CPSIA – A Consequence of Being Governed by Idiots

At what point will we all rise up and say we are SICK of the oppression of the CPSIA? Today’s offense is the discovery that an innovative educational products developer has begun to sell a chemistry kit that advertises that it is “chemical-free” .

CPSIA – ICPHSO Keynote Speech by Inez Tenenbaum

This speech will no doubt be posted on the CPSC website shortly. I will add the link later, please forgive any errors in these notes.

Reviewed 2010 efforts and achievements.

1. New crib standards (“vastly improved”).
2. Baby bath seats and walker rules
3. Cadmium in jewelry and children’s products (held off what might have been a repeat of the lead recall fiasco). Turned back some shipments at the port. Are now screening for cadmium when they find low lead levels in children’s products. Looking at cadmium in substrate in toys and in children’s products generally. Technical staff has made their position on these issues “abundantly clear”.
4. Toy safety improved. Recalls reduced from 172 in 2008 to 50 in 2009 to 44 in 2010. Lead recalls in 2010 were THREE. [RW: Obviously, lead is a huge issue.] This has helped to “restore” consumer confidence in toys.
5. Drywall initiative with HUD. Warnings about sleep positioners and baby slings.

As for 2011,

1. Looking forward to a “civil discussion” of the issues in 2011. The Commissioners go out to lunch together and aren’t like the Sopranos. The Commission is not fractious. 85% of our votes are unanimous. We do disagree from time to time, but “hope to do so without personal or disparaging attacks”.
2. 2010 was the year of the Consumer and 2011 will be “the year to get connected with the CPSC”. [RW: Last year she promised us that 2011 would be the year of enforcement. I guess that lays ahead . . . .]
3. Will implement the Five Year Strategic Plan
4. Wants to use Neal Cohen’s office
5. Launch the new database, assuming the government is “still open”.
6. Continuing new Section 104 rules, Pool Safely initiative, educating consumers about safe sleep.

“Knocking on the door” on being the global leader in consumer product safety. Looking for an “even more rigorous” identification process for product hazards. Will turn hazard identification into injury reduction. Want “safety built into the products intended for our store shelves.”

Touts her agency’s agreement with the Chinese government on toy safety. Sampling and testing in China will help assure safety.

Touts Neal Cohen’s efforts, and the efforts of the CPSC Beijing office. Re Small Business Ombudsman, it is dedicated “touch point” for small business for education. Many manufacturers might not know where to turn for information or to fully implement the new rules. Not trying to take away business from outside counsel. [She really said this.] Wants to facilitate the transfer of knowledge across industries.

[No mention of SBO advocating for small business or playing an active role in RESOLVING rules disputes or problems. Hmmm. A shoulder to cry on?]

Looking at a shifting supply base, bringing other countries into play. We’re looking to prevent a repeat of the China problems.

Re toxic metals, lead and cadmium requirements are intended to create safeguards for the future. Need to expand our vision beyond lead and cadmium. She’s got a nice long list of new things to be scared of. We want to be “leaders” in preventing harm from these metals. Need to avoid exposure from the substrate of toys or other products.

[RW: I think a few more tests will do us ALL a lot of good! I am CRAZY to stick around in this industry.]

Back to new crib standards. Cribs must be replaced by end of 2012 to come into compliance with the new rules. [RW: Stimulus plan!] Cribs compliant with the new rules will be available by June, we hope. Lots new rules in “safe sleep” and other juvenile products.

Database ready to roll in two weeks. Don’t forget to ask CF “more questions” today at 4 PM. ["More" questions?] She respectfully disagrees with objections to the database. Her pledge is that they will educate consumers that the report should be accurate and safety-based. Let’s not let perfect be the enemy of the good. Data warehouse will promote greater efficiency. Consumers will be more “empowered”. If consumers withdraw products while the CPSC is working behind the scenes to issue a recall, that’s a good thing in her view.

[RW: Is it a "good thing" if they withdraw from using products that are safe or are not subject to recall? Hmmm. That question was unaddressed.]

Recounts her advice on how to amend the CPSIA (functional purpose exception, should get the lead out if it’s “practical” to be removed, 100 ppm should be prospective only, and small businesses and small batch manufacturers deserve some relief). Will work with Congress on other changes.

She says, change it but don’t end it. Hmmm. Certainly remains open to making old suggested changes to the law.

Finally, pleased to share that starting on March 1, will launch the Chairman’s Commendation Circle Program. There will be more details about the nomination process. Wants to highlight innovators and those who are working to prevent injuries every day. [Hmmm.]

Have the right team in place, willing to take action against those who don’t follow the law. Forging a new regulatory approach with predictability and consumer confidence. If all of us can be partners in this effort, can build on the progress made in recent years.

RW: This is BY FAR the least threatening speech by Ms. Tenenbaum since she ascended to her chairmanship. Let’s hope this signals a significant shift in tone and direction.

Read more here:
CPSIA – ICPHSO Keynote Speech by Inez Tenenbaum

CPSIA – The Worm Continues To Turn

The day we all feared, the day we knew would come someday . . . well, the Federal Register says it’s coming soon. According to a notice of “Final Rule Stage” published on December 20, the CPSC is moving forward on the so-called “15 Month” Rule.

You have to chuckle at the “15 Months” part. This rule was legally mandated to be enacted 15 months after the CPSIA was signed into law. The presumed date of enactment would then have been November 14, 2009, a mere 14 months ago now. They didn’t even published a first draft until May 2010. If the agency can somehow finish this project by January 14, it could be called the “15 Months Times Two” Rule. Then again, it’s basically inconceivable that they will make it. Eventually they’ll need another name for this thing.

The urgency behind finishing up this rule is that the testing and certification stay expires on February 10, 2011. Remember that Bob Adler already said he wouldn’t vote an extension of this stay because . . . he hates stays. Perhaps he prefers market chaos and economic depression instead. Anyhow, to avoid the showdown, they need to get their ducks in a row, hence the need to get this rule going.

I sent in comments on the first draft of this rule on August 3. I wasn’t a big fan . . . and I guess other people had reservations, too. According to www.regulations.gov, the CPSC received 112 comments letters (that may overstate the number, because regulations.gov seems to have some duplicates). I haven’t read them myself, but I assume I am the only one who saw any flaws in this rule. The rest of the letters are probably just “thank you” notes.

Anyhow, it’s worth noting that the Chinese New Year occurs on February 3, 2011 so take my word for it, all the Chinese factories will be closed on Feb. 3rd and probably won’t reopen until Feb. 10 at the earliest after a two-week holiday. Some workers are gone three or even four weeks for this holiday. In a “best case” scenario, the CPSC can’t take action on this rule until they officially acknowledge the public comment “thank you” notes and hold a public Commission meeting. Do the math – if they choose to take action on this rule now, we will get about ten minutes notice to begin conforming. I can’t see any risk of market chaos again . . . can you?

