Recently, in the wake of the January 15th recommendations of the CPSC Commission, the Dems reignited the simmering discussion of CPSIA changes by engaging various stakeholders on how the first Waxman amendment could be improved. This process was constrained by the Dems’ insistence that comments be in the form of changes to the first Waxman amendment, thereby eliminating anything too “blue sky”. Consistent with the recent (and short-lived) post-Massachusetts Dem preference for bipartisan “cooperation”, the Dems actually asked House Republicans what they thought. Let’s just say the Republicans see some basic flaws in the law. . . . Anyhow, the Republicans having provided their feedback, largely rebuffed, this draft emerged.

The procedural process forward is unclear. The standard (and appropriate) process would be a hearing followed by a “mark-up”. The Senate also has something to say on this legislation (their position is not clear although Senate Dems more readily acknowledge the need to fix the law). It remains to be seen whether Waxman will allow a real hearing on the CPSIA to take place. Dissenting views are not well-tolerated in this era of Congress. Anyhow, the Dems are asking stakeholders to send comments by this Friday.

I intend to discuss this proposed legislation in several essays. In this essay, I would like to discuss global issues. I will return to discuss the specifics of the law, notably the treatment of Section 101(b), in later posts.

A few thoughts, generally:

a. The amendment dodges most of the serious issues in the law. My list of changes is comprehensive, and the draft legislation avoids most of it. This amendment makes no effort to respond broadly to the well-documented flaws in the law. No one can argue anymore that the CPSC can fix these problems. The legislation reads (to me) like the position of someone almost completely in denial.

Let’s face FACTS – the CPSIA was passed on August 14, 2008. It is now March 14, 2010. That’s a long time. The CPSC has blown countless deadlines, and has failed to resolve MANY critical issues so far, like the phthalates test standard, the 15 month rule and so on. They are working around the clock. This thing is not going to fix itself, and the agency’s future is literally at stake.

The Dems refusal to face up to these issues is a betrayal of you, your customers and your marketplace.

b. You might ask – WHY are the Dems avoiding all of these serious issues? Are they deaf?

I think the answer is that they are hardly deaf but have little interest in opposing viewpoints. The CPSIA is their legacy and as such, no amendment will be blessed by them if it admits a defect in their original thinking or their asserted Perfect Legislative Process. An “acceptable” amendment must therefore pay homage to the original law and its structure. By working within the law’s original structure, the Dems ensure that the basic defects will survive amendment – and the consequences to your business, your market and to the regulators themselves will remain devastating.

[The Dems' "legacy" also survives if they can delay change long enough to make it impractical or impossible to unwind all rules and regulations implementing the misguided CPSIA. After all, we business people have no choice but to upend our businesses to follow these rules, and would incur more damaging expense to change our processes a second time. There seems little doubt that the forces behind the CPSIA want the law's infrastructure to be impossible to untangle by future Congresses or CPSC Commissions.]

The Dems’ homage to the original law is evident in several places. For instance, the concept of a “low volume manufacturer” is designed to provide a very (VERY) limited opportunity to craft an exception to the original testing requirements. Even so, the language clearly states that exceptions benefiting the LVMs must still “assure certification based on compliance with the relevant consumer product safety standards.” [Emphasis added.] In other words, no exception will be given to the little guys from the law’s basic premise that manufacturers must prove compliance before sale. [More on LVMs later.]

The proposed rules on the so-called “functional purpose” exception also kowtows to the law’s concept that everyone must ask for permission to be excused from lead requirements. In other words, the Dems reject the notion that the law can be narrowed rationally and appropriately without a burdensome bureaucratic process. Even action by the agency on its own initiative will be a major ordeal. The Dems know (because they have been told) that the exception process is effectively a closed door for all but the most well-capitalized companies. You may interpret the legislative language as the Dems’ response to this small business issue.

