CPSIA – Illinois Finally Issues Its Lead Labeling Rules

At long last, Illinois has published its rulemaking under the Illinois Lead Poisoning Prevention Act. The relevant pages are 5568-5575. As you will see, true to their word, Illinois has clarified that the lead limitation pertaining to toys only affects paint.

It is still regrettable that Illinois felt the need to keep its standard for lead-in-paint below the federal standards, especially since there is no demonstrated difference in Illinois 40 ppm level and the federal standard of 90 ppm from a health standpoint. It is important to remember that background lead levels in the environment very often exceed the limit in the Illinois law, including famously in the Obama’s vegetable garden at the White House.

Hopefully this law will cause minimal disruption or random loss of capital for those companies that elect to stay active in children’s products in Illinois.

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CPSIA – Illinois Finally Issues Its Lead Labeling Rules

CPSIA – New Waxman Amendment Draft Issued Tonight, Mark-up Set for Wednesday Morning

The third draft of the Waxman Amendment 2.0 was released this evening. I have attached a clean copy of the legislation, as well as a redline for your convenience. The powers-that-be also released a draft of their “report language“. The report language is interpretative language and is not included in the law mainly to keep future law clerks busy doing research. It should also give us something new to argue about.

This is the Committee Briefing Memo accompanying the draft legislation.

Consistent with past practice, this draft was issued with the usual coercion. A mark-up has been scheduled for Wednesday AM 10:00 a.m. in Room 2123 Rayburn House Office Building BUT the Dems will decide tomorrow if they will proceed with that process. All talk of a hearing to vet this legislation has been quashed by the Dems who are scrupulous in managing the record. [I will never get to testify, that's for sure.] There will be a meeting on Tuesday at 4 PM to discuss this draft, at which point the Dems will either pull the plug or move forward. Presumably, this depends on the enthusiastic response to this draft. The Dems say they want a bipartisan bill and further want to send it to the Senate with the news that the bill is “supported by industry”. In other words, Mr. Waxman is not interested in negotiating with the Senate, just wants their rubber stamp. He’s not big on “jawboning” if that means he has to listen to others and make concessions . . . .

You are right to consider this another patented Waxman “take it or leave it” offer.

In response to complaints that this bill ignores the many legitimate concerns of the small business community, Waxman staff has advised that they “can’t help everyone”. That means you, guys.

Changes in this Draft:

a. Functional Purpose “Exception” – Minimal changes, mainly reverting back to the “public health or safety” test formulation. References to “all foreseeable users” is gone now. The “town hall” provision allowing “interested parties” to intervene in every proceeding has been eliminated. The “Previously Denied Petitions” provision is unchanged and still makes no sense.

The report language clarifies the meaning of “practicable”, noting that excessive or unreasonable costs should be considered not “practicable”. Specifically, they note: “The Committee does not consider a mere increase in the cost of manufacture or production, in itself, to be excessive. The Committee does expect that the Commission will consider compliance to be impracticable where compliance would place the viability and continuation of a class of products or materials in jeopardy, such as youth All Terrain Vehicles or youth bicycles made with recycled steel.” [Emphasis added]

In case you were wondering about the purpose of the functional purpose exception, it is a gift to the noted industries. It’s not for you. Remember, this relief is only available to those who are capable of mounting an exception application. Not a small undertaking.

Remember that the applicant for a functional purpose exception must apply for relief for a “specific product or material”. You must also PROVE that your costs are not “practicable”. Can you see some wiggle room there? A true believer Commission might have very little incentive to interpret these terms permissively. [You can count on that one with the Dems in charge.] This will be a costly and technical process. Think of this in the context of your business – is this realistic? With our 1500 products, it’s just inconceivable. Too bad for us. Let’s also not forget the stringency of the three-prong test.

The report language specifies that a “measurable adverse effect” on public health or safety refers to changes in blood lead levels. The language is pretty specific and will require a toxicologist’s report to justify any exemption. Here are the magic words: “Given that there is no current blood level at which the scientific community considers lead exposure to be ‘safe,’ the Committee understands that a very small adverse effect may theoretically occur at any level of exposure. The Committee intends, however, for the Commission to deny requests for exception under this section as having a ‘measurable adverse effect’ on health or safety only in the case of those adverse effects that the Commission determines to be empirically, as opposed to theoretically, measurable. At present, the Committee understands that there is scientific consensus to interpret the phrase ‘measurable adverse effect’ from lead exposure to mean a measurable increase in blood lead levels.“

This is a form of legislative filter to make sure that the exception is only for the chosen industries or companies. Again, this isn’t meant for small fry, just big business. That’s equity these days, I guess.

Anyone remember how hotly the Dems defended the inclusion of ATVs and bikes in this law back in ’08 and ’09? It was intentional, they insisted, necessary to protect the public against deadly lead. There’s no safe level of lead, blah blah blah. Guess they got over that one . . . after they received 170,000 emails from ATV’rs.

b. Thrift Store Relief: Virtually no change, other than minor clarifications.

Not unlike the workings of other parts of the CPSIA, this new provision will be good for large scale thrift organizations like Goodwill or Salvation Army who are presumably able to centrally evaluate complex laws and implement system-wide responses to changes in law. i wonder how the smaller independent Mom-and-Pops will react to this provision. In any event, the provision tacitly bans resale of children’s jewelry, painted toys and vinyl children’s products. Stores will have to keep straight which items are in and which are out. With many resale stores staffed with minimum wage workers, I question how effectively most owners can prevent violations without just avoiding the category (at least in part).