Here’s a fairly obvious fact for you – we have not incorporated any of the pending rules into our supply chain or manufacturing processes. Why? You tell me what I’m supposed to do. The rule that has been published is deeply flawed and, basically, stupid. It is not a final rule. 112 comment letters were filed on it. It could change . . . it BETTER change. How am I supposed to implement rules that haven’t been published or possibly even written? Telepathy? I don’t read minds and I haven’t implemented the unknowable, either.

If this does not make your blood boil enough, consider these excerpts from the notice of Final Rule Stage:

• “The U.S. Consumer Product Safety Commission is charged with protecting the public from unreasonable risks of death and injury associated with consumer products.” [Emphasis added] The CPSIA makes consideration of RISK by the CPSC illegal. Bummer, huh? Someone should have told the CPSC because they still claim to be concerned with “risk” of injury.
• “When deciding which of these approaches to take in any specific case, the Commission gathers and analyzes the best available data about the nature and extent of the risk presented by the product.” And then ignores it??? See also the final bullet below.
• “As for exemptions [from the "15 Month Rule"], the statute does not appear to give the Commission the authority to exempt firms from the testing or certification requirements, so it may not be possible to exempt firms within section 14 of the CPSA.” In other words, HTA, you can lump it. And the CPSC is telling you who to blame – Congress.
• “The congressional mandate to issue this regulation does not require the Consumer Product Safety Commission to do a cost/benefit analysis for this regulation. Therefore, a cost/benefit analysis is not available for this regulatory action.” Head-in-sand syndrome. I bet you’ll be able to do a cost/benefit analysis pretty quickly when your costs go up again by 20x.
• “[It] is not possible to provide an analysis of the magnitude of the risk this regulatory action addresses.” Ahem. And it’s okay to put forward a rule of this complexity and far-reaching impact while flying entirely blind because . . . why???

Let’s not forget that there’s a new Congress being sworn in January 5th. The incoming Republican House majority has pledged to shrink the federal government and to closely examine how regulatory agencies are governing. Hmmm. Help may be on the way . . . soon.

Read more here:
CPSIA – The Worm Continues To Turn

CPSIA – Component Testing Rule Comment Letter

August 3, 2010

Todd A. Stevenson
Director, Office of the Secretary
Room 820
U.S. Consumer Product Safety Commission
4330 East West Highway
Bethesda, Maryland 20814

Agency: Consumer Product Safety Commission (CPSC)

Re: Docket No. CPSC–2010-0037 Conditions and Requirements for Testing Component Parts of Consumer Products.

Dear Mr. Stevenson:

I am hereby submitting comments in response to the Solicitation of Comments on the Conditions and Requirements for Testing Component Parts of Consumer Products (Docket No. CPSC–2010–0037) published in the Federal Register on May 20, 2010 (the “Proposed Rule”).

This request for comments comes after, among other things, a two-day workshop held at the CPSC on December 10-11, 2009. Our company incurred the expense of sending three people (all panelists on multiple panels) to attend this “sold out” event which was purportedly to solicit stakeholder feedback on this rule and the so-called “15 Month Rule” (also up for comment today). There is little evidence from the Federal Register that any of our feedback was taken or possibly even heard. I have lost track of how many comment letters I have filed, panels or hearings I have appeared at and essays or letters I have written about the CPSIA and these issues. So far, my comments have added up to . . . nothing. Nevertheless, I am filing this letter in the vain hope that perhaps this will be my lucky day and you may listen to me, finally.

I would like to make some general comments first.

a. Some Positives in the Proposed Rule. I am in favor of the concept of component testing and applaud the Commission for taking steps to make it a reality, however flawed. In addition, I am also enthusiastic about composite testing. Regrettably, however, the devil is in the details.

b. CPSC Data Demonstrates that Risk is Low, so the Proposed Rule does not Need to be so Strict. I have analyzed the recall data published on the CPSC website and determined that from 1999 – 2010, the CPSC can account for ONE DEATH and THREE ASSERTED INJURIES from lead or lead-in-paint. If the goal of these rulemakings is to reduce deaths and injuries from lead, then these data must be borne in mind. With so few incidents involving lead injury of any kind in children’s products (less than occurs on AN AVERAGE DAY from swimming pools and spas in the U.S.), there is no justification for building such an ornate rule for something simple and logical like component testing or composite testing. Likewise, incidents of fraud in testing are equally infrequent and in any event, already addressed by other statutes. Congress did not require this complicated regulatory scheme, and the data cannot justify it.

c. The Proposed Rule Puts Compliance First, Before Safety. This rule seems to place a very high emphasis on the need to comply, as opposed to the need to make children safer. One is not necessarily the equivalent of the other. My favorite example is our company’s record of compliance. Founded in 1984, our company has recalled a grand total of 130 pieces in its history, all recovered, out of perhaps one billion pieces sold. Not bad. Were we to meet the myriad requirements of this rule, I cannot fathom that our products would be safer. Does all that extra compliance benefit anyone? It certainly will cost a lot (we pay, you don’t). As I read your rule, I wondered why you didn’t list the wire transfer instructions for the top testing companies. You might as well . . . . Still, the casual waste of our resources cannot make anyone safer – they were already completely safe.

Safety is the reason the CPSC exists. This document fails because it confuses the desire to powerfully enforce the CPSIA with actually making people safer. The only thing that may be accomplished is business death for many companies, principally small ones. Swashbuckling enforcement may make great headlines but no one will be any safer. Compliance is not safety.

d. Science Has Apparently Been Rendered Moot at the CPSC. While I accept that Congress has banned certain phthalates in toys, I do not accept that the ban is a SCIENTIFIC CONCLUSION. It is legislation, not science. Notably, the CPSC has twice investigated phthalates and held that phthalates were safe in toys. Yet, on page 28213 in the Federal Register, the Proposed Rule discusses the “risk” presented by a product that might have a violative concentration of phthalates in a component, but with an overall concentration that wouldn’t violate the ban. It goes on to assert that a component-based rule is “more protective of human health”, as though the agency had reached the scientific conclusion that phthalates were dangerous – which is not true. Re-characterizing the legislative ban as an assessment of “risk” may appear to legitimize your rule, but it is certainly not an accurate statement of the historical position of the agency. I object to the rule’s equating of a ban by politicians to a scientific judgment. Science is under enough assault without the stamp of approval of the CPSC announcing its death.

My specific comments on this proposal:

1. Component Testing Looks Better Than It Is. I wish I felt we (or anyone else) would use component testing extensively in the future. There are several reasons why this option will be of little use to anyone, particularly the small companies that it was intended to benefit. [Companies with enough scale may find the Proposed Rule useful – one of the many ironies of the CPSIA is that its principal beneficiaries may be the companies that prompted its passage.]

a. Limited Market Availability for Component Certificates. While some high volume components of children’s products may quickly be tested to meet these requirements, many other kinds of components are not likely to be tested:

i. Low volume components
ii. Components made in small lots
iii. Components made by small suppliers (many fabrics)
iv. Components which derive only a tiny percentage of revenues from regulated products or which principally cater to other industries (e.g., paper clips or aluminum foil in a science kit)

Unfortunately, it appears to me that the logic of this rule is that if we can be certain that some certificates will be widely available (e.g., paint, plastic pellets), therefore all other certificates will be available. That’s plainly ridiculous.

b. Complexity. The subdividing of compliance testing into component parts and the whole, some tests done on parts and some on the whole, with tests of varying dates substituting from time to time, is simply a mindboggling mess. I cannot imagine that this can be successfully managed on any scale (how many products need to take advantage of this rule before test reports develop big and inconsistent holes?). And how will retailers be able to interpret this patchwork quilt of tests? This scheme will be self-defeating on all levels.