Another good example of the Dems’ sticking with the original law’s structure is the use of the word “practicable” in the Section 101(b) changes. This change is the doorway for the ATV’rs and book publishers to argue for exceptions to the lead-in-substrate standards. I am told that this word was chosen because of a Supreme Court decision (that I have not read) holding that “practicable” incorporates concepts of economics. Ah, I see. In other words, this language is a way to make the law look just like the original one, but still provide a faint hope for business people that they can somehow wriggle out of ridiculous lead-in-substrate restrictions. It’s obscure, to say the least, but leaves the original legislative structure in place – the Dems’ principal goal.

c. The new amendment ADDS more complexity to an already blindingly complex law. I have written about complexity numerous times, and recently posted a video explaining the frustrating challenge of trying to understand this law fully. Complexity in this case does not reflect the difficulty in creating a safe market for children’s products. Actually, that issue is long-resolved. The complexity stems entirely from a defective legal structure and its consequences. If the Dems insist on keeping the original CPSIA structure in place, you must get used to complexity spawning more complexity in your business life. It will only get worse.

This is what Big Government looks like. Hope you like it.

d. CRITICAL ISSUES are absent and unaddressed in this legislation. Examples:

• 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.

And so on. As noted above, to take these steps would mean acknowledging that the original law was grossly defective. The Dems would rather eat lead-free glass than admit their career achievement was fundamentally defective. Ironically, the Republicans have no such reluctance, despite voting for the original law. The sad prospect is that unless the Dems have a change of outlook (soon), real reform may need to wait for a change in gavel (bye, bye, Mr. Waxman).

Hence my excitement over the prospect of voting in November.

More to follow.

Read more here:
CPSIA – The New Waxman Amendment Analyzed

Please NOTE that this draft is a result of recent backroom negotiation, such as it is with Mr. Waxman, and thus reflects the Dems’ view of “middle ground”. The “bipartisan” nature of the drafting process leaves something to be desired, as Mr. Waxman and his team have insisted that the bill be based on his failed unilateral CPSIA amendment of last December, and have resisted the larger changes necessary to restore rationality to the law. While some issues are addressed by this draft, other problems move backwards or are simply ignored or buried. As you might imagine, this has not pleased everyone. Time will tell whether the Dems will continue to exhibit selective hearing as the process moves forward.

For now, enjoy reading the latest. I will provide analysis in due course, and in any event, look forward to your comments.

Read more here:
CPSIA – Draft of Second Waxman Amendment Is Released

Read more here:
CPSIA – How to Know if the CPSC is Going to Pull a "Daiso" on You

Read more here:
CPSIA – How to Know if the CPSC is Going to Pull a "Daiso" on You

Let me try you out on a hypothetical. What would you recommend as “consequences” for the following fact pattern? A company exhibits a pattern of safety incompetence over a period of time. Owing to agency vigilance, they are told multiple times to shape up, which they never get around to doing. No one is injured, but several minor recalls result. As we live in a time of political correctness and hyper-concern over trivial matters, the recalls not surprisingly involve only a few units of numerous products (less than 1000 units over two years). No injuries are reported. Numerous letters go back and forth, and theoretically, some of the culprit’s safety violations could have resulted in injuries.

So what penalty do you hit them with to get your message across?

For perspective, Mattel paid a fine of $2.3 million for about 2 million units recalled. This was national headline news. Mattel also recalled many millions more in other recalls in the same time period. RC2 paid $1.25 million for their recalls of 1.7 million units of Thomas the Tank Engine, a series of recalls that included an embarrassing recall of “thank you” gifts sent to people returning lead-laden Thomases. Target paid $600,000 for its “sins” in three relatively large scale recalls (545,500 total units). And I fully agree, respect and attentiveness to the details of the law are mandatory. Everybody needs to take these issues seriously.

And the answer is . . . . Try $2.05 million. Cash.

You wonder why I say that the CPSC leadership has blood lust . . . .

Oh yeah, I forgot, the CPSC also sicced the U.S. Attorney on ‘em, hitting the company with an injunction, a cease importation order and a mandatory plan of remediation.

Of course, I am alluding to the case of Daiso, the Japanese dollar store chain with a small U.S. presence. I have written about this company in the past, noting that they recalled 40 inflatable baseball bats for phthalates violations. For this and other unpardonable sins, this company was subjected to regulatory horrors on an incomprehensible scale. Here are their five recalls for your consideration:

May 12, 2008: 48 units, two skus
June 3, 2008: 50 units, two skus
July 25, 2008: 40 units, two skus
October 6, 2009: 430 units, four skus
October 6, 2009: 130 units, nine skus

Total over two years: five recalls, 698 units, 19 skus.

