CPSIA – More Details on Schylling Penalty Fiasco

The worm continues to turn on the Schylling penalty. Buried DEEP in the “easy to use” CPSC website are documents relating to the timeline of this penalty assessment.

1. First agreement was signed by the CPSC six weeks after Schylling on January 19.

2. The CPSC Commission met on February 3 to ratify the agreement. The vote is 4-1, with Anne Northup voting no. Northup apparently objected because she felt the penalty was out of line with other penalties set by the CPSC (too high).

[Ed. Note: I have been repeating myself of late when I assert that these penalties are PRECEDENT to be used against YOU. Ignore them at your peril - they are an evolving, common law measuring stick for penalties that may be assessed against you. Fact patterns are very difficult to compare but luckily big round numbers are easy to compare. Schylling may be . . . you next time.]

3. On February 5, in a remarkable and unexplained about-face, Tenenbaum, Adler and Northup voted 3-0-2 to rescind the agreement and send it back for to the staff “for further consideration of the financial condition of the company“. Nord and Moore didn’t vote.

5. On May 25th, the Commission again met to decide the fate of the beleaguered Schylling. By a vote of 5-0, the Commission approved the new, doubled penalty. Here is what the Record of Commission Action says: “The staff alleges that Schylling’s importation, sale, or offering for sale, certain consumer products, tin pail toys and spinning tops, entrusted to or for use by children, violated the Lead Paint Ban, and that Schylling committed these prohibited acts “knowingly” as that term is defined in section 20(d) of the CPSA. The settlement agreement also resolves certain possible liabilities of Sections 19(a)(1) and 19(a)(4) of the CPSA for possible CPSA violations with other products. Section 20(a)(1) of the CPSA, 15 U.S.C. § 2069(a)(1), permits the imposition of civil penalties for the violations.”

As noted in my prior post, there is a question of whether the Statute of Limitations on penalties permitted the assessment of this punishment. The focus of this document seems to be on lead-in-paint violations, which were probably beyond the reach of the CPSC’s legal authority to assess penalties. Schylling paid anyhow.

So what happened? Only Ms. Northup provided a written statement. Her statement begs many questions but does provide fodder for conjecture. Here are some salient quotes:

“As an aside, I personally believe that it is inappropriate and risky for companies to ask political figures—including those who exercise control over the agency via budget or supervisory authority—to try to persuade the Commission to reduce a civil penalty. Our civil penalties are open for public comment for two weeks after publication in the Federal Register, and elected officials can comment upon them at that time. Intervention during the Commission’s quasi-judicial civil penalty decision-making process creates the possibility of conscious or subconscious influence on the fair resolution of cases. It also creates a perception that penalties vary according to the political influence of the violator rather than the severity of offenses. . . . The penalty will deter non-compliance and create the proper incentives to import safe products in the future without crippling the company. I believe Schylling has received a proportionately lower civil penalty than a similarly situated major corporation would receive if it engaged in similar conduct.”

Hmmm. Seems to be a case of foot-in-mouth disease on someone’s part. I admire that Ms. Northup was offended by the “insider baseball” approach apparently adopted by Schylling. The notion that the CPSC and the federal government is some kind of “good ole’ boys” club is both outrageous and not even slightly surprising. Who doesn’t imagine that there are people out there who have the ability to make your problems go away with a simple phone call? It’s nice to see Ms. Northup to take a stand on this. Quite interesting that it is a Republican ex-Member of Congress who was apparently offended. Surprising only because of the press bias against Republicans these days. Good for you, Ms. Northup!

One can imagine an ill-advised or ham-handed conversation that set off this odd sequence of events. This may also be why a new law firm was appointed by Schylling.

I still get the feeling that anger determines the size of penalties by this CPSC. Think Daiso. Since Ms. Northup speaks in terms of deterrence, I presume she is addressing our company and companies similarly situated (like yours). We are supposed to be influenced by these penalties. I sure will be. I can’t try any harder or spend any more time or money on safety. [Consumers, please note our almost unblemished safety record over 26 years - no more time is NEEDED, either.] Unfortunately, we have to spend a few moments every day tending to the OTHER needs of our business, like sales, marketing, product development, order fulfillment, accounting and so on. It’s a shame we can’t spend every waking moment on safety. What a world that might be.