Add to this the requirement that components need to be traceable, and you basically rendered the component testing opportunity moot. Of course, I am presuming that industry will take your rules seriously. To me, it’s completely inconceivable that anyone will build your traceability system. [Traceability will not raise revenues, only mindless complexity, and as noted above, cannot conceivably improve safety.] If you take these rules seriously, you will cry, laugh/scream – or walk away. The paperwork required for this exercise is well beyond almost all companies’ capabilities. [Does the CPSC have ANY tangible evidence that its requirements can be met by anyone . . . other than Mattel and Wal-Mart? Presumably, no one at the agency living in the real world thinks that traceability rules can be met by the typical Handmade Toy Alliance member, or other small businesses like ours.]

c. Unrealistic Expectations on Manufacturing Control and Traceability. To take advantage of this rule, a manufacturer must take responsibility at the sub-micro-level for manufacturing quality. Let’s recall for a moment that we are not making drug treatments here, nor are we building the Space Shuttle. We are making simple plastic toys and games, children’s shoes, pens, shirts, books, educational materials and so on. Consider this instruction from your new rule: “The manufacturer must exercise due care that the manufacturing process does not add a prohibited chemical from an untested source, such as the material hopper, regrind equipment, or other equipment used in the assembly of the finished product.” Our company has several hundred vendors producing thousands of SKUs – do you honestly believe we could possibly manage how all these independent companies wash out their molding machines or manage their regrinding operations? Is this some kind of sick joke?

By the way, this verbiage will end the use of recycled materials in children’s products. This is completely unjustified for safety reasons and is certainly very unfriendly to the environment. As noted above, your agency’s responsibility is to manage safety. You have no basis in fact for asserting that these theoretical sources of lead are or could constitute a public safety risk.

d. Liability Risk. The Proposed Rule goes to great length to ram home the message that all the risk is on our shoulders. The monotonously repetitive use of the term “due care” throughout this document makes abundantly clear that the CPSC is perfecting a myriad of claims to be made against any and all manufacturers of children’s products when it suits the purpose of the agency. Many of the claims may be perfected with the agency’s 20-20 hindsight. The Proposed Rule minces few words on this preservation of rights: “The above information is needed so that, if noncomplying products are found, the Commission can use this information to determine whether a finished product certifier, component part certifier, or third party conformity assessment body is not complying with the appropriate requirements.” Under the Proposed Rule, even a missing piece of paper can be the basis of charge of failed due care. A fear of criminal charges seems realistic.

Will aggravating letter writers be the first to suffer under this hammer? The answer is – it’s entirely up to YOU under your rule. Small companies will see how the deck is stacked against them and steer far from the component testing option (if they understand the obtuse wording of the rule).

2. If Few Companies Can or Will Use Component Testing, Has the Agency Provided “Relief”? Of course, the answer is NO. The Proposed Rule may look like good policy, but if the practical impact of the rule is that few people can or will take advantage of it, it is simple window-dressing. The impact on small businesses, exemplified by the well-known and sympathetic Handmade Toy Alliance, will be severe. They are not the only ones in need of help, either. If small companies like HTA members cannot take advantage of these rules in large part or would be too scared to take a chance in the face of the awesome display of governmental power in the rule’s terms, then they will suffer and shrink. I would note that the Notice on the “15 Month Rule” explains how a failure to protect small companies could play out badly (see “Caveats and Possible Market Reactions to Third Party Testing Requirements” on page 28358). Those negative impacts could result from a failure of policy here, too.

3. Maintenance of Records for the Life of a Product Plus Five Years Is Unduly Burdensome (Not to Mention Pointless). Please consider our case: We still produce certain items from our original product line in 1984. Clocks don’t go out of style in education, even if Tickle Me Elmo and Furby last only one year. The requirement that we must retain records for the life of the product plus five years could theoretically be forever in our case. Perhaps the CPSC can provide us free unlimited warehouse space for all these records. In any event, our case also makes clear how pointless this requirement is. We have only had one recall in 26 years, which we successfully administered without the assistance or guidance of the thousands of pages of rules and legislations that befell us under the CPSIA. How, precisely, will decades of records improve the public weal in OUR case? Your rule is very good at spending our money, our resources and our time, but doesn’t make a reasoned connection to safety in any way. We are not Mattel and in any event, they don’t define the market. Had you listened to us in December 2009 at your workshop, you would know this already.

4. Composite Testing Rule for Paint LOWERS the Lead Standard to Sub-trace Levels. In yet another example of overly risk-averse rulemaking, the agency’s new composite testing rule for paints requires that lead content must never exceed that for any individual component paint in the composite. This slices the 90 ppm limit by two-thirds for a three-paint sample and by 75% for a four-paint sample. This super-stringent rule ensures that it is literally a gamble to use composite testing – so why would anyone bother? Even more bothersome, since the new policy of the agency is to impose strict liability for lead-in-paint violations, this new rule demonstrates the ascendency of the debunked notion that there is “no safe level for lead”. If the agency really wants to take this position, it should not permit composite testing for paints. Too risky . . . .

5. The Regulatory Flexibility Analysis is Flawed and Self-Justifying. The analysis justifying this Proposed Rule is a “best case” scenario, and takes none of the foregoing into account. If in fact the rule will hard or impossible to use, or will create too many legal risks or recordkeeping burdens and thus go largely unused, the reasoning in this section will be completely inapplicable.

6. The Burden of Recordkeeping is FAR GREATER than Asserted in the Proposed Rule. At our company, we produce about 1500 “catalog” items and several thousand other SKUs and custom products through a network of hundreds of factories in various countries. We do not control these factories – they are generally family businesses like our company, and are independent of us. Typically, we provide only a small share of annual revenue of any of our factories and thus have limited leverage over their business practices. Like many small businesses, we have a very limited infrastructure in place to supervise factories “on the ground”, although it is worth noting that our safety record indicates that our business methods have worked well for more than two decades.

To implement the recordkeeping set forth in this rule, I estimate that we would have to spend $50,000 – $100,000 in software development expenses to store and manage the desired records. In addition, we would need to expand our staff significantly. To reach out to all of our factories, negotiate and monitor many new business practices, will take a significant increase in staff. I posit that we would need to open an Asian office with as many as 5-10 local employees. A Chinese office would cost us at least $500,000 per annum. In addition, we would have to increase our clerical and management staff in the U.S. to help with data input, software management, project management, audits, vendor relations and general management. This would cost us at least $250,000 per annum. We anticipate that this intrusion on the business practices of our vendors would cost us business relationships and would lead to significant cost increases. The total cost of these disruptions would add another $500,000 or more per annum. It is not inconceivable that we ALONE could incur annual expenses of $1.5 million and certainly at least 10 man-years of labor (more than 20,000 hours) to comply with these rules. There are THOUSANDS of companies affected by this rule. We estimate that the assessment of cost and man-hours in the Paperwork Reduction Act section of the Proposed Rule is LOW by a factor of 100x-5,000x.

