlahBlah is an interactive, animated Web series that focuses on popular culture, told through the perspective of the Blah Girls – Tiffany, Krystle and Britney. They will keep you up to date on the latest in celebrity gossip, fashion, relationships and life as it happens. http://www.blahgirls.com/ ” Just oozes safety and concern for the health of children, doesn’t it? Ashton, SAVE ME! Maybe Ashton asked Scott to keep him posted. I don’t know. From my perspective, the outreach to the Hollywood types is yet another sign of confused, conflicted priorities in today’s CPSC. It seems to me that the agency is being tooled to please the power elite of the moment while placing the mission of safety in a back seat (except when the power elite wants some heads on a stick to impress the populace). They talk about “transparency” and “openness” but don’t answer questions or respond to clear and documented criticisms. They reach out to celebrities and publicize the garage sale police (with a little too much enthusiasm) but are unwilling to resist the decimation of critical regulated markets with sterling safety records like educational products, apparel (putting aside drawstrings, a different issue altogether), bikes and ATVs, non-lead jewelry and jewels. The emerging picture is certainly not inspiring to someone (like me) who has known this agency for almost two decades and knows the good work it is capable of. It makes so much sense. . . . Thanks Scott for turning Ashton on to your new website! I am sure that will make everyone so safe – and so hip!

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CPSIA – Ashton Kutcher to the Rescue!

CPSIA – Consumer Group LIES

The propaganda machine of the consumer groups grinds on, even as the screams of dying businesses echo in the media and in the blogosphere. In a recent email to a Handmade Toy Alliance member, a WashPIRG Consumer Advocate (Seattle, Washington) made the following remarks: “Thank you for your e-mail! While my primary concern is keeping toxics substances out of toys and other consumer products, I share your concern about how this new law impacts the viability of small businesses. As with most laws written by Congress, the CPSIA allows the agency enforcing new regulations to flesh out how the law will be implemented. In this case, the Consumer Product Safety Commission can, and indeed has, written reasonable exemptions for certain products. Clothes, wood products, and books have been exempted and non-toxic pre-approved dyes for children’s products will be on the market soon, which should preempt the need for testing. To be blunt, I’m not impressed with some of the statements made by the Handmade Toy Alliance over the past year. Just as an example, they’ve grossly overestimated the average cost of toy testing on several occasions. The $300 – $4,000 fee per toy figure is, quite frankly, exaggerated. The average cost per toy test is often as low as $75. Moreover, toy manufacturers won’t be required to purchase testing guns, but can instead contract out to existing testing services who, in most cases, charge much lower rates than those quoted by the Alliance.” I see. Again, we are being victimized by business prognosticating by people who have never worked for a business and have never made a product. Let’s count the lies and misinformation: a. “. . . the CPSIA allows the agency enforcing new regulations to flesh out how the law will be implemented. In this case, the Consumer Product Safety Commission can, and indeed has, written reasonable exemptions for certain products.” This baloney has been hashed over endlessly in this space and is a well-documented lie. Chairman Tenenbaum and Commissioners Nord and Moore, among others, have repeatedly bemoaned their utter lack of flexibility in making decisions under the CPSIA. The absurd rules of the CPSIA has forced the CPSC to confirm the illegality of ATVs, bicycles, ballpoint pens and rhinestones and has caused companies selling rocks and fossils to test them for sharp point and the presence of lead. The fact that they have exempted cotton cloth from lead testing is not the same as liberating the apparel industry, nor does it exempt those products from the burdensome tracking labels requirement or any of the other extreme provisions of this law. b. “Clothes, wood products, and books have been exempted and non-toxic pre-approved dyes for children’s products will be on the market soon, which should preempt the need for testing.” As previously noted , the phthalates testing standard requires testing on anything that “conceivably” could have phthalates in them, including natural wood and cloth, among other things. In addition, clothing will only avoid testing for lead if they have NO components which are subject to testing. This means no appliques, grommets, buttons and so on. The only wood products that will avoid lead testing are products made of pure, untreated natural wood. Not exactly a truck-sized hole to drive through. Finally, the component testing rule, which is more than a year in preparation, is unlikely to solve all the testing problems in the market. The ones that will be solved are easy ones, like button testing. In any event, I have never been convinced that a jumbled mass of product testing reports will satisfy the market in a post-CPSIA environment. You would be BLOWN AWAY by the testing and certification requests we get on a daily basis. The testing mania is a boat that left the harbor on August 14, 2008, and unless Congress gets this back under control, it seems utterly hopeless to me. c. THE BIG LIE : “To be blunt, I’m not impressed with some of the statements made by the Handmade Toy Alliance over the past year. Just as an example, they’ve grossly overestimated the average cost of toy testing on several occasions. The $300 – $4,000 fee per toy figure is, quite frankly, exaggerated. The average cost per toy test is often as low as $75. Moreover, toy manufacturers won’t be required to purchase testing guns, but can instead contract out to existing testing services who, in most cases, charge much lower rates than those quoted by the Alliance.” Okay, Mr. PIRG, here are a few representative testing reports . Please show me the test report that costs $75. This lie is laughably ridiculous. We have been aggressively testing our products for 20 years and to my knowledge, have NEVER paid $75 for a safety test. Perhaps one line on an invoice is $75, but clearly that won’t do it. Unfortunately, the PIRGs of the world have a very gullible Congress in the palm of their hand. Congress seems quite susceptible to the Big Lie. As long as Congress will accept nonsense as fact, and as long as the CPSC continues to willingly implement the toxic CPSIA as though nothing were wrong, we are doomed. It won’t matter if the PIRGs are telling the Big Lie. We won’t be here to argue about it anymore.