In any event, I will be influenced by the mega-penalties that the angry CPSC is handing out. Given my conviction that there is no more time or money available for “more” safety, how will we be influenced? Well, we might hire fewer employees, develop fewer products, invest in fewer systems to operate our business better, pay lower bonuses, take money out of the business, enter new markets not subject to the prying eyes of the CPSC, and so on. We haven’t decided how to be properly influenced by the incentives so generously provided by the CSPC . . . but it all sounds good, right?

Time will tell.

Read more here:
CPSIA – More Details on Schylling Penalty Fiasco

CPSIA – McDonalds Recall Urged by CPSC – WHY?

The CPSC has put in writing that the Shrek glasses recalled by McDonald’s last week are “non-toxic”. Nonetheless, the CPSC (perhaps the commission itself, as noted in certain press reports) “urged” the company to make the recall.

So now it appears that the CPSC thinks it’s okay to ask a company to recall a product for reasons that it acknowledges pose no safety issue. Why?

Let’s not forget all the expense that this move imposes on the company coerced into making the recall. The law restrict the power of the agency to take this step, in part to preserve the incentive to make “at risk” investments in new products. There’s also that small detail called “due process”. My previous post noted that the CPSC does not have the authority to make recalls of products absent a “substantial product hazard”. This suggests that the CPSC was exceeding its authority in the McDonald’s case. By almost any measure, the CPSC’s actions were inexplicable. Why demand a recall of a safe product?

I cannot answer this question for the CPSC or its Chairman, Inez Tenenbaum. However, here’s a few salient facts to chew on:

1. The Member of Congress (Jackie Speier) that “tipped off” the CPSC about this matter is a Democrat.
2. Jackie Speier represents a California Congressional district (12th) that abuts Nancy Pelosi’s district (8th).
3. Shortly after first being elected to Congress in a 2008 by-election, Speier was appointed by Pelosi to serve as a member of the House Oversight and Government Reform Committee, then chaired by none other than Henry Waxman. Waxman resigned this chairmanship to take over as Chairman of the House Committee on Energy and Commerce.
4. Ms. Speier has publicly endorsed the “black box” requirement for cars that Mr. Waxman supports. She also wants to create a federal law restricting cadmium in jewelry. Her concept of Congressional activism is very closely aligned with Mr. Waxman, another California Democrat and patron of the Democratic majority on the Commission.
5. Today, Speier is a member of three committees. Besides Oversight, the other two committees are chaired by Edward Markey and Barney Frank, two close allies of Waxman and Pelosi.
6. Jackie Speier is running for reelection in one of the most phobic of states, California. The Democrats need every seat they can get in this Mid-Term election.
7. One of the three Democrat Commissioners appointed by Obama was a member of Henry Waxman’s staff for several years (Adler).

And can anyone imagine a Democrat-controlled CPSC telling a Democratic Member of Congress from the San Francisco area that her highly-publicized call for investigation of Shrek glasses because of cadmium was, in fact, unmerited, that the product was perfectly safe and the large corporation responsible for the glasses had protected consumers very well? In an election year with Nancy Pelosi in charge of the House and Henry Waxman directly overseeing the agency?

Nope, can’t think of a single reason why the leadership of the CPSC would urge McDonald’s to recall the safe glasses.

At least the CPSC won’t have to pay the costs of the recall. That’s McDonald’s problem.

Read more here:
CPSIA – McDonalds Recall Urged by CPSC – WHY?

CPSIA – Imagine the Fun, the Commission to Discuss the "15 Month Rule" Tomorrow

The CPSC Commission will be discussing the following matters tomorrow at 9 AM EST:

1. Testing and Labeling to Product Certification – Notice of Proposed Rulemaking (NPR) and Testing Component Parts – Notice of Proposed Rulemaking (NPR)
2. CPSA 15(j) Rule for Drawstrings – Notice of Proposed Rulemaking (NPR)
3. CPSA 15(j) Rule for Hairdryers – Notice of Proposed Rulemaking (NPR)
4. Infant Bath Seats – Final Rule – and Laboratory Accreditation

Please NOTE that the Testing and Labeling rules (the “15 Month Rule” announced on April 1) has been converted into a Notice of Proposed Rulemaking to expedite its completion. Other than their desire to move on to something more interesting to do, why do you suppose the Commission is so hot-to-trot to get this rulemaking behind them?