I would suggest that this rule be greatly simplified by making the following changes:

a. Eliminating the Requirement for Traceability Recordkeeping. As noted above, this ornate rule architecture is completely inappropriate for the minimal, almost non-existent threat, demonstrated by the CPSC’s own injury data. Recordkeeping requirements should minimized or dropped altogether.

b. Encourage the Exercise of Business Judgment. The presumption that only the CPSC (or Congress) can make sound judgments when considering safety issues is simply not supported by the data. Again, our company is a good example of that – we scrupulously maintained our safety record without the CPSC’s oversight, coercion or even encouragement since 1984. The concept of “business judgment” is well-defined in U.S. common law and has real meaning under the law. I think the concept of using components supported by GCCs is simple enough. Given that the restrictions on lead are clear under the CPSIA, why not let businesses exercise their judgment on how to meet those requirements and then measure them on their success in doing so? What is to be gained by inserting the CPSC into all aspects of how we conduct business? We were doing just fine before you arrived on the scene.

Given the few lead injuries noted in the CPSC’s historical data, the agency could save its scarce resources and remain effective as a safety administrator by focusing on known safety issues and incidents and leave the vast majority of law-abiding and safety-conscious companies ALONE. The data suggests that higher and higher mountains of regulations will never reduce injuries from the historically miniscule levels documented on the CPSC website.

c. Allow Composite Testing Using the Overall Concentration as the Pass/Fail Measure. Again, this is justifiable based on the historically minimal risk posed by the regulated substances. The already low lead levels specified in the CPSIA have not reduced injuries or deaths from the negligible levels that predated it. Since the number of recalls is so dramatically affected by agency policy (e.g., strict liability or not, how recalls are accounted for, etc.), the only reliable measure of the effectiveness of policy is injuries. Composite testing holds the promise of real savings to the many law-abiding companies affected by the CPSIA. Loosen the noose and they may actually save some money.

Component testing can be a simple and effective way to lower costs, but a different approach is necessary to get to that result. A sharp reconsideration of the Proposed Rule will be required to achieve this goal.

Thank you for considering my views on this important subject.

Sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.
380 North Fairway Drive
Vernon Hills, IL 60061

Read more here:
CPSIA – Component Testing Rule Comment Letter

CPSIA – Your Partner in Mischief, Congress

Never content to leave an economy merely in tatters, Henry Waxman and Bobby Rush jumped into action this week to create an international trade war, all in the name of “protecting” you. In fact, their troubling new legislation includes a sneak amendment of the CPSIA. It also takes an idea dropped from the CPSIA (submission to U.S. jurisdiction) and applies it across several new industries. Sounds promising, right?

Nominally introduced by Rep. Betty Sutton (D-OH), a wobbly Democrat said to need propping up in her faltering reelection campaign, the new bill (called “H.R.4678 — Foreign Manufacturers Legal Accountability Act of 2010″) is scheduled for mark-up tomorrow (in Rush’s subcommittee. This innocuous and technical sounding bill is packed with trouble for you and for our country. In Sutton’s blue collar industrial district, that kind of work is prized. Or so the Dems must think.

Here is the GovTrack version of the bill. In fact, I have obtained a more recent version of the bill, a “manager’s mark-up” , which includes many new provisions. The revised version of the bill packs quite a punch, right to the gut. I discuss the newer version of the bill below.

The purpose of this bill is to make foreign manufacturers of finished goods and parts intended to be used as components in those finished goods register for service of process in this country. In other words, foreign manufacturers must register here so our plaintiff’s bar and the government can sue them with ease. The new law prohibits trade with foreign manufacturers unless they are registered, and enlists the aid of the federal government’s snarling dog, the U.S. Customs and Border Patrol, to enforce this law.

This means that every factory we use outside the U.S. will have to register for service of process in the U.S. if we want to continue to import our products from them. The law goes even FURTHER, asking that each agency involved to study ways to force manufacturers of components to register here, too. So, for example, if you make a toy in China and your factory buys boxes from a local printer who has NO contractual relationship with you, this law asks the agencies to study the feasibility of getting such box printers to register for service of process in this country. To accomplish that lofty goal, of course, you have to know their identity. Our customers do not know our vendors’ names and we aren’t telling. It’s none of their business. Do you think it’s any different for our factories relative to us? Will they ever disclose that information to our Mother Government (to them, a foreign government)? Please – would you disclose your sources to the Chinese government? And who pays the administrative and out-of-pocket costs of this exercise? And what about the consequences of the fear factor and the costs of new litigation on markets?

What-a-stimulus program! Naturally, those groups most linked to your future business health and ability to create jobs, the plaintiff’s bar and consumer groups, think this legislation is long overdue!

The scope of this law covers the EPA, the CPSC, the FDA and NHTSA, and applies to drugs, cosmetics, medical devices, “biological products”, consumer products, chemicals and chemical mixtures under TSCA (the coming storm), pesticides, motor vehicles or “motor vehicle equipment”, plus components for the foregoing. That’s pretty much everything and everyone.

Oh, by the way, the manager’s mark-up adds a little provision that gives you five working days to inform the CPSC if you have “a safety recall or other safety campaign” in any country, whether initiated by the company or by the foreign government. Just thought they’d slip that one in, just in case you weren’t watching!

So, who cares? Doesn’t this “solve” the Chinese drywall problem? In fact, it’s going to make things a lot worse. This is Major League trade war material. It is not entirely unlike Smoot-Hawley, the bill that precipitated the Depression. None of our factories will be willing to accept exposure to our ravenous tort system and out-of-control invasive government regulators as a condition of doing business with us. To most of them, this will be too risky and too hard to understand. Our suppliers are small businesses like us – they will NEVER have the resources or skills to master the minute details of our legal system and myriad risks and rules. It will also be breathtakingly expensive for them, and they run very low margin businesses with no ability to absorb those costs.

Even if some of our factories will take this risk, many will not. As with Smoot-Hawley’s tariffs, this kind of rule will spur quick responses by foreign governments. If the U.S. wants the right to reach across borders and take the assets of foreign companies without a legal presence in this country, then foreign governments will extend the same “privilege” to U.S. companies selling products inside their borders. Won’t that be nice?! Learning Resources sells its products in dozens of countries. Will we have to register in each country to continue to do so? Will we be exposed to lawsuits all over the world as a result? Will we have to pay to settle “strike suits” in dozens of new jurisdictions? If the answer is yes, I cannot imagine staying in business across borders.