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CPSIA – Consumer Group LIES

CPSIA – Hmmm

From this week’s New Yorker Magazine:

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CPSIA – Hmmm

CPSIA – Tenenbaum Has the Wrong Focus

Chairman Inez Tenenbaum is quoted in the September 21 issue of the Product Safety Letter responding to requests from manufacturers for “speed and clarity” (NAM meeting): “Clarity is what we want too. We want everyone to get it straight, to get the information out to suppliers, and make sure everyone gets it right.” Unfortunately, that’s not quite right. Yes, everyone wants the water torture to end. Yes, stop talking about component testing rules and ISSUE THEM. To that extent, she’s right. That would help. On the other hand . . . hurrying to issue guidance or rules that are shortsighted, worded in double-speak or obviously defective won’t help anyone. Getting the word out about destructive or unworkable rules will only WORSEN the chaos and confusion. Nancy Nord issued a warning along these lines in her January 30 letter to Reps. Waxman and Rush and Senators Rockefeller and Pryor ( attached to her statement explaining her vote to stay implementation of the CPSIA testing and certification requirements): “Although the staff has been directed to move as quickly as possible to complete its work, short-circuiting the rulemaking process gives short shrift to the analytical discipline contemplated by the statute.” This remark was noted in the recent letter by Rep. Michael Burgess . Interestingly, Ms. Nord also noted in her January 30 statement: “The stay will give the CPSC time to develop and issue rules defining responsibilities of manufacturers, importers, retailers, and testing labs. It will give the Commission time to rule on exemptions and exclusions from the lead provisions and develop and put in place appropriate testing protocols. It will give staff time to develop an approach to component parts testing, given the ambiguity of the statute on this point.” If I still had a sense of humor, I might find this 236-day-old statement amusing. Nice to know that the staff could use this extra time so productively to crank out the component testing standard. . . what? It’s not out yet? That CAN’T be right! Wow . . . . Ms. Tenenbaum needs to understand that her challenge is not all about speed. She needs to get it RIGHT on the first try. Sending manufacturers down the river to meet a deadline is rather . . . shortsighted, and that’s putting it nicely. Of course, to get it right may involve taking some political risk and publicly disagreeing with the Democratic demagogues. If she won’t do that, we are all doomed, but then again, according to Ms. Tenenbaum, at least the end will come quickly. I just can’t guarantee that it will painless.

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CPSIA – Tenenbaum Has the Wrong Focus

CPSIA – How Much Should We Pay to Prevent "Cheating"?