Resale of childcare articles, including cribs, seems unaffected. The real gotcha is the risk the stores will bear from recalls. For that reason, I think many stores will stay away from reselling this category of goods. Clothing may make a reappearance in resale shops, finally.

It is uncredible that the Democrats let this industry flap in the wind for almost two years before acting to save them from CPSIA oblivion. Think of the economic devastation these insensitive legislators wrought on small businesses all America, not to mention the patrons of this important industry – through two cold winters. This is just inexcusable, a true demonstration of stubbornness or being completely out of touch. Those who suffered at the hands of the Dem inaction have no recourse, either. Shame, shame.

c. Relief for Small Batch Manufacturers: The sham of this “relief” is perpetuated in this new draft. The definitions of “covered products” and “Small Batch Manufacturer” were left structurally intact but the thresholds were tweaked upward meaninglessly to 7500 units or $50,000 sold per item per (calendar) year, with an overall cap of company sales of $1 million. “Covered Products” oddly continues to refer only to manufactured items but Small Batch Manufacturers are defined by sales of manufactured OR imported goods. Go figure.

As I pointed out earlier today, Mattell and Hasbro have quarterly revenues of $880 million and $672 million, respectively. The so-called relief here is for companies with annual revenue of under $1 million. If these little companies pop over that revenue hurdle, they will be held to the same standard as Mattel and Hasbro. Don’t worry, the CPSC plans to coach the little guys! Now if only they could provide non-recourse financing . . . .

Even if you are salivating over this pathetic crumb of “relief”, I encourage you to reread what goodies Mr. Waxman is giving you. Here’s the meat of it: “Any such alternative requirements shall provide for reasonable testing methods to assure compliance with the relevant consumer product safety standards.” The reasonable TESTING METHODS must ASSURE COMPLIANCE. You tell me what this English sentence means. I think it means the small fry will be testing. I know the rest of us will, too. Testing and testing and testing and testing. It’s time to buy stock in Intertek, I think. Later on, the bill instructs the Commission to work “cooperatively” with the little guys to “impose the least burdensome testing requirements . . . consistent with goals of statute.” And those goals are, what exactly? Comprehensive, prophylactic testing.

Oh, the bounty of this relief!

d. Phthlates and Inaccessible Components: No material changes.

e. Subpoena Power: No changes whatsoever. Somebody’s going to be sorry someday that this procedural speed bump was removed. Unfettered power of government was always un-American . . . until we met these Democrats.

Conclusion:

I wish I could recommend this bill. It has some good stuff in it. Unfortunately, it is utterly ineffective to arrest the damage being inflicted by the CPSIA. It is a gift to large industries but leaves the hammerlock on American small businesses catering children’s markets. It sustains the fantastic notion that those of us in this business have somehow been poisoning kids for years or decades. That’s a slanderous notion, something deeply offensive to me, but for the Dems to admit otherwise would mean a mea culpa. And there’s no chance of that.

If the Dems manage to tempt enough corporate entities to sell out for this low price, it will be the biggest gift ever given by the corporate community to Mr. Waxman. He should host a champagne party for himself if he buys off the resistance. There will be no remaining organized opposition to the bulk of his CPSIA handiwork, and the focus will shift to surviving a manic CPSC bent on enforcing voluminous but ineffective safety rules and ladling out massive penalties for infractions without injuries. And once the action moves permanently to Bethesda, we’ll see finally how much Cassandra got right.

I’m not looking forward to finding out. Vote NO on Waxman.

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CPSIA – New Waxman Amendment Draft Issued Tonight, Mark-up Set for Wednesday Morning

CPSIA – Good News Finally, Two Toy Companies are Doing Okay

Don’t despair, everyone – there are at least two toy companies who have found a way to weather the CPSIA storm. Yes, both tiny Mattel and minuscule Hasbro were able to eek out a nice profit jump this quarter. Mattel reported earnings of $24.8 million in the first quarter, instead of a $51 million loss last year, and Hasbro had to make due with earnings of $58.9 million this quarter, up over winnings of $19.7 million in the same quarter last year.

The CPSIA is obviously crushing these companies. They are so brave!

Don’t worry though – Waxman has a few morsels for us small fry, too. To ease the burden on us, his new amendment authorizes the CPSC to make special testing rules for us, provided (it’s complicated) our revenue is under $500,000 per year. Oh goodie! Unfortunately, if we happen to be bigger than that, we face the exact same rules as Mattel (revenue of $880.1 million in the last QUARTER) and Hasbro (sales of $672.4 million in the last quarter).

That seems fair to me. Really fair . . . .

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CPSIA – Good News Finally, Two Toy Companies are Doing Okay

CPSIA – The Myth of the "Common Toy Box"

If you wonder why Waxman and his staff won’t discuss a change to the age limits in the CPSIA, it’s their fear of the “common toy box”. They claim that unless a wide net is spread over children’s products, small children could be “affected” by the toys of older children in the same home.

It is absolutely outrageous that an urban myth could send thousands of businesses down the river and cost literally billions in compliance and regulatory expenses. While common toy boxes are not themselves a myth, their ability to cause bodily injury is certainly fantastic.

I know it’s downright prissy to discuss numbers in this era of junk science but, ahem, where’s the evidence that so-called “common toy boxes” cause injuries? I am not aware of a SINGLE incident where this occurred. If you restrict your inquiry to lead injuries, the phobia du jour, I am even more certain that it has NEVER HAPPENED.