The provision about foreign “safety campaigns” is intended to make sure that we don’t miss a trick here. The Waxmanis want a worldwide recall system. Does ANYONE IN CONGRESS know what this will cost? Congress must want to terminate small businesses in our economy.

Rumor has it that Ways and Means wants to take this bill out of the hands of the Energy and Commerce Committee. Of course. Speaker Pelosi can skip that step if she wants. Ways and Means purportedly knows there are BIG problems here and I am assured the Republicans on that committee will fight to restrain this bill. Still, it is in keeping with recent House practice to pass something irresponsible and dangerous like this bill, relying on the Senate to stop it. It’s a “message” bill, unless it somehow gets passed into law . . . . Then there’s the rumor that the Dems intend to stick it into a moving bill, like a jobs bill, to make it impossible to stop. You know, because it’s for our own good.

This is an example of how I learned to HATE Congress and Democrats. These rules descend on our business in suffocating waves, adding no value but creating major distractions and feeding fear. On the other hand, perhaps I will be eating crow when Obama’s recently announced master plan to reduce the deficit by two-thirds in three years through increased spending, increased entitlements, increased taxes and increased regulation works like a charm. Maybe this law is part of the implementation of that great plan.

It must be me.

It must be me. . . right?

Read more here:
CPSIA – Your Partner in Mischief, Congress

CPSIA – McDonald’s Fallout Continues

The spectacle of the McDonald’s cadmium “scare” continued to unfold today.

Let’s not forget that this recall was “urged” by the CPSC although the CPSC admits in writing that the glasses are “non-toxic”. In other words, the glasses are safe. As the manufacturer notes: “‘It could have been any glass company,’ said Ron Biagi, an executive with Arc International, which made the glasses. ‘We all do the same thing using materials from the same suppliers.’” McDonald’s clearly had no choice in the matter, suffering a terrible loss of prestige no matter what the outcome. So the CPSC, Rep. Jackie Speier, one anonymous tipster and a hyperbolic press forced a highly wasteful and destructive recall.

The tumult, chaos and confusion thoughtlessly spawned by the CPSC continues to unfurl in almost predictable fashion: “But the returns [to McDonald's] are just the beginning of the next chapter in the cadmium debate, with the CPSC poised to set new limits on the metal even as it downplays the McDonald’s recall and environmental advocates aim to use the episode to build momentum for reform of federal toxics law.”

A terrible move deserves an even worse follow-up.

What’s the cause for alarm here? The glasses are safe, so says the CPSC . . . as it dramatically lowers the standard for cadmium. Yeah, nobody’s worried.

The consumer group talking heads can’t resist chiming in: “Don Mays, senior director of product safety for Consumer Reports, said cadmium was being used in some manufactured goods to replace lead, which has been eliminated from many products in response to heavy regulation and widespread health concerns. Many of those goods were once commonly associated with lead, like paint and inexpensive jewelry. ‘We’re just starting to see this,’ Mr. Mays said. ‘It’s starting to creep into a lot of consumer products that never had it before.’”

Does anyone care that the CPSC SAYS THIS ISN’T TRUE? “After an Associated Press investigation first uncovered the high cadmium levels in some children’s jewelry, CPSC Chairwoman Inez Tenenbaum publicly warned manufacturers in Hong Kong not to replace lead with cadmium or other toxic metals. Tenenbaum told senators in April that ‘we really don’t think’ companies are deliberately swapping out lead for other hazardous chemicals, ‘but we think they’re being careless and not realizing that you cannot use these metals in children’s products.’” [Emphasis added]

Some in the press aren’t persuaded. After all, urban myths are true . . . aren’t they? “[David Lazarus of the LA Times] notes that Cadmium has probably stayed off the radar for so long because people weren’t widely aware of its use. The focus has primarily been on the danger of lead products, and lead product replacements weren’t a primary concern. Chinese manufacturers began using Cadmium insted [sic] of lead to get the same vivid pigments in product colors.” Right. David Lazarus knows all about this.

And then there are our Democratic leaders in Congress. It’s election season so there’s little incentive to be a calming influence. “Congresswoman Jackie Spear [sic], who first received the anonymous tip about the Shrek cups, doubts Europe is the Cadmium culprit due to its strict manufacturing rules. Spear [sic] suspects either a subcontractor or ingredient provider in China; China is one of the leading Cadmium producers in the world. . . . Spear [sic] says she has legislation in the works that would expand the Cadmium ban in U.S., specifying removing its use in any product for children.”

And the basis for Rep. Speier’s hunch is . . . what, exactly? The glasses were made in a U.S. factory: “In contrast to the Chinese-made children’s jewelry recalled earlier in the year, the drinking glasses were manufactured in the United States, by the Millville, N.J.-based company ARC International. Ron Biagi, vice president for North American sales at ARC, said he was surprised by the recall and vouched for the safety of the glasses. While environmental and consumer groups pointed to the importance of identifying the producer of the cadmium-tainted enamel used on the McDonald’s glasses, Biagi declined to name ARC’s supplier. ‘It’s not fair for me to pull them in,’ he said.” OMG, somebody decent is left in the world! I had about given up hope.

Having set off the blaze, CPSC Director of Public Affairs Scott Wolfson again spewed more of his patented mixed signals sure to sow seeds of doubt: “‘What’s so important is for parents to understand the difference. … Children are not at an acute risk; the glasses are not toxic,’ Wolfson said, adding that ‘there are no signs we’re looking at a wave here of cadmium becoming the next lead.’” Which is why, Scott, you and your agency acted so promptly to push for a recall of this non-toxic product made of common materials in wide distribution in this country for years without any detectable adverse health effect? Which is why you told America to stop using the oh-so-safe glasses “immediately” in your OnSafety blog? Do I have this wrong? Clear as mud. Very believable, too.

There are terms for this that are too crass for a family publication like my blog. Let your imagination run. How will all this resolve itself? Of course, not very well. Justified by fear of “bone softening” (that sounds HORRIBLE, doesn’t it?) and other bizarre maladies that supposedly COULD befall us from unspecified exposure to cadmium, we will get many new and ineffective regulations imposing yet more devastating costs and devastating risk on the children’s product industry.

While hatred of government is a necessary by-product of the massive self-inflicted injury of the CPSIA, we will more pertinently be faced with the difficult challenge of protecting our life’s work – our businesses. The livelihoods of our friends and associates at our company, the economic well-being of our customers and suppliers (often our close friends, too) and in our case, the economic future prospects of the kids who are being educated with our products, all hang in the balance. I don’t know what stops this freight train before it tragically collides with reality. Certainly not leadership or a show of character from our government.

I hate to close these essays sounding like a Tea Bagger (not that I resent the label). I don’t wish to be marginalized for having strong views about an abdication of leadership and judgment by our government leaders. Say what you will, the McDonald’s fiasco was fomented by politicians with agendas. Many companies and people – and our economy – will be severely damaged as a result.

There’s nothing to be proud of here.