I was contacted today by an ex-CPSC’r who read my blog on Section 102(d)(2)(B) and wanted to point out that sometimes people lie and cheat when it comes to disclosure to the agency. So the question is: if people might pull the “switcheroo” or otherwise commit intentional fraud, wouldn’t the right solution be to make everyone test under much more controlled and regulated circumstances? This might make things much harder for cheaters. Isn’t that good? My response is NO . First of all, I hope it is no surprise to you or anyone that some people cheat. I believe this was discussed in the Bible and frequently thereafter. This MIGHT be the reason we have a criminal code and JAILS. Some people are also incompetent. They don’t cheat, they just fail repeatedly but goodnaturedly. The rest of us work hard and get our jobs done. As for me, although some people might cheat, I do NOT. If all the honest people must pay a high certain price in order to squeeze out the bad guys, we will all be crushed. This is akin to being treated like a murderer – just because there have been murders in your town. The CPSIA punishes the many for the sins of the few. The dispiriting idea underlying the lunkheaded Section 102(d)(2)(B) is that no one can be trusted, and that unless the government gets involved in regulating the minutia of safety testing, we cannot be sure that everything will be okay. [Did you ever think about why the CPSC must now accredit testing labs? We never needed it before - what precipitated the change? I am not aware of a single recall that was blamed on an incompetent or fraudulent lab. This is all the more troubling when you consider how much money has been wasted on this pointless and growing devotion of CPSC resources.] The economics of over-regulation are poor. Investment incentive is crushed by excessive regulatory costs as a profit motivation is rendered moot. In this case, we are CERTAIN to bear excessive costs for needless and pointless testing, all because a panicked Congress’ felt an urgent need to “do something” about recalls. What costs will be eliminated as a result? If our company has to pay 2-5% of our revenue for compliance with this new law (my estimate), can we save that much or more in avoided costs? Not based on our 25-year track record (recalled 130 pieces out of a billion in 25 years, or 0.000013% per annum). We now must trade an annual cost increase of 2-5% for an annual savings of 0.000013%. What about the costs to society? Well, in our case, all 130 pieces were recovered and there were no known injuries. Cost to society: zero. This is not so crazy, as less than 0.01% of all children’s products are ever recalled. Consider the famous lead-in-paint recalls of 2007-8: 125 recalls, no deaths and only one claimed injury (from a crib). So, who will pay for this folly? You. Some myths need to be dispelled: a. America pays the costs of the CPSIA. This is simple economics. The law of land regulates us a community. We pay for all recalls and we incur the costs of all injuries. Although costs may be shifted (reallocated) among us by law (some winners, some losers), ideal laws lower our net societal costs by incentivizing the most efficient allocation of resources. Thus, a law might assign one party to bear a responsibility because they can manage it at the lowest overall cost, thus avoiding significant and greater costs by a less efficient party. Common examples of this are torts (the law places strict burden for product liability on manufacturers) and railroad crossings (railroads must pay for safety of the crossings). Manufacturers and railroads are in the best position to protect against safety dangers, as opposed to consumers acting individually. If manufacturers and railroads weren’t allocated this responsibility, consumers would bear too much cost (inefficiently) in the form of injuries or losses. This is nothing more than a law-and-economics explanation of how legal systems work. See “The Problem of Social Cost” by Ronald Coase (Coase received the Nobel Prize for this theory). In the bargaining world hypothesized by Mr. Coase, costs would be borne by the party best able to bear them efficienlty, which might be manufacturers . . . or might be consumers. [It also is clear that no matter what happens to the CPSIA (be still, my heart!), manufacturers will still have a strong incentive (by law) to make their products as safe as possible. Tort law provides this economic incentive quite