I have no personal knowledge of these people or this case. I also agree that the facts suggest that this company was recalcitrant or possibly incompetent. In any event, it’s their responsibility to take our laws seriously. Nevertheless the CPSC press release and the injunction both portray a far more serious situation than the facts seem to demonstrate. This is hardly a case of ingested super-magnets and millions of units in circulation. And the penalty, of course, is so far beyond the pale that I consider it incomprehensible. It is also extremely worrisome.

Today’s CPSC is about sound bites and putting you “on notice”. Whether their tactics are fair or appropriate seem to be a secondary concern. Note this quote from Japan Today: “‘This landmark agreement for an injunction sets a precedent for any firm attempting to distribute hazardous products to our nation’s children,’ commission Chairwoman Inez Tenenbaum said. ‘We are committed to the safety of children’s products, and we will use the full force of our enforcement powers to prevent the sale of harmful products.’ . . . CPSC spokesman Scott Wolfson said the company had been warned several times about violating safety standards.” In other words, this is entirely justified because the company had been warned and laws had been broken. I see.

There is a concept in Anglo-American jurisprudence of a punishment to fit the crime. I wish the CPSC knew something about proportionality in administering justice. Unfortunately, this CPSC seems to think that the importance of public messaging allows them to justify whatever they want to do. There seems to be no constraints, whatsoever. As Mr. Wolfson intones, after all, Daiso had been warned several times. Ergo, it’s fair to whack them with a penalty almost as great as imposed on Mattel. For less than 1,000 units sold.

Have you ever sold less than 1,000 units of something? Has anything ever gone wrong in your business? Uh-oh. Start saving up!

If you are having trouble grasping the point, consider the recent case of the man caught stealing a $3.99 bag of cheese in California. The judge went easy on him, only sentencing him to 7.7 years in jail. Nothing wrong with that, right? As the defendant’s lawyer noted in her closing remarks, “She concluded that his most recent thefts were petty. ‘We’re talking about a pack of cheese,’ she said.” Good thing the judge was listening . . . . This kind of justice brings to mind Midnight Express, the nightmarish story about Turkish jails. We’re not that kind of country, right? Right???

But in this environment, with the pack of jackal consumer groups egging them on, this CPSC is prepared to lower the boom to squish anyone who dares be incompetent. Here’s Consumer Reports on the case: “Our take: This is more evidence that the CPSC has been reinvigorated and that the new leadership at the Commission, plus the new powers under the CPSIA, mean good things for consumers.” In other words, it’s not only okay, it’s a sign of returning “health” in our U.S. government. Yippee.

I agree some sort of penalty may be merited in a case involving a pattern of violations. A large company like this one might need a large-ish penalty to “get the message”. [I wonder about that. Is it certain that this company would not have changed its behavior for a penalty of $50,000 or $150,000? The CPSC never tried smaller penalties first, as escalation seems to not be part of their vocabulary.] Nevertheless, this penalty lacks any rational relationship to the trivial problems cited in the recalls. In other words, it is completely arbitrary.

And for those of us destined to have to deal with the CPSC on resolving problems in the future, the Daiso case in your warning. Under this Commission, the agency has no apparent intention or need to be reasonable. They are unfettered in their ability to punish and exhibit no self-restraint. You won’t be able to fight them, they print their own money. It must be nice to be both judge and jury.

This is what our country has turned into. I CAN’T WAIT TO VOTE AGAIN. November can’t come fast enough for me.

Read more here:
CPSIA – Anyone Care about Penalties Yet?

Read more here:
CPSIA – You Can Add 43 Pages to the Heap

Read more here:
CPSIA – Video Blog – Understanding the CPSIA!

It’s worth noting that the CPSC has yet to assess a single penalty under the CPSIA. The whoppers assessed against Mattel, RC2, Target and Schylling, among others, all reflect prior law. I rather doubt they are done knocking on doors and waking up the occupants with news of penalties for long-ago infractions. When they’re finished with that task, the agency can begin assessing penalties under the CPSIA. The new penalty section became effective on August 14, 2009 and increased the maximum penalty per violation from $8,000 to $100,000 and the maximum penalty for a related series of violations from $1.825 million to $15 million (see Section 20 of the CPSA). Gets your attention, right?

There is a considerable risk of abuse of the penalty assessment process without procedural protections. The penalties being assessed today are substantially larger than in the past, and seem (to this observer) to follow no clear pattern or bear any relationship to the infractions. Arbitrary penalties will depress trade as manufacturers reassess risk or find that they cannot bear the increased cost of insurance (self-insurance or commercially-available insurance). The cost will come to rest somewhere and like any tax, will reduce the incentive to innovate or compete.