Could it be that they REALLY want to lift the testing stay on February 10, 2011, as PROMISED? Hmmm.

You can view the hearing tomorrow at this link.

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CPSIA – Imagine the Fun, the Commission to Discuss the "15 Month Rule" Tomorrow

CPSIA – Fantasies of Small Business "Relief" in Waxman Amendment 2.0

I am tired of arguing about whether the new Waxman Amendment features “relief” for small businesses. I have pointed out that the definition of small business in the bill is both absurdly low and represents a super-sensitive trigger for enlarged responsibilities and risk. The notion behind rules protecting small business is that these companies have neither the skills, capital or human resources or the scale to bear the increased burdens and risk of the more sophisticated and demanding rules imposed on big business. These fragile enterprises are supposed to face larger legal responsibilities only when they have grown to be able to handle it (skills, resources, scale).

Can anyone rationally argue that a $1 million business is closer in skill sets, resources and business scale to Mattel and Hasbro than a lemonade stand? Frankly, that’s an idiotic suggestion. Idiotic or not, it was all set to become law as part of the Waxman Amendment.

In any event, the Waxman gremlins that crafted the so-called Consumer Product Safety “Enhancement” (snort) Act of 2010 designed the testing “relief” for the little guys as follows:

“. . . the Commission shall take into consideration any economic, administrative, or other limits on the ability of small batch manufacturers to comply with such requirements and 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 methods to assure compliance with the relevant consumer product safety standards.” [Emphasis added] The legislation goes on to instruct: “The Commission shall work cooperatively with small batch manufacturers . . . using its discretion . . . to impose the least burdensome testing requirements for small batch manufacturers consistent with goals of statute. . . .”

Ummm, what ARE those alternative “reasonable testing methods to assure compliance with the relevant consumer product safety standards”? A recent inquiry to the CPSC reveals that these special alternative testing methods are . . . are . . . are unknown. In fact, they don’t exist. Straight from the horse’s mouth – THE CPSC SAYS THERE AREN’T ANY ALTERNATIVE TESTING METHODS THAT WILL ASSURE COMPLIANCE.

I guess it’s really a shame that the CPSC has nothing to offer the small batch folks. In lieu of these alternative methods, they’ll have to just do it the way Mattel does. Maybe each crafter can open up a firewalled safety lab, after they make appropriate financial disclosures to the CPSC to qualify for this “relief”. And MORE GOOD NEWS – if other testing methods are ever discovered, this legislation will make it possible for the CPSC to let the little guys use them! Hey, that’s SOMETHING, isn’t it?!

It’s so good to know that Mr. Waxman has heard our pain and stepped right up to help us out.

Thanks for nothing, Henry.

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CPSIA – Fantasies of Small Business "Relief" in Waxman Amendment 2.0

CPSIA – It’s Raining Paper . . . .

I have previously made the point (again and again) that the paperwork involved in complying or even understanding the CPSIA has escalated to absurd and previously unimaginable levels. When I recently posted my latest video blog, I noted that MY count of the pages of rules implementing the CPSIA was over 1800. [The CPSC has not promulgated a list of these documents and some of them may not even be publicly available, so that's just my count - no one knows the true number.]

Since then, the paper shower has continued unabated. Here are a few new shovel fulls from your CPSC:

Definition of “Children’s Products”: 52 pages

Standard Operating Procedure for Determination of Phthalates: 8 pages

Proposed Rule: Conditions and Requirements for Testing Component Parts of Consumer Products: 69 pages

Draft Notice of Proposed Rule -Publicly Available Consumer Product Safety Information Database: 172 pages

Proposed Rule: Testing and Labeling Pertaining to Product Certification: 160 pages

Staff Briefing Package CPSIA Certification & Testing, April 1, 2010: 110 pages

Total pages: 571

In addition, public meetings of the Commission on Wednesday morning and all day on Thursday this week will feature major topics of great importance to those companies affected by the CPSIA. These will be Must Watch hearings. Hope you aren’t too busy running your business to stop what you are doing and tune in all day.