well.] b. NOT all recalled items are “deadly”. Some recalls have the potential to kill, but most do not. Of the simple “risk of injury” recalls, many are technical violations (immaterial threats of injury), theoretical risks, or worst of all, self-imposed (sometimes companies insist on recalls over the objection of the CPSC). It is plainly WRONG to contend that recalled items are “deadly” (Ahem, Ms. Tenenbaum). c. We cannot simply “raise” our prices to cover the new costs. Products have a strong “perceived value” which cannot be overcome with marketing. Some items are quite price sensitive. How much would you pay for your Starbucks latte? If the price went over $5, would you change coffee shops? $6? $8? No one is indifferent to price. How much would you pay for napkins at McDonalds, given that you probably think you are entitled to free napkins? Most people would cut their napkin use by 90%+ if the cost was as little as 1 cent each. This reasoning applies to ALL products and ALL services, no exceptions (even medical care). In the case of toys, many toys are commodities and have essentially a known “market value”. If you price them too high, you will lose business. “Perceived value” is set or heavily influenced by the mass market, precisely the part of the children’s market most able to absorb new CPSIA costs. Those of us in the specialty markets are toast as a consequence. d. The right way to measure recall effectiveness is in their economics. As noted above, we Americans will bear the net cost of this law. Is it worth it? We know that some items subject to recall present “unacceptable” risks of injury and others do not. It has always been the common sense practice of the CPSC (until recently) to exercise judgment when imposing a recall. They used to recognize that recalls come at a cost. There are many factors to assess in determining that a recall is merited. Having never been a CPSC manager or a legislator (heaven forbid!), please take my amateur’s list of factors with a grain of salt: (i) nature and severity of the risk of injury, (ii) number of units in circulation, (iii) age of the child subject to the risk, (iv) public policy [Is there a reason to justify strict liability? This would presumably be infrequent.] and (v) durability and value of the recalled item. Common sense dictates that you must weigh the benefits of a recall against the economic damage wrought by the recall. Since we finance both sides of the ledger, we Americans have an incentive to behave rationally and take the lowest cost route. [ The Coase Theorem again.] If you think about the case where one “dangerous” children’s product (say, a pair of shoes) is in circulation somewhere in the United States, it probably wouldn’t be worth the significant expense of recovering that special pair of shoes unless we knew that one or more lives were DEFINITELY at risk, a very high cost. [Exploding shoes, perhaps.] Thus, if some situations present low grade risk of injury and a high expense for a recall, it may sense to NOT expend the money on a recall, but perhaps to engage in other activities to keep costs down (like education or a “running” change in product design). Let’s also not forget that manufacturers that go through a CPSC process incur meaningful “transaction” costs even if there is NO recall (i.e., legal expenses, possible inventory loss, embarrassment, etc.). Thus, even without penalties, there is an incentive to do better next time – a recall is not needed to get most companies to straighten up. Given my estimate that we will expend 2-5% of revenues to comply with this awful law, could the economics ever justify that expense to save “injuries”? You already know that we incur an anticipated annual expense for recalls of 0.000013% of revenue, all to avoid a 25-year injury rate of zero. This annual “CPSIA tax” of 2-5% is entirely “inefficient” in a Coase sense, as the imposition (and allocation) of costs is irrational. This completely explains why the law is misconceived. Since the CPSC is not allowed to exercise judgment under the CPSIA, and since economics are not allowed to be considered either, it is by definition an irrational and shamefully inefficient law. Mr. Coase would be outraged. I happen to be outraged, too. Cheaters frustrate me but that’s no justification for treating everyone like they are cheaters. It’s time to rewrite the law to permit the cheaters to be treated like cheaters, and leave the rest of us ALONE.