It is also debatable how negotiable the agency has been or will be on penalties, amplifying the risk of arbitrary penalties. After all, how are you supposed to use leverage against the CPSC – no one has enough money to fight the federal government in court. Nor the time or energy. As someone said, never sue someone who has access to a printing press. This lack of a level playing field raises questions of due process in CPSC penalty assessment. The dilemmas presented by the current version of the civil penalty factors prompted many comment letters, including one from me.

Nothing scares me more than the populist blood lust we continue to see from the agency. The penalty factors need to restrain efforts to please politicians then in power. The urge to “cut [the agency's] conscience to fit this year’s fashions” may be overwhelming at times. It is worth noting that Gib Mullan, head of enforcement at the agency, is signalling more sensitivity to this issue in his recent speeches. This is much appreciated and is a much-needed change. That said, to restore trust and confidence, the agency MUST tie its hands in important ways. The unfettered ability to whack manufacturers however they arbitrarily feel on a given day is too much power for the CPSC and places too much risk on businesses.

The agency received many comments giving this advice. Let’s hope they had an open mind as they read the comments.

Read more here:
CPSIA – CPSC Commission to Vote on Civil Penalty Factors

“Amid continued concern about children’s jewelry tainted with toxic materials, the [New Jersey] Assembly will also consider legislation targeting unsafe jewelry. The bill comes after 55,000 “Princess and the Frog” necklaces were recalled because they may contain high levels of the toxic heavy metal cadmium. Under the bill (A-2076), no one may sell, distribute, import or manufacture jewelry in New Jersey that contains materials classified as unsafe. The bill also includes stricter restrictions on materials used in children’s jewelry and body piercing jewelry. ‘Buying a necklace or a charm bracelet shouldn’t bring about fears of lead and mercury poisoning, yet the health and safety of New Jerseyans are at risk,’ said Assemblyman Patrick J. Diegnan (D-Middlesex), a co-sponsor. ‘It’s time these harmful products are taken down from store shelves for good.’” [Emphasis added]

Assemblyman Diegnan, noble Democrat of Middlesex, I am getting sick of listening to headline-seeking politicians who have absolutely NO idea what they are talking about. The January 11 AP story you refer to found a small handful of jewelry with cadmium present. There was no mention of mercury or lead . . . . As to cadmium, the CPSC says they have little or no data on ingestion of cadmium in children and can’t even say (based on available data) that cadmium is a carcinogen through ingestion in children (the current evidence on cadmium involves workplace exposure or inhalation, a horse of a different color). Where did you come up with lead and mercury poisoning from jewelry? Was cadmium not scary enough to get you reelected? Do you have any idea if the presence of cadmium in jewelry is even an issue? Science be damned.

This kind of idiocy brings to mind one of the most memorable of our nation’s discarded political parties, the Know-Nothings of the 1840’s and 50’s. This aptly-named party died a well-deserved slow death . . . but seems to have risen from the dead in the form of today’s Democrats.

Know-Nothings, we can’t let them take over!

Read more here:
CPSIA – Science, It’s Really Overrated. So Is Knowing What You are Talking About.

Pundits across the blogosphere couldn’t let this pass, like our friends Walter Olson (”Cut grapes into pea-sized portions?“) and Lenora Skenazy (”Surely You Must Be Choking!“). Many newspapers repeated the AAP’s call for warning labels on items like nuts, certain hard fruits and hot dogs. “Back away from the peanut slowly, Tommy, I don’t want you to choke!”

Any of this ring a bell? The AAP remains among the most ardent of the CPSIA advocates. They are in regular contact with the Waxmanis and advise on which scraps of relief we might be allowed. In fact, my spies point to the AAP as the big rabble rouser on rhinestones (sooooooo dangerous!) Having succeeded in gutting the children’s products industry, the AAP have turned their attention to that symbol of America, the hot dog. Parents cannot possibly deal with hot dogs without government intervention – individual responsibility is so passe. The AAP will make us all so safe . . . .

This seems to be a theme of this space – the world seems to have lost its moorings. Redesign the dog, indeed. Spare me.

Read more here:
CPSIA – Redesign the Dog!