There cannot be any rational expectation by the CPSC that businesses interested in the development of CPSIA implementation rules could POSSIBLY keep up with this torrent of paper and hearings. The impracticality of participating in this process means that it is a railroad job, plain and simple. It is intentional, too – overwhelming the regulated community is one way to silence the critics.

Despite the absence of any credible evidence that such a massive expansion in safety rules is justified by injury statistics or any form of safety data from marketplace, the CPSC is in the process of gleefully converting the safety rules governing children’s products into something approaching the Internal Revenue Code in complexity. The compliance burden on businesses will be overwhelming – or simply impossible in a practical sense. As important as Ms. Tenenbaum’s instant death rules are, running our operating businesses will take priority for most people.

With this inundation of complexity, the point of capitulation is upon us. Add to this the known risk of mega penalties. Remember, this CPSC has warned businesses not to dare resist it. The consequences of resistance can be interpolated from the Daiso penalty – $2.05 million for recalls of 698 pieces in five recalls of 19 products over two years without a single reported injury. [Imagine what Mattel or RC2 would pay today under this enforcement scheme. I wonder if my calculator has enough digits for that number . . . .] Ms. Tenenbaum has demonstrated that she will have no reluctance to sic the U.S. Attorney on us for our transgressions without regard to actual market impact, striving to impose “a very high hurdle to jump over to ever get back in the import business again”.

This approach to regulation is an irresponsible act by our government and very damaging to the market. It’s naive and shortsighted, but in the “Father Knows Best” world wrought by Mr. Obama, it’s useless to attempt to reason with the regulators. The promised “dialogue” with the regulated community has been exposed as a sham. It’s hard not to conclude that businesses have now been deemed evil by nature. Otherwise, how do you explain the paper blizzard? Sadly, none of this holds any prospect of making kids safer.

I hate the feeling of shouting in a vacuum. I am not sure what will trigger a revolt against this insanity. Does another work assignment of 600 pages anger you . . . yet? The mountain is at about 2500 pages to read now, and there’s more to come. What outrages will have to take place before you resist?

This may be too urgent to wait for November. Think about how you will deal with penalties for complying with rules you have never read, cannot possibly read and may not even understand. This regulator has already acted to put a minor player out of business. Are you next?

It’s time to act with a sense of urgency. Your customers, your employees, your stakeholders are counting on you.

Read more here:
CPSIA – It’s Raining Paper . . . .

CPSIA – Duplicity and Sleight of Hand in the Waxman Amendment

The icing on the cake of the Waxman Amendment is their sneakiness. As if the problems already reported were not enough, the Dem authors greedily tossed in some real bombs, all using language sufficiently opaque to obscure their meaning. I presume this was some sort of “clever” gambit to escape attention.

You deserve to know more.

First, by way of background, let’s review how we got to this point. The CPSIA was signed into law in August 2008 and howls of pain and protest began immediately. For more than a year, the Dems asserted that the law was perfect and the CPSC would fix the “unintended consequences”. Over time, overwhelming evidence mounted to prove that the law needed to be changed, the CPSC could not fix everything without help and most disappointing, not all the bad consequences were ‘unintended”. After more than a year of bickering, Henry Waxman unilaterally tried to sneak a CPSIA amendment into an omnibus bill in December but failed. Finally, the CPSC Commission was ordered to submit a list of recommended CPSIA changes to the House Appropriations Committee on January 15. The Commission issued its report on time but could only come to consensus on a small handful of items.

In the wake of the Commission report, this amendment was drafted by Waxman’s staffers to “fix” the CPSIA.

But . . . a couple other things happened. First, it is my understanding that Inez Tenenbaum sent a secret list of 20 changes she wanted to the Waxmanis. [I have not seen this document; its existence is an open secret.] So apparently, the Commission report was for public consumption, but the Chairman had her own wish list for private viewing.