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CPSIA – How Much Should We Pay to Prevent "Cheating"?

CPSIA – Brace for It, Things Are About to Get WORSE

CPSIA Testing Costs . . . Tracking Labels . . . Retroactivity . . . Civil Penalties . . . Criminal Penalties . . . Phthalates ban . . . State AG enforcement . . . Market Chaos . . . It’s bad, bad, bad right now. Could it REALLY get worse? Consider Section 102(d)(2)(B) of the CPSIA, the latest horror story to smack you in the kisser: “(d) ADDITIONAL REGULATIONS FOR THIRD PARTY TESTING . . . (2) COMPLIANCE; CONTINUING TESTING.—Not later than 15 months after the date of enactment of the Consumer Product Safety Improvement Act of 2008, the Commission shall by regulation . . . (B) establish protocols and standards— (i) for ensuring that a children’s product tested for compliance with an applicable children’s product safety rule is subject to testing periodically and when there has been a material change in the product’s design or manufacturing process, including the sourcing of component parts; (ii) for the testing of random samples to ensure continued compliance . . . .” Nice and obscure, buried deep in the CPSIA. Never heard of it? Ayyy! Haven’t I told you that you must ALWAYS read the fine print??? This rulemaking, which has been giving CPSC Bar attorneys sleepless nights but has otherwise escaped the attention of the business community, is due in about seven weeks (November 14 deadline). It has the potential to be the final nail in our coffin, guys. Right now, there are no rules on frequency of safety testing. We are free to negotiate with our customers or establish our own testing plan. This has worked rather well for many, many years – after all, less than 0.01% of all children’s products are EVER recalled. But no longer. The CPSC is going to tell us how to assure safety and quality now. The premise is that we are incompetent to do so without government involvement. In our company’s case, the 130 pieces we recalled in 25 years (one incident) out of perhaps a billion pieces sold is no proof that we know what we are doing, apparently. Thank heavens we will finally have someone qualified to oversee our processes! The speculation is that the CPSC is going to specify testing every X pieces or Y lots, or at least annually. In addition, the requirement to have random testing suggests that we cannot be allowed to supply testing samples directly. The “idea”, as simple-minded and insulting as it may be, is that manufacturers might somehow pull the SWITCHEROO after a test report is issued. After all, we are SO EVIL ! The CPSC does, actually, worry about the “switcheroo”. They have mentioned it repeatedly as one of the impediments to the long-promised component testing rule that is aging like fine wine somewhere. NEVER has anyone pointed to a SINGLE recall that involved a “switcheroo” to my knowledge, but whatever – laws don’t need any basis in reality anymore. Hence the CPSIA. Math Interlude Begins Here . . . . I have submitted information to Congress on testing for one of our telescopes. We recently obtained a new quote on testing – it now costs about $11,500 all-in (including the 23-24 samples). Our annual revenue for this item before the econony crashed was about $30,000 per annum. Assuming gross margins of 33%, typical for the toy industry (and easy for illustration purposes), our annual gross profit (not NET profit) would be $10,000. The cost to test this item is MORE than our annual GROSS PROFIT. This means that the telescope dies – even IF we can set our own reasonable testing program. If testing on this item is conducted annually, our COMPANY dies, too. Let’s look at it another way. Say your testing cost (including samples and so on) is $3,000 for a particular product. How much profit do you require to make it worthwhile to sell that item? If you need a gross profit 33% to make 5% on the bottom line, presumably you cannot afford an annual testing cost of even 5% of the total revenue of the item. If you accept breakeven as the tipping point for this illustration, then the math is also simple: $3,000/5%, or $60,000 in annual revenue. Ideally, you would want more than that so you aren’t just “trading dollars”. You would be marginally profitable at $80,000 in annual revenue for this ONE item. In the specialty market, a product producing $80,000 per annum is pretty darned good. The profit you would earn on this $80,000 item would be 5% net profit or $4,000 less the testing cost of $3,000, or a grand total of $1,000. Sell $80,000 in telescopes, make a thousand bucks. Nifty, that must be how Bill Gates got so rich. Remember, this also means that the prospective revenue hurdle for any NEW item is ALSO $80,000 per annum revenue. AND you would have to front $11,500 before you sell dollar one of the new item. Hmmm, that might cut your product development pipeline down a LOT. In fact, this annual testing requirement will send many companies scurrying into other markets, such as the mass market or into other businesses, in any event far, far away from the CPSC and this law. I do not see how the education market would survive. Honestly, virtually every manufacturer serving the NSSEA market (educational dealers) is a small company. Even the bigger small companies still do insufficient revenue on the vast majority of products to justify this expense. I know that this rule ALONE could many companies to shed at least two-thirds of their product line. That’s too horrible to contemplate. Math Interlude Ends Here . . . . It is another irony of this rule that by formalizing the requirement to retest when you change components, you actually provide a negative incentive to become more efficient or more safe. There is no incentive to change factories if you save less than the new testing costs. It will take our factories about two seconds to realize that this gives them dominion over their customers. American businesses will be tied to their sources irretrievably even as costs rise, and will thus be at a cost disadvantage outside the U.S. to more efficient European and other competitors. In addition, the law punishes companies for improving their products by imposing a testing penalty on any change. Thus, your incentive to change a product to, for example, make it better or safer is greatly reduced – you will pay (literally) for your good deed. As these innovations are often voluntary, it will be impossible for the government to know how you might have improved your products had they not meddled in your business. You save money, and your products are more expensive, uncompetitive and less safe. What a great way to run an economy! Given everything that has happened to date, we shouldn’t expect a Knight in Shining Armor to emerge from the CPSC to save us. After the double-speaking phthalates standard and tracking labels guidance , plus the truly stupefying rules on exempt materials , I find it hard to believe they will do the right thing here. The lip service by Commissioners about recognizing the needs and legitimate concerns of the business community has been just that – lip service. How could disaster be averted? It would take unprecedented bravery and character by Inez Tenenbaum. Democratic leadership in Congress has thumbed its nose at the children’s product industry. It would be overly kind to call their attitude a calculated indifference to our fate. That leaves us in the hands of Chairman Tenenbaum. Thusfar, Ms. Tenenbaum has chosen to kiss the pinkie rings of Mr. Waxman and Mr. Rush and with Southern charm, coo about the “good statute”. She has done nothing to stand up for the moral, law-abiding, crucial businesses serving the children’s market despite overwhelming documentation of the senseless damage being done by the terrible CPSIA. Ms. Tenenbaum needs to have a change of heart. If she takes the route of least resistance and issues guidance requiring frequent testing and other unnecessary but expensive similar requirements, it is probably game over for everybody . On the other hand, she could rise to the call of history and tell Mr. Waxman to drop his pretense that this law is somehow workable. Frankly, there is no data available to justify Section 102(d)(2)(B). The assertion that the government must, for the first time in history, tell us how often to test to assure quality has no basis in fact. It’s just a Congressional staffer’s (or consumer group’s) lunkheaded idea. Ms. Tenenbaum, it’s your call. You can save us and be a hero, or you can send us down the river and be remembered as the one who committed this mortal sin. You won’t be afforded the opportunity to blame this one on Congress – you can act, and you know it.