And what if it did happen? I submit that we cannot and SHOULD NOT conclude that anything is “unsafe” based on a single incident. Have you never heard of “accidents”? The concept of safety administration is inherently economic in nature, so the risk and cost of controlling that risk must be considered before making any choices. The risk of injury from “common toy boxes” needs to be evaluated for the probability of occurrence, and for whether the cost to remediate is greater than the benefit to be gained.

Is that really so outlandish? Am I some sort of corporate “tool” for daring to suggest this? If so, I challenge you to counter my argument that getting out of bed in the morning involves weighing risks. If you were to equally weight all known risks, without considering the probability of incurring the costs of those risks, you would never leave your bed – too risky. In fact, you would probably sleep below your bed in the basement, which provides better protection against meteorites. We intuit this every day without difficulty and bear these low risks because we believe we can control them.

Absurd example? Is the over-weighting of a single injury or death from lead any different?

Our company has been in business for almost 26 years. I have previously acknowledged that we have had one recall, for a grand total of 130 pieces (out of perhaps 1 billion pieces sold). These items were sold to 14 customers, and we called each one and got back more than 100% of what we shipped out. The world was made safe again for mankind. That is it for us. I submit that our safety record is not an accident. If that’s true (and it is), what is America gaining by the excessive costs we will bear under this law, or worse, the dramatic liability risks we now face? All because Waxman’s staff can’t get past the “common toy box”.

The sham of the justification of the “common toy box” is further exposed by presence in a child’s life of so many other sources of the very same risk that this law seeks to eradicate.

• Will it rid the world of lead? Certainly not, it’s in our food, potable water and air. The media is awash in articles about lead in drinking fountains in schools. Lead pipes have been conveying our water for years. And good luck getting rid of brass in the home. And “deadly” rhinestones are in every girl’s closet already.
• Will it prevent lead-in-substrate from entering their world? No, products outside children’s products remain unregulated, including products intended for the home but not specifically intended for kids (e.g., pens and housewares). Even dog toys will continue to be unregulated. Do you think children handle dog toys? Come on!
• Will the law even eliminate lead-in-paint from a child’s life? No – it’s smeared all over your cars. Will your kid touch your car more often than he/she sucks on his bike’s tire valve? One word – duh.

The justification of the “common toy box” is a negotiating ploy. It’s an artifice to permit the utter change of our safety system from risk-based to a European-style set if precautionary and prescriptive rules. The idea sells and no one gives it much thought, which is all that matters. As last week’s Senate Appropriations Committee hearing demonstrated, this new era permits members of Congress to justify their existence with long rants on their basic and poorly-researched fears (such as antimony on the nose of a Zhu Zhu Pet). Anything goes when you are afraid of a toy box.

Don’t buy into the logic of the precautionary principle people. If you do, you will end in the “common rubbish bin” with the rest of the victim businesses.

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CPSIA – The Myth of the "Common Toy Box"

CPSIA – "Anchoring" in the Waxman Amendment

The concept of “anchoring” is well-known to experienced negotiators. Make an outlandish initial proposal, and afterwards, all further negotiation is relative to that initial offer. The context of the negotiation is reset by its starting point notwithstanding the nature of the problem being negotiated. This clever technique is a great way to engineer a favorable outcome in a negotiation by “compromise”, all while leaving your negotiating partner totally in the dark that they have been snookered.

Mr. Waxman wasn’t born yesterday and is playing the disorganized corporate community like a maestro. The Waxman Amendment 2.0 is a classic case of anchoring. As his staff slowly compromises away most (but not all) of the legislation’s obnoxious provisions, the corporate community seems to be forgetting what is really at stake and how low a price it would be accepting to go away.

Rumors are that this amendment could go to a vote as soon as this week. Forget the idea of a hearing – that was just another head fake by Waxman staffers trying to lull us all to sleep. We hold our fate in our hands as this amendment may essentially kill off resistance to the CPSIA.

The Waxman Amendment offers slight and attenuated relief on some relatively insignificant provisions of the underlying bill, namely elimination of the cost of testing internal components for phthalates and prospective application of the proposed August 2011 100 ppm lead-in-substrate limit (which must first clear OTHER hurdles before it becomes law). The total cost of the internal component phthalates testing is trivial in the context of testing costs imposed by the law. The impact of prospective application of the 100 ppm limit, with its long lead time, seems to be virtually nil in reality. What did Warren Buffett say about picking up nickels in front of a steamroller???

By selling out for the measly offerings of the Waxman Amendment, we would be setting quite a low price for the misery and years of pain that the CPSIA is certain inflict. Is that all it takes to buy us off?

Don’t bite at Mr. Waxman’s bait. Stand strong, demand real hearings, and if he won’t act, wait him out. What price for your kingdom? The Waxman Amendment isn’t that price, whatever it is.

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CPSIA – "Anchoring" in the Waxman Amendment

CPSIA – Why the Waxman Amendment MUST BE REJECTED

As we face the dilemma of what to do about the Waxman Amendment 2.0, I want to point out recent quotes by Sam Zell, a Chicago-based real estate entrepreneur. At a recent panel discussion of the Urban Land Institute, Mr. Zell bemoaned how our federal government governs these days: “[What's] going on now is frightening . . . Up until this administration, you knew the rules and had a very stable environment . . . If the current situation is indicative of the next half century, I think we’re screwed.”

Screwed. Mr. Zell’s words ring in my ears.

In the wake of Friday’s contentious meeting with the Waxmanis on Capitol Hill, the Dems announced that a new draft of the Waxman Amendment 2.0 would be released on Monday. In their usual bullying style, Waxman staff issued yet another ultimatum, advising this time that after release of that next draft, we all must “decide” whether or not to support the amendment. If we won’t support it, they say they have better things to do.