The second thing that happened was that the Waxmanis decided (perhaps with the encouragement of Tenenbaum) to use this amendment as a way to further amend the original CPSA (dating back to 1972) and make things WORSE for you and your businesses. These changes were cloaked in seemingly technical jargon at the end of an the amendment. [Connsumer groups had also expressed support for these changes in recent public meetings.]

Let’s look at what the Waxmanis are trying to do:

a. An Open Door to Confidential Information. Section 6(b) of the CPSA provides a notice period before disclosure of information to the public by the CPSC. Among other things, this provision requires that the Commission must give notice to the manufacturer of the disclosure to permit comment and dialogue, as well as the initiation of court actions (injunctions) to prevent the disclosure of such information (this is called “due process”). The Commission is also obligated to make sure “that such disclosure is fair in the circumstances and reasonably related to effectuating the purposes of this Act”. This provision essentially provides a check-and-balance to prevent the unfair coopting of the information disclosure process against manufacturers.

The amendment makes the following change to Section 6(b)(1): “striking ‘its public disclosure’ and inserting ‘initiating the public disclosure’”. Wow. I can tell you’re reeling from the significance of this change.

Okay, what’s the big deal? Is there ANY difference here? Yes, in fact, there is. By changing these three words, Section 6(b) now applies ONLY to disclosures initiated by the Commission. Isn’t that everything? No. What kind of information disclosures might NOT be initiated by the Commission? Freedom of Information Act requests by, say, reporters, plaintiff attorneys or consumer groups.

Uh-oh.

Let me state this a little more clearly – the changes in the Waxman Amendment take away ALL protection of businesses on FOIA requests and allows the (passive) disclosure without prior notice. You lose ALL protection under 6(b) with this tiny change of three words. This would apply to all investigative files (like any of your Section 15 reports) and other confidential correspondence between you and the CPSC. Presumably, if enacted, that confidential material could show up on the front page of the Chicago Tribune WITHOUT NOTICE. [Disclosure of trade secret information is regulated by Section 6(a) and is presumably not eroded by this amendment.]

The relationship between this provision and the Public Database is not clear. It might change (reduce) the flimsy protections already in place, or might provide a way for reporters, plainiff attorneys and consumer groups to get at information that might not appear in the database.

This provision is entitled “CLARIFICATION OF LAW” in the Waxman Amendment. That is a plain, unambiguous LIE. The authors of this amendment think you are a fool.

b. Subpoena Authority Loses Its Check-and-Balance. The amendment changes the rules on subpoenas in two important ways. First, in another “clarification of law”, Section 27(b)(3) is amended “by striking ‘documentary evidence’ and inserting ‘documentary and physical evidence’”. This change does not incorporate any reasonableness standard and thus allows the CPSC to subpoena evidence in private suits regardless of the consequences, and even more importantly, can subpoena inventory as a backdoor way to recall it. This is unfettered government power. Is that a good idea?

The second change requires a little background. The Commission has broad powers to delegate its powers to staff – except for subpoena power. So, if the CPSC wants to issue a subpoena, there is a procedural check-and-balance in place to require the additional step of seeking Commission approval. The Commission, being an entity visible to the public, presumably would be less wrapped up in the emotions of an investigation and be capable of more balanced judgments. It’s a procedural safeguard that protects the integrity of the system but is highly unlikely to slow an investigation detrimentally.

The amendment, however, gives the Commission the power to delegate its subpoena power now. This opens up the possibility of zealous staffers who could use subpoena power to harass or even punish “uncooperative” firms, all outside of public view. There would be no due process protections to rely on, either. This is yet another expansion of government power – but with little demonstrated need. [In other words, what terrible things have happened that could only be fixed with this legislative change?]

c. Information Disclosures in Voluntary Recalls Ratchets Up. The CPSC recently put out a 17 page Federal Register notice of its requirements for Mandatory Recall notices. Memorized it yet? Why not?! Of course, you may be forgiven for feeling you could ignore it, since mandatory recalls are quite rare and usually relate to severe risks to public health and safety. Most recalls are voluntary, which means mandatory provisions are rarely used. In any event, if it ever comes to this, the disclosure probably needs to be more comprehensive and significant.

For those reasons, I did not comment on these rules. They seemed irrelevant to me. G-d forbid such a thing should happen on my watch. Pew-pew, knock wood. I may not have been the only one to look at it this way.