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CPSIA – Brace for It, Things Are About to Get WORSE

CPSC – Rep. Michael Burgess Bashes the CPSIA

Rep. Michael Burgess (R-TX26), a practicing physcian for nearly three decades, wrote a three-page letter to Reps. Henry Waxman and Bobby Rush. [Dr. Burgess was also a speaker at our April 1 Rally .] The letter certainly makes interesting reading. Here’s a couple snippets. Please remember that Rep. Burgess is a medical doctor, presumably able to assess the scientific need for the strong restrictions in the law. 1. “I voted for this bill. At the time, I was compelled by the arguments we should work diligently to bring the Consumer Product Safety Commission into the 21st Century. . . . Sadly, this intent has ushered in a virtual avalanche of unintended consequences. . . . During a time of recession and staggering job loss, [businesses large and small] are suffering while the CPSC is moving at a staggering snail’s pace to implement the 42 required actions under this law. This has caused me to regret my vote for the nebulous language of this bill. In our zeal to protect children from lead in children’s toy products, we have endangered an entire industry. ” [Emphasis added] 2. “Furthermore, Ms. Nord stated numerous times that her hands were tied at the CPSC due to the language of the CPSIA. This complaint is one that, regardless of whether it is true or not, needs to be addressed. The CPSC should not have to spend all their time fielding exclusion requests from the application of the CPSIA. The CPSC should be implementing, enforcing and punishing for lead in toy products. Not for clothes, not for shoes, not for books, not for wooden jewelry and not for all-terrain vehicles.” 3. “[At last week's hearing, we] should have had third party testers who could explain to us . . . how they are going to test this multi-billion dollars industry every minute, of every hour, of every day, of every year until Congress addresses this issue. We cannot say we are addressing the problems as a result of our own actions with having a hearing with one panelist.” [Emphasis added] Thank you, Rep. Burgess. You speak the truth. I note you copied the White House on your letter. I hope someone is listening. . . .

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CPSC – Rep. Michael Burgess Bashes the CPSIA

CPSIA – Too Much of a Good Thing? Nah!