The meeting produced no breakthroughs. The fundamental flaws in the law remain unaddressed, and meager goodies meant to partially salve the wounds of a limited number of companies remain the focus of the legislation. The goal of this legislation is to split the group protesting this law, peeling off the ATV’rs, the book industry, the crafters and mass market retailers. None of these groups is a clear winner, either. The rest of us, namely the Small Business community, will be left as roadkill.

A request by the ranking Republican for hearings was rejected on the grounds that there has been too much “jawboning” already. We are apparently all Chatty Cathies. Shame on us.

This reasoning behind the limited intent of the legislation was on display at this week’s Senate Appropriations Committee hearing attended by Illinois’ own Senator Dick Durbin and Maine’s Senator Susan Collins with only one witness, CPSC Chairman Inez Tenenbaum. Don’t watch the hearing on a full stomach . . . . Among other things confirmed by this hearing was that the functional purpose exemption embedded in Waxman Amendment is supposed to benefit a “narrow class” of products (in the words of Ms. Tenenbaum), namely bikes, ATVs and books. Lucky them.

Sadly, the hearing also confirmed the bizarre impression held by members of Congress that the small business issues are limited to crafters, for some reason a particular source of angst. Our company happens to also be a small business, although we no longer operate out of a bedroom or a garage – and we face major issues caused by this law. While I share concern for the tiniest of enterprises, the economic problems don’t end there. In the words of the Chicago City Treasurer Stephanie Neely: “We are truly an economy of small businesses. And it’s important that they thrive. They do a lot of employing. . . on a day-to-day basis, these are people who are employing one, ten, thirty people, and and it’s important that we help them.” Oh yeah, jobs.

The Waxman Amendment should be REJECTED until comprehensive legislation to fix the law is brought to the floor. If we let them pass this law, organized resistance to this law will be greatly diminished, and any opportunity to restore a sensible rule of law may be lost . . . permanently.

Consider the consequences if this amendment is passed:

- Our national safety law has changed from risk-based to standards-based. Mindlessly focused on lines in the sand, the new law’s definition of safety has been completely rubbed out. Without this compass, the world of safety has become an unpredictable, unstable random walk. The Senate hearing included (incredibly) a rehashing of the “dangers” posed by Zhu Zhu Pets, the need for BPA recalls, the potential risk posed by triclosan and the CPSC’s ability and interest in initiating recalls for these “dangers”. Given that we no longer can figure out what’s safe and what’s not, every possible threat brings up discussion of recalls.

Try to run a business under conditions like that.

The risk of this reactive form of government CANNOT BE OVERSTATED. On April 13, Representative Edward Markey proudly sent out letters to 13 companies demanding that they stop using the antibacterial compound triclosan. The list of targets was almost certainly supplied to him by consumer groups. Mr. Markey, for all his power, is not a regulatory agency and does not have authority, resources or expertise to act as a regulator and his consumer group buddies are also not empowered to regulate our markets (thankfully). He is only a Congressman (up for reelection in November, btw). However, nowadays, that’s apparently enough to regulate. I would not want to receive such a letter. I also do not cotton to this style of government.

- The complexity and volume of safety law being spewed out is truly breathtaking and overwhelming. I literally cannot keep up anymore. i can’t read it all, watch it all, digest it all or even write comment letters. [Unfortunately, I still have job responsibilities, too.] On a recent Friday, the CPSC expelled almost 600 pages of new rules – and they were IMPORTANT. They included the new so-called 15 Month Rule – have you read it yet? This 100+ page rule has been written to control children’s products as though we were merchants of death. We are not. The April 15 hearing to review this regulatory morsel was a mere five hours long, so lengthy that the CPSC has only posted one hour of the fun so far. Ironically, this hearing wasn’t broadcast live, as it conflicted with broadcast of the first meeting of phthalates CHAP. Can’t broadcast two mega-hearings at once.

Do you get it yet?

By my reckoning, the rules applicable to generic children’s products is now nearing 2500 pages. If you take into account childcare items and other ancillary matters, the number of pages is probably well in excess of 3000 pages. We are clearly heading to a place where the rules total many thousands of pages. And WHY are there so many rules? It has nothing to do with actual safety. The injuries (one) and deaths (one) from lead in 2007/8, the highest outbreak of recalls in our history, were simply nominal for a country 300 million people.

In any event, you are going to have to know and bear the risk of ALL of those rules. And the new rules keep coming, very often overruling the rules you already mastered. For those you who are tempted to support Mr. Waxman’s Amendment, please THINK about this.

- When the CPSC is done with its rulemaking, it is going into enforcement mode. That was a clear message of Ms. Tenenbaum’s testimony in front of the Senate Appropriations Committee.
Her Compliance initiative will feature another 41 employees at a cost of $4,7 million to catch you violating rules. In addition, the resources of the existing agency will also shift to catching you. If you have read any of my writings about penalties, perhaps you can figure out what that means.

Bottom line, having divorced their mission from common sense or any notion of risk, the CPSC built an ornate and truly incomprehensible set of safety rules that even mega-corporations have admitted exceeds their capacity to manage. For small businesses, not merely the home crafters, compliance will be simply impossible. If those businesses are unable to understand the rules or afford to comply (while staying in business), they won’t be able to follow them, and if the agency is bent on catching them, well, the results will be grim.

If you can’t see this coming – my friend, you are blind.

The Testing and Certification stay ends on February 10, 2010. Don’t expect this Commission to extend it again. The meter is running.