Oops, my bad. The amendment makes these provisions apply to VOLUNTARY RECALLS. Sneak attack? Perhaps. The rules for mandatory recalls includes several obnoxious requirements, making compliance much more burdensome and expensive, not to mention potentially devastating to your business.

d. If You Liked the Baby Slings Warning, You’ll Just Love This Change. Knowing you as I do, I imagine you are thinking “I wish the CPSC could act more impetuously and strike out at entire product classes or industries without doing studies or anything too science-y.” Well, it’s really your lucky day!

The Waxmanis sent you an early Christmas gift with their proposed change to CPSA Section 5(a) requiring the Commission to “promptly inform and educate consumers regarding a class of imminently hazardous consumer products upon identifying or being made aware of such a class of products.’’

And how will this work? “[Whenever] the Commission identifies or is made aware of a class of imminently hazardous consumer products, the Commission shall take appropriate steps to inform and educate consumers through the media, State and local governments, and private organizations regarding such class of products and the nature of the hazard.’’

I believe that the CSPC must go to court to do this now.

I have just a few questions:

- What about due process?
- What are the procedural safeguards?
- What constitutes a “class of imminently hazardous consumer products”? What steps must the Commission take to reach that conclusion? Is reading an AP story enough? [I presume the answer is yes.]
- Who will protect innocent companies inadvertently slandered by your advice? [For example, the baby slings warning apparently related to very young babies or preemies, but the headlines applied to everything in the product class. Too bad for companies making safe baby slings for older babies?]
- When the CPSC jumps the gun and hurts companies or entire industries needlessly or in error, who will pay the damages? Do we get a bailout?

Call me a cynic, but I think this erosion of safeguards is just a mite troubling.

There are probably other ticking bombs in this legislation that I haven’t found or told you about. I think you get the point nonetheless.

Two more thoughts:

1. These four changes significantly erode protection of corporate interests under the CPSA. This makes doing business MUCH riskier and invites a lot of randomness into our business lives. It also makes it tough to believe you can trust the CPSC during a Section 15 investigation or other altercation. If you have a real worry about how you will be treated, do you experience a heightened incentive to cooperate or to hide? Will this raise the rate of disclosure of problems, or provide an incentive to bury the problems?

If disclosure to the CPSC now involves certain pain, why would people bring misery on themselves voluntarily? And when more people start to hide – and are found and punished – will the cries for stricter rules rise or fall? They will rise, as howling consumer advocates will assert that this is “proof” of the venality of corporations. The “only” solution will be even stricter rules and higher penalties. Perhaps we should all be sent to jail preemptively, save some time.

2. I hope you share my utter outrage at the arrogance and effrontery of the duplicity and sneakery of the Waxmanis. Such arrogance is only possible when public officials feel that they are beyond reach. This deception shows clearly how high and mighty the Waxmanis feel, how imperious their attitude. Their anticipated ultimatum to the business community to fall in line behind this amendment is more of the same. It’s rather revealing.

There is no reason to puzzle over disillusionment with our government. The Dems blew it . . . and continue to blow it. This amendment was a chance to build bridges and mend fences. Insead, the Dems go on a rampage.

I am tired of being treated like this by my own government.

Read more here:
CPSIA – Duplicity and Sleight of Hand in the Waxman Amendment

CPSIA – Treatment of Section 101(b)(2) in the New Waxman Amendment

i have attached a conformed version of Section 101(b) reflecting the new Waxman amendment’s proposed changes for your reference.

The dilemma posed by the current Section 101(b)(2) is that exclusions to the lead standard are basically impossible to obtain. There have been several rejected exemption requests and much pleading by Nancy Nord and Anne Northup for changes providing flexibility.

Last December, Mr. Waxman (supposedly with input from Chairman Tenenbaum) launched a sneak effort to implement something called the “functional purpose” exemption to “solve” these issues. The original construct of this exemption applied to situations where the manufacturer could demonstrate that the lead served a “functional” purpose and could not be removed without consequences (not including economic loss). This provision would have permitted ATV manufacturers to assert the need to put lead in certain parts to strengthen the steel, for instance. The functional purpose concept derives from a similar procedure under the EU’s ROHS-WEEE and is also present in the treatment of electronics under the CPSIA.