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CPSIA – McDonald’s Fallout Continues

CPSIA – ICPHSO Update – Remarks of Gib Mullan, Head of CPSC Enforcement

Gib Mullan’s remarks on enforcement:

• Import surveillance staff is now up to 18 people.
• Using Commercial Targeting Analysis Center (CTAC) to stop things at the port. Can see what’s coming in before it arrives.
• Is working with the International Trade Commission, the folks responsible for HTS Codes (Harmonized Tariff Schedule). The CPSC is trying to “piggyback” on HTS code to identify the products of interest to the agency. Making “significant headway”.
• Imports samples rising at a rapid rate. Only about half of the samples fail.
• Use of XRF is one of the agency’s “secrets for success”. Will use for cadmium, too. Only one-tenth of items scanned are being sampled. This implies that less than 5% of items scanned fail. Most items are not inspected, which is just a numbers game.
• Field Investigation Division is back to a “growth mode”, in 55 locations with 89 investigators. Expanding to Internet surveillance. They have seen a surge in eBay sales of recalled items after recalls are announced. Interesting!
• Created email address for the public to report sales of recalled products. Now everyone can be on a cop on the beat, how wonderful. Hope I can still trust my kids. . . .
• Retailer reports are rising. Participants in this program include WalMart, Sears, Amazon and others. 20,000 reports a year. Also reports by email and on the hot line 800 number are jumping. The total number of reports is cresting at 50,000 per year. All of this is BEFORE the public database. [Soon a system will be fully constructed that will make doing business in the U.S. children's product industry impossible, something to look forward to (this is my thought, not Gib's remarks).]
• Field “blitzes” are increasing. Examples are pool and spas, drywall, drawstrings, cribs. This is a new activity although blitzes at the port are old hat, in my experience.
• Defect Investigations Division has 19 compliance officers.
• Recalls in 2009 DECLINED from 563 to 466. Number of units went up to an all-time high, 229 million units. Lots of big recalls in 2009. Should we feel safer now? I wonder . . . . Gib himself questions whether this is “good or bad”.
• Fast Track recalls are pretty steady. “Fast tracks” are recalls initiated by companies and brought to the CPSC’s attention by the company itself. CPSC-initiated recalls are steady in the 50-60 range. Cases stemming from regulatory violations declined from 167 to 47.
• Early warning system relating to cribs, bassinets and play yards is resulting in faster recalls. [No info on the availability of cribs and so on was provided, or the cost of those goods now.]
• Joint recalls with Canada was done first on February 19, 2009 (that fills in a hole!). Total of 13 joint recalls in 2009 and 16 in 2010 to date. Expects more joint recalls in the future, broadening to other countries. Gib thinks this makes it simpler for companies going through recalls. Again, not sure how I feel about this but am not opposed in principle.
• Regulatory Enforcement Division has 18 Compliance Officers now. This includes Chemical, Children’s, Flammability and Mechanical hazards. Letters of Advice (“LOAs”) fell a bit in 2009 by perhaps 12%. Only a small percentage result in recalls. In 2009, found 338 lead content violations and 118 lead in paint violations, mainly at the port. Recalls have come down considerably, almost to zero. Stops at the port are higher than that, but don’t result in recalls necessarily. Those are declining, too.
• Compliance Division now has 14 of its own attorneys
• Civil penalties rose a lot in 2009. Gib specifically noted that he was not being “gleeful” about penalties but simply noting that penalties are a more serious risk now. I am okay with this tone, it is common sense. Penalties totalled nearly $9 million. I just hope that penalties moderate and become more purposeful, rather than political.
• Made a STRONG point about fraudulent testing. The CPSC caught fraud in lighter testing and it led to criminal charges. They are working on another case now. This is great news as far as I am concerned. Cheating is a REAL problem (an actual problem, not an imaginary problem). The CPSC should find the bad guys and punish them. The resources of the agency are well-served if focused on removing these unscrupulous people from the market.
• The agency is forging new alliances with the State AGs. They have a monthly conference call with this group. This is the CPSC’s proactive effort to reign in the State AGs by making them part of the process. If this works, great. Again, we need to watch out for the lowest common denominator risk.
• Working with China on implementing “best practices”. Getting better, faster. China recalls went DOWN in 2009 and he anticipates improved safety in Chinese products. This, too, is a good use of agency resources. If we really are getting better, faster, Gib and his team should take a bow. Safety benefits everyone. Next up, consideration of the relationship between these initiatives and cost. Safety is an inherently economic subject. We need recognition of this basic fact.

I have omitted all reference to drywall here. This is a one-of-a-kind problem that seems unrelated to the CPSIA as far as I can tell. Likewise, I have not attempted to summarize the issues relating to ATVs and other tangential product/safety issues brought up by Gib. [He did say that repairs to the Rhino seem to be working well, btw.]

To Gib’s credit, I found his presentation quite balanced with no particular effort to frighten. I appreciate the choice of tone for what could be a quite intimidating topic.

Gib’s presentation was one of the few I can recall in the last two years on the topic of enforcement that did not materially raise my blood pressure or make me think dark thoughts about the future. Let’s hope that the CPSC can build on this base to restore trust among the business community. Safety and fear mongering is an unholy alliance. The CPSC needs the cooperation and trust of the manufacturing base.

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CPSIA – ICPHSO Update – Remarks of Gib Mullan, Head of CPSC Enforcement

CPSIA – ICPHSO Toronto Update

I attended this week’s ICPHSO meeting in Toronto. The meeting was located in Toronto and focused much attention on the proposed amendment to Canada’s 40-year-old Hazardous Products Act (the so-called Bill C-6). The meeting was attended by more than 250 people, largely comprised of Health Canada officials (the analog to the CPSC), CPSC staff, including Chairman Inez Tenenbaum directly from China, a variety of testing companies, mass market companies, Canadian companies, lawyers and other interested parties.

I thought I would share a few tidbits from the meeting:

Chairman Tenenbaum’s Keynote Speech: Chairman Tenenbaum addressed the conference on Wednesday morning. Her speech is posted on the CPSC website. The speech included a few hints of movement toward accommodation of businesses under the CPSIA, but unfortunately, it is only provides hints at this point. It is worth noting that sidebars at the conference suggest that there is more sensitivity to business concerns than CPSC public statements might suggest, but then again, we can only rely on real action, not just words. The next development to look for is a change in tone and a change in actions. When we can triangulate from words to actions, and see a real easing of the intense pressure on businesses, then we can take the off-line assurances more seriously.