IF you support the Waxman Amendment because you really want the meager relief they are dangling, you will be conceding that you are prepared to endure what I have described. You are not ready for that, and you know it. Support for revising the bill comprehensibly will be greatly diminished at the same time, and even our most steadfast supporters in Congress will give up on us.

As painful as it may seem, you MUST decline to support this legislation. We must, as a community, insist on a true fix, one that addresses the real problems caused by the CPSIA. Nothing short of a total fix will suffice. The ornate rules needs to be simplified and refocused on real issues. The needless self-destructive imposition of blinding costs needs to be reversed. Excessive bureaucratic processes and exemptions only for big industries and big companies must end.

NOTHING that I am suggesting will or should amount to a retrenchment in safety for children or anyone else. It is no “free pass” for industry, whatever that might mean. It is simply means a return to sanity.

That may be too much to ask for this Congress or this Commission. I am not optimistic. Make me a believer this week – REJECT THE WAXMAN AMENDMENT.

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CPSIA – Why the Waxman Amendment MUST BE REJECTED

CPSIA – A Quick and Incomplete Analysis of New Draft Waxman Amendment 2.0

With only a few hours to look over the new draft of the Waxman Amendment 2.0 before tomorrow’s meeting, I guess the idea is that we are supposed to drop what we are doing to complete an analysis fire drill. Power trip for the Waxman staffers? Possibly. Still, what choice do we have? I thought I would outline my preliminary comments to contribute to the debate.

It goes without saying that this is entirely my own work without the benefit of discussing it with others similarly situated and without the opportunity to compare notes. It is therefore likely that I have missed something important or made other mistakes. Sorry . . . . This post is also painfully long. Again, given that Mr. Waxman hardly cares about your problems or mine, I have little choice but to post this as one essay. Again, sorry . . . .

a. Modifications to Section 101(b)(2) Exemption Process:

• The idiotic post-exemption warnings provision has been deleted.
• The three-pronged exemption test remains in place, as does the ambiguous and troubling term “practicable”. “Practicable” is a sneaky Waxman approach to providing an escape hatch for big industries with narrow product definitions like ATVs and books. You’re not supposed to know this. Our laws aren’t for the little people anymore.
• The third prong of the exemption test has been clarified from no effect on “public health or safety” to no effect on “the user’s health or safety, taking into account normal and foreseeable use and abuse by all foreseeable users.” This change seems like new belts and suspenders to make it easy to deny an exemption. The Dem zealots want to be sure no one gets an exemption but ATVs and books, wink-wink-nudge-nudge.
• Poor applicants for exemptions are still obliged to wait hungrily by the door of the CPSC for the leavings of rich supplicants. Yes, small business owners who want exemptions like the big guys but can’t afford to pay the big bucks can reuse the big guys’ consultant’s reports provided the evidence is considered non-proprietary. [Whatever that might be.] Nice . . . if someone else has already paid for it and submitted it in an exemption process, and if you have access to it (and have found it), you can use it. Noblesse oblige, I guess. Thank You, Kind Sir. I speak for all the little people . . . . Oddly, this concept reappears in a confusing provision called “Previously Denied Petitions” that only refers to previously denied petitions in its title (I don’t get it).
• In another “how closely are you watching me?” change, the grounds for decision provision now permits the Commission to consider “only” evidence presented by “interested parties”, rather than the evidence presented by the party seeking such exceptions. So if you ever get as far as an exemption hearing, this provision turns it into a town meeting. How would you like it if anyone could enter and participate in your litigation without your consent . . . like your competitors or your business enemies? I have a good idea – why not just write into the law that Rachel Weintraub will be considered a party in interest to every action at the CPSC?
• The Narrowest Scope provision has been modified to clarify that you must not only address each component but also each material. The paranoia you sense in this legislation is just the precautionary principle at work. The staffer-gnomes who have been crafting this legislation are not thinking about how our markets work or should work – they are simply obsessing over how we business people might find loopholes. Of course, it is in the nature of business people to try to avoid laws, we are all so evil. Oh yeah, I forgot . . . .
• The Limitation of Exception provision now is framed in terms of “all foreseeable users” which I can only assume is meant to make the burden of proof higher for supplicants. After all, if you can foresee a so-and-so using the product (I won’t supply the colorful example), then the Commission must limit the exception. No possibility of risk can be tolerated by the precautionary principle folks.

As the provision for exclusions has not changed much, here is my analysis of the original language for your reference.

b. Treatment of Resale Shops by the Waxman Amendment:

• The provision defining a “used children’s product” seems to now mean (a) an actual used children’s product, and (b) new goods donated for a charitable purpose. This would seem to protect resale shops from liability for sale of items violating the lead provisions (but not the phthalates ban, notably) unless the seller or the person who supplied it to the seller knew it was in violation of the lead provisions. If that seems somewhat circular, it is. In this case, the law as drafted encourages resale shops to remain as ignorant as possible. This is Waxman’s “Don’t Ask, Don’t Tell” policy. Nice.
• There has been no clarification about the application of this provision to consignment shops. Do they “obtain” goods for resale if they never take title? Something fun to speculate about!
• In a little-noticed provision, the definition of “seller” includes lenders or donators of used children’s products. Thus, for lending libraries, they will be in the clear if they lend used goods, but will be on the hook if they lend new product. Does it become “used” after one loan, and if so, what does this mean? The legal department in your local children’s library will figure this out. Sure. As to people who donate, the provision is circular again. As best I can figure out, you are not subject to the lead rules (only) if you are donating something used for charitable purposes, but if you give away something new, you are on the hook. At least, that’s how I read it. So the bottom line is – don’t give anything new to a charity, just give them junk. This is what Mr. Waxman wants. And that means this is what Congress wants.