Waxman’s functional purpose language generated howls of protest as the “solution” solved nothing for anyone. Later, the Commission could not agree on a functional purpose recommendation for its January 15h report, and the idea “died”.

In the new Waxman Amendment which emerged last week, a new version of the functional purpose exemption was introduced to modify Section 101(b)(2). You may find the conformed version of Section 101(b)(2) helpful in understanding how the new provision works.

My thoughts on the new language:

a. The limitations of the exemption process in Section 101(b)(1) are UNCHANGED. In other words, the problematic “any” language is still effective. The new functional purpose exception will be an exception to the exception. Get it?

b. The Section 101(b) structure which limits exceptions to specific products, materials (or component part, in the case of the functional purpose section) remains in place. The language does NOT permit exceptions by product class. You must apply product by product, material by material. The rule even specifies that each component must be individually considered. How many parts are in an ATV . . . .

c. The Commission is now allowed to act “on its own initiative” to exempt “a specific product, material, or component part”. A petitioner may also seek the same relief.

It is hard to imagine how this would take place – will a Commission of five people pick lucky companies or industries for random acts of kindness? Of course, the first products likely to be accorded this “on its own initiative” treatment would be books, ATVs and bikes because of political pressure. [Let's not call that "influence peddling".] More complex product categories, like school supplies (my industry), would be stuck without an effective means to seek exemption.

d. The process, regardless of who initiates it, will be subject to a notice and comment period. This is new and presumably is designed to enable consumer groups to “participate in” (read, slow down or obstruct) the exception process. You have to hand it to the authors of this provision – they found a way to make a slow, expensive and tedious process even worse.

e. The standard for obtaining a functional purpose exception has several parts (all of which must be satisfied) -

“(i) the product, material, or component part requires the inclusion of lead because it is not practicable or not technologically feasible to manufacture such product, component part, or material in accordance with subsection (a) by removing the excessive lead or by making the lead inaccessible.”

This clause has several tricky parts in it. First, the word “practicable” was supposedly chosen because of a Supreme Court decision holding that “practicable” implies consideration of economic factors. So bickering over what “practicable” means is almost certain under this provision. The legal standard will need to be developed to make this provision workable – another nice project for Cheryl Falvey and her CPSC legal department. No guidance has been provided on how much economic pain needs to be incurred before lead removal is deemed not “practicable”. Consider for instance the use of recycled metal for bike frames. When is removal of lead from bike frames not “practicable”? Each frame is presumably different. Virgin metal is available without lead. You figure it out, I can’t.

Let’s not forget that the amendment also uses the term “technologically feasible” as defined in CPSIA Section 101(d). The CPSIA definition omits any reference to economics – intentionally. So the phrase “is not practicable or not technologically feasible” means that it is either too expensive or impossible to remove lead. This makes no sense to me, as the term “practicable” with its advertised meaning incorporates technologically feasibility and makes inclusion of the latter term duplicative. If there is a reason to use both terms, I can’t figure it out. Readers?

In addition to the problematic standard of “practicable”, the petitioners must also demonstrate that it is both too expensive to remove the lead to levels below the standard AND also too expensive to make the part inaccessible. Since the standard for “too expensive” (not “practicable”) is not specified, this language means we must invite the CPSC, the Commission and (due to the notice and comment period) the general public and our competitors into our business processes. That rag-tag lot will get to decide whether the expense of money on the removal of lead from the subject product, material or component is “practicable”. Yes, that’s what it means – you must publicly expose your judgments and economic choices to the Commission for their feedback and approval. Presumably, this would require you to publicly disclose your costs to obtain the “not practicable” decision.

That really sounds like FUN! I can’t see a deterrent to submitting a petition . . . can you?

“(ii) the product, material, or component part is not likely to be placed in the mouth or ingested, taking into account normal and foreseeable use and abuse of such product, material, or component part by a child; and”

Two years ago, I might have thought this was reasonable language. In a world where logic prevails, this language is something that most companies could fairly easily (and probably already do) consider. However, after Ms. Tenenbaum’s testimony about rhinestones on September 10, 2009 in which she speculated about the ingestion of 50 rhinestones by a child, it is hard to predict which imaginary risk the CPSC will fixate on. Recent events suggest that “foreseeable” is now in the eyes of the beholder.