Some highlights from the speech:

• The “good”: The “15 Month Rule” is due soon. Tenenbaum promised a special two-day workshop on this rulemaking IN ADDITION to normal public outreach. She emphasized that they want to “get it right”. [Ed. Note: Rumorville has it that this rulemaking will be delayed, and the two day workshop may precede the issuance of the draft rule. Likewise, there is growing suspicion that the testing stay may therefore have to be stayed. There are multiple reasons why this may have to happen.]
• She emphasized a need to minimize the burden on small businesses. [Minimize is a relative term, let's not get too giddy yet. Need to see what they have up their sleeves.]
• The CPSC is reaching out to SAGs to make them partners in the safety process. She wants to minimize competition between the CPSC and the SAGs. I consider this a major advancement in CPSC practice and a nice contribution by Ms. Tenenbaum in the early days of her administration. Arguably, the 2007-8 crush of State legislation and SAG grandstanding evidenced strong State feelings of isolation and legal impoverishment (in addition to a general desire of local politicians to appeal to the populace before elections). A proactive approach by the CPSC to working with the SAGs is the best chance for ANY OF US to neutralize or minimize the disruptive behavior of States and SAGs in the future.
• Ms. Tenenbaum announced a substantial change to the penalty factors when she said: “In cases where CPSC may impose a financial penalty on a U.S importer for violations, CPSC may to take into account whether the importer has safety or compliance programs in place and whether they conducted pre-market and production testing to minimize safety risks.” Gib Mullan also acknowledged that the penalty factors will be changing. This is another faint sign that we are being heard. The penalty factors were very harsh in the first draft. After a bit of an uproar, it appears now that the agency is going to moderate its approach somewhat. If this turns out to be a “real” shift, it is good news indeed.
• The “bad”: The overall tone of the speech remained harsh and somewhat threatening, at least that’s how it felt to me. Phrases such as the following were reminders that the CPSC has a big club and intends to use it:

- “Chinese suppliers and U.S. importers are now on notice from both governments that it is a mistake to depend on good intentions and a few final inspections to ensure compliance with safety requirements.”

- “We will enforce in a firm but a fair manner the new federal law that puts strict limits on lead and phthalates in children’s products and makes all toy requirements mandatory.” [The emphasis was hers in the live speech.]

- “As I have consistently stated, we intend to enforce this law that Congress put in place in a firm but fair manner. CPSC also has a federal rule making underway that puts U.S. importers on notice.”

- “Another area that we at CPSC are rethinking is the singular approach used in the past to identify risks and simply recall products when necessary. This is one aspect of enforcement that will not work if pursued alone.”

So Ms. Tenenbaum maintained the tough tone but gave hints of a coming thaw. We’ll see in due course if I am imagining things. Needless to say, I hope not!

Remarks of Gib Mullan: Gib Mullan, the CPSC chief enforcement officer, gave a short speech summarizing the CPSIA and recent events. I must say I found some of this speech positively chilling. For one thing, Mr. Mullan noted with apparent satisfaction the first recall of a toy for violations of the phthalates ban. I believe this refers to the recall of 40 inflatable toy baseball bats previously highlighted in this space. Aside from the fact that Mr. Mullan confirmed that the enforcement focus of the agency is (supposedly) bath squeeze toys, which certainly does not include inflatable baseball bats, this micro-recall of 40 bats is highly suggestive of a strict liability enforcement policy. If that is so, then what is the purpose of pointing out this recall to the crowd at ICPHSO? I would suggest that it is intended to scare the business community. Mission accomplished?!

Further to that mission, Mr. Mullan announced that the agency is attempting to be more “consistent” and “rigorous” in assessing penalties. Okay kids, think of Target’s $600,000 penalty – if the CPSC is going to be “consistent”, what does that precedent mean for the rest of us? If Target gets hit with a massive penalty after it performed preshipment testing, had no actual knowledge, was increasing its safety surveillance and turned itself in voluntarily after catching its own errors, what should we expect from a “consistent” penalty practice at the agency now? Mr. Mullan continued by noting (again, with a bit too much relish) the rising tide of penalties assessed by the agency in 2009, and further noted that they haven’t even cracked the 2007 lead-in-paint violations yet. He said larger penalties should be expected now, given the new powers allowed the agency under the CPSIA.

What is the purpose of this announcement? What else could it be, besides an intent to scare you and me? And, hats off to the chef, it succeeded. Among the many outrages of this new practice is the focus on retribution for old recalls with new penalties. Why is this a problem in my view? Well, for one thing, no one can do anything about the 2007 recalls at this point. Is the CPSC under the impression that the toy industry hasn’t “learned its lesson” yet? If that isn’t their view, then why lay on mega-penalties for matters that were apparently closed with significant expense now almost three years ago?

At what point is our penance complete? I can only supply a couple suggestions to explain this new penalty practice – (a) vindictiveness (as in CPSC meting out “justice”, rather than simply ensuring a safe marketplace), and (b) terrorizing the corporate community into “compliance”. Both rationales are wrongheaded and destructive. I continue to return to my original comment (December 17) on the penalty factors – CPSC penalties can only be consistent, rigorous, purposeful and (importantly) predictable if they are restricted to egregious conduct. Until the CPSC disciplines itself to a fairer penalty system, ALL OF US will assume we are next in line to get whacked like Target. After all, the CPSC has said publicly that they intend to be consistent and rigorous on penalties – in other words, they are telling us that we can and should learn from Target’s experience. That message unleashes a parade of horribles. The CPSC needs to take this on board.

One last observation about Mr. Mullan’s speech – he noted that recalls from China fell by 40% in 2009, the first fall in years. This is of course good news for everyone, most of all the children’s product industry. As we know, success has many fathers but failure is an orphan. Many pundits point to the CPSIA as the reason that recalls have fallen. Mr. Mullan added another factor, the deep recession of 2009. Both of these factors contributed, but I think the real “father” of this success is that the notorious publicity of the new law and the new strict enforcement of the lead-in-paint rules (under the old law) led various companies and industry organizations to get mobilized to address safety practices. Who among us wasn’t shocked and horrified by the suicide of the owner of a Chinese factory that supplied Mattel with lead-in-paint toys? The horrors of the recall frenzy and everything it entailed led to changes in practice. The remaining hubbub of the new law is just a hang-over IMHO, and does not explain the good recent reduction in recalls. For this reason, I believe the focus of the CPSC and its enforcement activities can and should SHIFT toward maintaining these gains through industry outreach, education, targeted and focused enforcement, and development of new and modern systems appropriate to the changing marketplace. It even calls into question the value of the law’s kneejerk requirement of prophylactic testing, something I am on record opposing.

Health Canada and Bill C-6: Frankly, I have not had time to dig into the Bill C-6 yet but it got a lot of air-play at ICPHSO. Much of the brass at Health Canada was there, and I attended several talks by these professionals. I must say I left impressed with the Health Canada leadership. They were incredibly approachable and engaged. I was not made to feel like the “enemy”. Especially notable was their TONE. They don’t even imply that businesses are populated with bad or untrustworthy people. They repeatedly pledged to work cooperatively with businesses and noted that they have done well for 40 years with voluntary recalls and non-confrontational relationships. Hmmm, could it really be true that you catch more flies with honey than with vinegar?

They also stressed their interest in hearing about “lessons learned” and engaging in real dialogue as the new bill is crafted and refined. They noted some real gaps in their enforcement empowerment under the existing law, which they characterize as outmoded, but then again, they also stressed that these powers are intended to be used only if necessary. What a different tone they struck. They convinced me that they are nice people who mean to be partners in safety with industry. A refreshing change.