While these changes may be an improvement, they are sadly improvements without much impact. This provision remains convoluted and hard to understand. The definition has numerous exceptions and also avoids giving the same shelter to resale shops for all the other picayune provisions of the law, like the phthalates ban. Frankly, without a clean exemption for this industry, resale stores are all going to avoid this class of goods. The complexity alone will kill this exemption except for the most sophisticated participants in an industry not known for its legal skills or resources. These stores won’t hire lawyers to check their work. They can’t afford it.

This is my original criticism of this provision, which is still applicable.

c. Prospective Application of 100 ppm Lead Limits – this provision was not changed in the new draft.

d. Low Volume Manufacturer “Exceptions”:

• Thank heavens, they changed the term of art for these small fry to Small Batch Manufacturers. This was done at the insistence of the HTA. What a victory! Someone please explain this to me.
• The “In General” provision is basically unchanged, other than the fancy new name for the supposed beneficiaries of this largess. Notably, the last sentence was clarified to make sure no one could contend that Waxman inadvertently gave the Commission the power to grant “alternative testing methodologies” for ANYONE but the small batch guys. There’s so much trust and love flowing here . . . .
• The truly non-existent “relief” of this provision remains EXACTLY the same. Here it is, bask in its wonderfulness: “The Commission . . . may, by regulation, provide alternative testing requirements for covered products manufactured by small batch manufacturers in lieu of those required under subsection (a) or (b). Any such alternative requirements shall provide for reasonable testing methodologies to assure certification based on compliance with the relevant consumer product safety standards. [Emphasis added] Standing ovation? These lucky micro-businesses must meet alternative TESTING methodologies that ASSURE compliance with the standards. In other words, they gotta test. They even added a “savings clause” to forbid any relief here (such as it is) if any foreseeable user might be foreseeably at risk. Some relief.

Notably, the reach of this section has now been limited to “covered products”. This new term, which incorporates a three-prong test (this is the second three-pronger of this amendment so far, but not the last). [See below.] Please NOTE that this new term means that the ONLY relief the CPSC can grant is to these small fry products. A product that exceeds the limits of a “covered product” will NOT enjoy any theoretical testing relief, even if made by a business qualifying for relief overall. Should you care? Well, in my view, if you have to endure the burden of full compliance with one product, you have to build the full infrastructure and bear the related liabilities. Thus, these micro-businesses supposedly being saved here are actually at substantial risk of suffocation if even ONE product sells well. Too bad for them.

The absurd and utterly inappropriate definition of a “low volume manufacturer” has been completely jumbled and incorporates the new concept of “covered products”, too. Let me try to sort out this for you.

- As noted above, only “covered product” enjoy any potential relief under this section. The “covered products” test is a three-prong test: (i) manufactured not more than 5,000 “units” of the product in the prior fiscal year, (ii) had not more than $30,000 in sales of the product in the prior fiscal year, AND (iii) had no more than $500,000 in total sales in the prior fiscal year. [Do you feel vines growing over your brain yet?] Dollars are indexed for inflation. Notably, the definition ONLY applies to the manufacture of these items, NOT importation. Too bad, importers. GOTCHA!

The implication of this definition is that if you grow to over $500,000 in total sales, all exemptions applicable to any of your low volume items goes up in smoke instantly. That last dollar is gonna HURT. You also cannot get relief for any individual product if your sales of THAT item are greater than 5,000 “units” per year or $30,000 in sales. Here’s another compliance tip: don’t grow your business! Too hard? Don’t worry, the other policies of this government should help you meet this goal . . . .

- The definition of a “small batch manufacturer” defines who should be treated with special charity by the CPSC under this marvelous section of the amendment. It’s not going be a long list. Who wants to see another three-prong test?! Okay, break out your calculator so you can figure out if they are referring to you: (a) AT LEAST TWO-THIRDS of “the manufacturer’s products” (I love that term) meets this two-part test: (i) the manufacturer manufactured or imported not more than 5,000 units of the product in the prior CALENDAR year, AND (ii) the manufacturer had not more than $30,000 in sales of the product in the prior CALENDAR year, AND (b) the manufacturer had not more than $500,000 in sales in the prior CALENDAR year.

This is getting fun! Okay, first we need to decide – is it a two-prong test with one prong having two sub-prongs, or is it a three-prong test? This is a rather metaphysical question . . . but I say it’s our third three-prong test of this short amendment. [Imagine how many three-prong tests are in the health care bill.] I welcome your insights on this question.

There are some interesting quirks in the Small Batch Manufacturer definition. First, this provision applies to imported products, but the “covered products” definition does not. Gotcha! What does this mean? Who knows. The head spins . . . . Even better, the definition of “Small Batch Manufacturer” is based on calendar year calculations and the definition of “covered products” is based on fiscal year calculations. Love it. I learn so much from Mr. Congress. Apparently, Congress wants it to work this way because there must be some sort of dangerous loophole for people who have fiscal years which are not the calendar year. Mr. Waxman is onto your game, you desperadoes! There’s no escape!

At least the Waxmanis kept it simple. Good job, guys, it’s artful!

Btw, they added a little provision to make sure that the Commission investigates the structure of your business’ “affiliations”. Clearly, the Commission needs to make SURE they correctly tote up your revenues for this ornate determination. [Little known fact: the CPSC uses clacker balls for this work.] The reach of the Obamist/Waxman government into your private affairs, in ways completely and utterly unrelated to public interest or safety, apparently knows no bounds. Get your files ready, little businesses – the CPSC wants to take a peek. Perhaps check out your tax returns and . . . oops, it appears you took a few deductions that you weren’t entitled to. We can just let our sister agency know, you don’t have to do ANYTHING, we’re just here to help.