The CPSC’s notorious Resale Roundup was greeted with more “acclaim” by Fox News this week. I don’t know whether to laugh or cry. Be sure to check out the article (“New Government Policy Imposes Strict Standards on Garage Sales Nationwide”), the slideshow (“Ridiculous Recalls?”) and the video . Each is worth your time. For those who are not familiar with this novel new program, the CPSC is fanning out to save you from “evil” resellers who might be foisting off recalled items on you. This includes spying on local garage sales, visiting your local resale shop and poking around on eBay and Craigslist.com. The CPSC has apparently given up on education and individual responsibility as a way to protect against harm – instead, they are redoubling their effort to be the Cop On The Beat, like it or not. In this case, they have chosen to make up a fake crisis, the resale of recalled items, to justify becoming an active protector of the public safety. To get the flavor of this article and the basic problem, here are a few quotes: 1. “The [strict CPSIA] standards were originally interpreted to apply only to new products, but now the CPSC says they apply to used items as well. ‘Those who resell recalled children’s products are not only breaking the law, they are putting children’s lives at risk,’ said CPSC Chairman Inez Tenenbaum. ‘Resale stores should make safety their business and check for recalled products and hazards to children.’” RW – Note that Ms. Tenenbaum justifies this massive incursion into people’s lives by the claim that recalled items “[put] children’s lives at risk”. While I concede SOME recalled items might in fact endanger children’s lives, please check out the slideshow for perspective on the mortal danger posed by many recalled items. Hmmm. A little hyperbole, perhaps? There are ways to deal with the limited problem of certain dangerous items circulating without resorting to the claim that there’s a Five Alarm Fire burning. 2. “CPSC spokesman Scott Wolfson says the fines are intended for large companies with serious infractions. ‘CPSC is an agency that has used its penalty powers over its 30-year history against companies,’ Wolfson told FOXNews.com. ‘CPSC is not seeking to pursue penalties against individuals hosting a garage sale or yard sale, we are encouraging them to take the right steps to not resell recalled products.’ But FOX News Legal Analyst Bob Massi says the law makes no distinction for families and small resellers. . . . Don Mays, senior director of product safety planning at the publisher of Consumer Reports, says the hefty penalties are necessary to have an impact. ‘The former civil penalty limit of $1.87 million was too small to be an effective deterrent to large companies who flagrantly violated the law,’ Mays told FOXNews.com. ‘Mattel and its subsidiary Fisher-Price, for example, recently paid a $2.3 million penalty for importing about 2 million toys that violated the CPSC 30-year-old lead paint ban — that amounts to just over one dollar per toy.’” RW – CPSC says they won’t hit you with big penalties, but the law permits it. The Fox video shows that people are afraid. It’s hard to trust a regulatory agency out looking for “bad guys” in your garage with a BIG stick and no checks, balances or controls on how it will use it. Yes, they claim to be all sweetness and light – but what happens if they change their minds? The consumer groups are all for hefty fines, as Mr. Mays confirms, and nowadays, they seem to be passing notes to Congress and to the CPSC. So, is it any surprise that many people are quite alarmed? Side note: Don’t worry, the CPSC says they won’t be coming into your home (yet): “Scott Wolfson, a spokesman for the agency, said it wouldn’t be dispatching bureaucratic storm troopers into private homes to see whether people were selling recalled products from their garages, yards or churches. ‘We’re not looking to come across as being heavy-handed,’ he said. ‘We want to make sure that everybody knows what the rules of engagement are to help spur greater compliance, so that enforcement becomes less of an issue. But we’re still going to enforce.’” Aha. Personally, I feel SO much better now. 3. “‘It is scary to think that there could be such hefty fines imposed on unsuspecting households,’ another garage sale organizer, Patti Lombardi, told FOXNews.com. ‘I think I speak for many people when I say that the government spends too much time interfering in the individual citizen’s personal life and this is almost bordering on the ridiculous … what if it opens up a Pandora’s box of litigation brought by the purchasers of items at garage sales?’” RW – Ms. Lombardi hits the nail on the head for the business community. We all KNOW that litigation will follow in the wake of this law. There is a reason why the trial bar-supported consumer groups are all so gung-ho on this law. Everything’s illegal now (check out your reporting requirements under Section 15(b) of the CPSIA – you have a generous 24 hours to report ANY violation of ANY term of ANY law, regulation or rule enforced by the CPSC (they don’t even publish a list, btw) – super!). Litigation by public attorney generals, State attorney generals and the Feds is expected by everyone. Given that it is inevitable that everyone will have violated something, and with the imputed knowledge standard of the CPSIA, probably deemed to have done so “intentionally”, the choice of when and who to sue will favor the government rather substantially. The law was written to terrorize – and mission accomplished, it has. 4. “‘If I’ve got a wirebound notebook, the lead content in that wire binding is now under scrutiny, even though the chance of ingesting lead in any amount from something like that is virtually non-existent, [TimetoPlayMag.com content director Chris Byrne] said. ‘It’s a level of political grandstanding to say ‘we’re taking care of everything,’ but the science clearly demonstrates that the transference is not really possible — I mean, a child who eats the wire binding from a notebook is going to have significantly worse health problems than lead.’” Perhaps you get the idea. I wonder if the CPSC and Congress will EVER get the idea.

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CPSIA – Too Much of a Good Thing? Nah!

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