The contrast with the last year of CPSC hostility was palpable. It gave me reason to reflect on the course of my own relationship with the CPSC. Interestingly, I was a big fan of the agency until about two years ago. For 17 years I trusted them, I consulted with them, I had no reluctance to work with them and thought of them as partners, I advised friends to trust them, I did not see them as the ‘enemy”. The CPSIA and the feeding frenzy of the last two years sadly eroded that trust. Trust has to be earned, of course. I believe trust in the CPSC can be restored but not without real effort and real action. The Health Canada folks struck the right tone, and we can only hope that the CPSC was listening. Industry and the CPSC do not have to be at loggerheads, and there can be trust (there MUST BE trust). To get there, the “new” CPSC may need to make some concessions, but a path to this worthy karma level does exist. This detente does not need to involve endangering children, either. Health Canada implicitly recognizes that industry has no interest in harming children. Considerable efforts by industry are expended to avoid this terrible outcome. The presence of a few bad or incompetent actors in a massive marketplace of many thousands of companies and millions of different products does not make the rest of the market participants into bad guys, too. This is the notion that must be abandoned.

Final Thoughts: ICPHSO was a great event for networking, off-line conversations and sharing of perspectives. I feel that there is room for more dialogue. We can only hope that some barriers are being broken down, and that we may see some positive surprises (for a change). It is also clear, as Health Canada demonstrated, that a regulator can be effective and non-confrontational at the same time. We know the CPSC has a big stick, perhaps they can stop reminding us with harsh rhetoric and harsh actions (we won’t forget about the stick, trust me). Next on the agenda is a rationalizing of the rules to allow businesses to function economically. Unfortunately, I cannot conceive of this development without a change in the law. To do this, the CPSC must summon up its resolve and TELL Congress that changes are needed. I do not see any way to avoid this. Time has a value, too, so the CPSC leadership must weigh the consequences of waiting – costs are mounting rapidly as time goes by.

I hope I’m not dreaming. This can be done. The coming weeks will reveal a lot about the direction and resolution of the pending issues confronting the business community.

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CPSIA – ICPHSO Toronto Update

CPSIA – Walter Olson Op-Ed in Today’s WSJ

OPINION SEPTEMBER 13, 2009 7:07 P.M. ET A Destructive Toy Story Made in Washington A dubious safety law is hammering small business, but Congress refuses to fix the mess it created in 2008. By WALTER OLSON Last Thursday, the House Energy and Commerce Committee finally held a hearing on the highly controversial Consumer Product Safety Improvement Act, the children’s-product-safety law that took effect on Feb. 10. Chairman Henry Waxman (D., Calif.) allowed a single witness: Inez Tenenbaum, the newly installed chair of the Consumer Product Safety Commission (CPSC), who, like himself, is a strong advocate of the law. Not one of the thousands of craftspeople, retailers and small manufacturers the law has sent reeling was permitted to testify. This law has saddled businesses with billions of dollars in losses on T-shirts, bath toys and other items that were lawful to sell one day and unlawful the next. It has induced thrift and secondhand stores to trash mountains of outgrown blue jeans, bicycles and board games for fear there might be trivial, harmless—but suddenly illegal—quantities of lead in their zippers and valves or phthalates in their plastic spinners. (Phthalates are substances that add flexibility to plastic.) Even classic children’s books are at risk: Because lead was not definitively removed from printing inks until 1985, the CPSC has advised that only kids’ books printed after that date should be considered safe to resell. Yielding to a business outcry, the agency postponed until next February the law’s highly onerous product-testing requirements, which many small manufacturers have said will impose costs exceeding their annual profit or even revenue. It also has postponed enforcement of the law’s effective ban on kids’ bikes and power vehicles, which unavoidably contain leaded brass or similar alloys in certain components. Nevertheless, the law’s latest shock hit businesses on Aug. 14. That’s when the law’s tracking-label mandate went into effect, requiring that makers of childrens’ goods “place permanent, distinguishing marks on the product and its packaging, to the extent practicable.” The idea is to facilitate recalls and make it easier to trace safety problems. The result will be to capsize yet more small businesses. According to the CPSC, the new marks must allow users to ascertain the identity of an item’s manufacturer, “location and date” of production, and “cohort information” such as batch or run numbers. An adhesive sticker on the product won’t qualify as “permanent” since consumers might peel it off, while other provisions of the law greatly discourage the use of paint or similar coatings on children’s products. Makers of wood, ceramic and glass items may therefore need to consider alternatives such as etching and branding. Much of the guesswork arises from Congress’s vague command that products carry distinguishing marks “to the extent practicable.” The CPSC got more than 500 pages worth of comments on the provision from affected parties, many from anguished small-business people. When the small-town owner of a producer of baby carriers in Michigan checked out the availability of suitable printed labels, she found they had to be ordered in minimum sets of 100 (at $30 per set) though her four-employee firm has never produced more than 30 carriers at a time, and often produces single-item “batches.” A South Carolina maker of school assignment sheets and other classroom supplies predicted that if enforced with rigor the law would require changing labels “hundreds of times a week” at its two facilities at “crippling” expense. On July 20, only three-and-a-half weeks before the rules were to take effect, the CPSC announced some lenient if vague interpretive guidelines. The agency said it didn’t think individual marking was required for very small objects and items in sets, such as wooden blocks, and agreed that harm to a product’s functionality or aesthetics might be a possible reason to reject marking as impracticable. So long as handcraft and small-production-run makers keep careful control of components, it seems, they might not even need to set up batch numbering systems. During a “period of education,” at least, the commission expects to avoid penalizing makers who have put in good-faith efforts to comply with its guidelines. That’s a step in the right direction. But the 50 state attorneys general can enforce the law independently, and they have never promised to be reasonable. The CPSC touched off another furor this summer when it confirmed that Mattel, the giant toy maker whose many recalls helped set off the lead-in-toys panic, had qualified for an exemption from onerous third-party (outside laboratory) testing of its products under the law, and would instead be allowed to test in its own in-house labs. (Mattel had successfully lobbied for such a provision.) Of course, most companies do not operate on a scale that will make such an exemption feasible. Why did Congress rush to pass this bill, and why is it so reluctant to amend a law whose burdens fall mostly on products that have never been linked to poisoning? One reason is the skill of antibusiness groups claiming to speak for consumers. Groups such as Public Citizen and the Public Interest Research Group seized on and promoted the Chinese toy panic for their own legislative ends and have taken credit for some of the law’s most extreme provisions. (The tracking-labels provision was added by then-Sen. Barack Obama.) Some of the same groups are active in the coalition now pushing for “traceability” principles in food and farm safety. New mandates being talked of include everything from machine-readable leg tags on backyard chickens to batch labeling of orchard fruit. Before ideas of that sort pass into law, one hopes the farm and food communities will study closely the experience of the Consumer Product Safety Improvement Act. Mr. Olson is a senior fellow at the Manhattan Institute. He’s covered the CPSIA controversy extensively at his blog Overlawyered.com.

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CPSIA – Walter Olson Op-Ed in Today’s WSJ