Small business people, you should be flipping mad over this pathetic attempt to “help” you. My original criticism of this provision is still largely applicable.

e. Phthalates Ban Exception for Internal Components: This is largely intact from the prior draft although they did add a provision modifying the Commission’s right to adopt the definition of an internal component from the lead accessibility standard. The Commission must now, “as appropriate”, consider whether the component can be placed in the mouth. We are talking about internal components here.

I wish I had a laugh track for my blog . . . .

f. Removal of CPSA Section 6(b) Due Process Rights of Manufacturers: has been eliminated from the draft.

g. Voluntary Recall Standards to be Matched to Mandatory Recalls: has been eliminated from this draft.

h. Imminent Hazard Panic Attacks by the Commission: has been eliminated from this draft.

i. Subpoena Power for Underlings at the CPSC: This provision was trimmed back partially to apply only to physical and documentary evidence. This modest restructuring of this new right does not in any way address the issues I have pointed out in the past (here and here). This new subpoena power is not essential to the operation of the CPSC, regardless of their assertions, and represents a significant degradation of procedural protections that encourage business people to invest. When all trust is destroyed among the regulated community and its safety regulator, who will want to invest? Hello, Congress?

CONCLUSIONS:

The Waxman Amendment has been improved mainly by deletions of several truly awful and duplicitous provisions. Many defective provisions in the original draft survived the revisions. What’s left provides little substantive relief to the unwashed masses, but promises some sub rosa relief to the book industry and ATV’rs without giving the appearance of favoritism. There is little to cheer here for resale shops, small businesses (even micro-businesses, hello HTA, are you there?), education companies, apparel companies, you-name-it.

And many important issues are left completely unaddressed. I have previously provided my most discrete list of CRITICAL missing elements that must be part of any meaningful amendment of the CPSIA:

• Risk Assessment by the CPSC and/or the Commission.
• Changes in age limits for the lead standards and phthalates ban.
• Narrowing of the scope of “Children’s Product” to eliminate many categories of products unthinkingly pulled into this law by its overly broad language.
• True reform to protect small businesses.
• Tracking labels relief.

My full list of needed changes is found here.

More fun to follow tomorrow, I am sure.

Read more here:
CPSIA – A Quick and Incomplete Analysis of New Draft Waxman Amendment 2.0

CPSIA – Waxman Amendment New Draft

There is a new draft of the Waxman Amendment circulating. Here is a redlined version to help you see the Democrats’ changes. This came out about three hours ago.

Notwithstanding that we have endured this torture since August 8, 2008, the Democrats in their infinite wisdom and kindness have set up a meeting tomorrow at 10:30 AM EST in Waxman’s offices to take “final” comments from a bipartisan group including certain representatives of regulated companies. The comments will be solicited in the context of a warning that the revised bill already incorporates “the comments of industry” and represents the “best” the Democrats can do. In other words, an ultimatum.

So we are facing a key deadline less than 24 hours after receiving this critical language, notwithstanding that this “final” meeting was not pre-announced or that this issue has been festering for almost two years.

The meeting was also scheduled notwithstanding that some of us have actual jobs in actual companies and may not be sitting around waiting to do our federal government’s work.

But to heck with people like me. Whiners! We should be happy with all the government our taxes and deficit can buy. Indeed. I can’t make tomorrow’s meeting. Guess I need to content myself with being excluded.

Another shining example of Open, Participatory Government . . . of the Waxman, by the Waxman, for the Waxman. [The Dems certainly are trying hard to make sure it won't perish from this Earth, too.]

Is that how it goes? I can’t remember. . . .

I will try to provide some comments on the bill later tonight.

Read more here:
CPSIA – Waxman Amendment New Draft

CPSIA – Broken Record . . . Does Anyone Care Anymore?

Misallocated safety resources – I have made the point again and again, that the misconceived CPSIA diverts limited resources away from real safety issues and lards them on bureaucratic exercises unlikely to produce safety results. [A pile of safety reports up to the sky does not constitute "results", btw.] This misallocation is not restricted to private companies – it also adversely impacts the CPSC. As they say, there are only so many hours in the day, even with an annual budget of $118 million.

The back-up in work at the CPSC is part of the untold story of the CPSIA. Certainly the zealots do not want to expose the damage done by their favorite law to this proud agency. The fantasy goes like this: if the CPSC isn’t acting, there isn’t anything to act on. Ergo if recalls go down, we must be safer – because the all-knowing CPSC is everywhere, instantly processing data, and recalling everything that is “bad”. If you believe that fairy tale, I have a bridge to sell you, or perhaps some lovely swamp land. This fantasy was on display in the recent hearing on the public database in which absurd promises were made about timely agency review of database postings. The agency’s inability to keep up with the data flow, probably from day one, will turn the database into a national commercial slander bulletin board. Among other things, this is because there aren’t and will never be enough hands on deck to manage the work flow with good quality control and concern for truth.

Some recent evidence of misallocated resources was provided by the General Accounting Office in their April 2010 report to Congressional Committees entitled “ALL-TERRAIN VEHICLES: How They Are Used, Crashes, and Sales of Adult-Sized Vehicles for Children’s Use“. Remember, it is almost inevitable that misallocated safety resources will lead to disaster, just as driving while taking your eyes off the road invites tragedy. Tragedy . . . you heard it here first.

The GAO report notes:

“[ATV industry] officials said they are taking actions to prevent the sale of adult-sized ATVs for use by children and Commission staff said they have taken steps to ensure compliance . . . . Since 1998, Commission staff have conducted undercover inspections of ATV dealers, by posing as buyers, to check compliance with the age recommendations. Nevertheless, compliance rates of the ATV dealers that Commission staff checked decreased from 85 percent in 1999 to 63 percent in 2007 . . . . A Commission compliance official said no undercover inspections of dealers had been conducted since early 2008 because Commission staff were focused on preparing to implement the Consumer Product Safety Improvement Act, but that inspections will be resumed in the future. . . .

Because Commission staff had not conducted any undercover inspections of dealers since 2008 and because the number of new entrants in the marketplace that had not been checked (as of February 2010, 37 companies had ATV action plans authorizing them to sell ATVs in the United States, compared with 8 companies in 2008), we conducted undercover operations of selected dealers to check whether dealers were willing to sell adult-sized ATVs for use by children under the age of 16. . . . The dealers who were willing to sell adult-sized ATVs for use by children included retailers that sold ATVs made by the traditional manufacturers and new market entrants as well as those that sold a single brand and a variety of brands. In some cases, sales staff subtly and in other cases blatantly admitted that they should not be selling adult-sized ATVs for use by a 13-year-old, but would do so anyway. In addition, one dealer we visited was selling ATVs manufactured by a company without an ATV action plan.” [Emphasis added]

I quote from this report not to indict ATV’rs. Some bad apples will be in every barrel, so almost any market sweep will turn up something. In this case, however, the GAO confirms that the CPSC has been in a two year nap induced by the CPSIA. And the nap isn’t over, either.

This problem explains why, in a recent conversation, a CPSC staffer referred to the agency as the Children’s Product Safety Commission (that’s not its name!). Something has been diverted or polluted in its mission by the CPSIA.

I feel we are sliding down this slippery slope to the doom of the critical market for children’s products. After two years of whining, I must sound like a broken record. That said, the CPSIA implementing rules aren’t survivable and with full implementation now just months away, there’s almost no time left to do anything about it. I have not yet explained in this space the so-called 15 Month Rule to be discussed this week in Thursday morning’s Commission meeting. When the time comes, you will get a strong sense of what a railroad job this entire process has been. The priority has been irretrievably shifted to paper pushing. The strictures imposed by the testing zealots will snuff out many businesses – or send us all underground.

Consumers will suffer and so will your business. We will see more collapses and will see markets go under-served. You were warned.

Read more here:
CPSIA – Broken Record . . . Does Anyone Care Anymore?

CPSIA – What does "Any" Mean, Anyhow? Waxman Staff Weighs in.

The Waxman Amendment 2.0 is still percolating but with Congress on its Spring break, progress has stopped briefly. That does not mean, however, that discussions have ended or that the Amendment is “dead”. It will likely spring back to life shortly as Congress wakes up again next week.

Those of you who savor fractiousness and gridlock in your government will no doubt be pleased to know that the usual bickering and stubborn disputes over the awful CPSIA continues unabated.

In a meeting last week about the Waxman Amendment, senior Waxman staff again rejected the concept of allowing the CPSC to assess risk. [Given the extraordinary conservatism of this CPSC Commission, I can't imagine what Waxman is worried about . . . .]

The position of the Waxmanis has significant implications for the controversy over the word “any” in the lead exemption provision. Some commentators have argued that “any” does not mean none and that if “any” is accorded that meaning, then the exemption process would never yield any exemptions. [CPSC staff have reached similar conclusions, hence their universal rejection of exemption requests. This also explains their puzzling approval of nuclear waste for inclusion in children's products.] Resolution of this issue might not only crack the door for exemptions but might also help narrow the scope of CPSC responsibilities by eliminating obviously safe products from the lead rules. This would be good, to restate the obvious.

According to Waxman staff, the CPSC got it exactly right – the word “any” is meant to prevent exemptions if ANY lead could pass from the subject item into the human body. No matter that this means that there will never be any exemptions possible under the exemption process (!). No matter that there are many other environmental sources of lead which pose a far greater hazard in a child’s life than almost all children’s products. No matter that many useful products might be banned (see my latest casualty post). In the Waxmanis’ estimable view, Congress “wanted” ZERO lead in the communal toy box. Otherwise, there might be a “perverse” effect on safety. Or so they say.

This is exceptionally unlikely to be true. Interviews with MANY members of Congress over the past two years confirms that “Congress” believed that the CPSIA included a real and workable mechanism for sensible exemptions. Not that anyone thought about the details of this bill for more than a few micro-seconds, but if they did, they thought there was a viable exemption process. Actually, it takes virtually no effort these days to find members of Congress who assert that the CPSIA was a toy bill. Gotta keep ‘em guessing, I suppose.

It must be nice to be able to project your own views onto an entire institution. This is a good way to defect blame. What did Congress “want”? No one can know what that amorphous institution wanted or wants. At this point, the Waxmanis are self-appointed interpreters of the Congressional psyche. In reality, it only matters what “House baron Henry Waxman” wants. In this case, an impotent exemption process is exactly what he wants. The sham also provides him with cover against more skeptical members of Congress. That you can see through it hardly matters – do you actually expect members of Congress to read the law and figure out how it works? Come on!

That’s participatory government for you. Unfortunately, you only think you are participating. Mr. Waxman will let you know when he needs your input. . . .

Read more here:
CPSIA – What does "Any" Mean, Anyhow? Waxman Staff Weighs in.

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