“(iii) an exception for the product, component part, or material will have no measurable adverse effect on public health or safety.”

This third plank in the exception standard is supposedly meant to connote that contact with a subject product which produces less than 1 micro-gram per deciliter change in blood lead levels (the smallest increment for measuring blood lead levels today) is okay. It does not say so explicitly but wink-wink-nudge-nudge, that’s what it means.

Unfortunately, the precision of this “standard” promises more than it delivers. There are few identifiable lead threats in children’s products that could foreseeably cause this kind of change in blood lead levels other than lead-in-paint (probably above 90 ppm, too) and lead in jewelry. So if each case must be argued and decided, isn’t the standard and the process some sort of sham? I think the difficulty and expense of proving the negative in this case is a strategy by the Dems to keep their ridiculous standard in place while appearing to be magnanimous in offering an exception process. Few companies will get exceptions.

Sadly, fear does not allow for the use of science. There’s a lot of hypocrisy here, too. Apparently, the risk from lead in handlebars of a bike is far more worrisome than lead in our air, water or food supply. Likewise, it must be far more serious than, say, lead-in-paint on cars and boats (both of which are perfectly legal). And for those cases which this law obsesses over, lead-in-substrate in children’s products, the zealots cannot agree on how to measure what’s safe – mainly because they don’t know. Let’s not forget that Commissioner Bob Adler wrote a lengthy paper )with 89 footnotes) on how there is NO safe level for lead. The non-scientists who now control this issue have even drafted a MOVING target for safety – it is dependent on what we can measure. If we can measure lead blood levels more precisely in the future, the exception standard will automatically tighten. Like a noose.

f. The Commission can require a warning label for those items afforded an exception under this strict standard. What? Are they going to warn us that the product is safe? No, it’s Proposition 65 creeping into federal law – apparently, the Dems think that the Commission may decide to warn the public that they weren’t able to rid these items of lead, even though they have determined in an investigation that the products are safe. Again, since the zealots think “there is no safe level for lead”, it is very scary for them to concede that anything could be safe if it contains lead. This is a belief system, stop trying to figure it out.

Btw, have any of you ever tried selling a children’s product with such a warning label? At our company, we would drop such an item rather than try to sell it. No one will buy such a product for their child or for use in their classroom. The imposition of a Prop. 65-style lead warning on a children’s product is a tacit ban.

g. The petitioner has the burden of proof in applying for an exception under this provision. That means a small business has to make the same case as a Big Business. Why not simply say that small businesses can’t have an exception under this provision?

The petitioner may utilize data submitted by other petitioners in making its case, but there is no requirement that such data be made publicly available. In recent cases, the submission of the petitioners has not always been made public.

h. The language allows a sunset date to be imposed for the exceptions, even though the very terms of the exception requires that the CPSC conclude that public health and safety will not be imperiled by sale of the product. I am made to understand that the motivation behind this illogical provision is that exceptions should not last forever. Why not? I think it’s the belief system again, or it could be some sense of unjust enrichment. In any event, the CPSC would be empowered to force the continued gratuitous erosion of a company’s cost structure for no particular reason other to remedy the offense of an exception to the rule.

i. The exception will have retroactive effect unless otherwise specified by the Commission. This sounds good . . . other than the fact that we have been shooting our businesses in the foot since August 2008. The ability to give retroactive effect to exceptions might have been valuable two years ago. To put it in an amendment now, two years too late, is an insult to the regulated community. Alternatively, it is yet more evidence of the absolute inability of Democratic legislators to even SIMULATE understanding of business issues under this law.

Next up – discussion of the Resale Shop Exception under Section 101(b)(3).

Read more here:
CPSIA – Treatment of Section 101(b)(2) in the New Waxman Amendment

CPSIA – CPSC Commission to Vote on Civil Penalty Factors

According to the latest CPSC Calendar, the Commission is due to vote on the Civil Penalty Factors “final rule” at their weekly meeting on Wednesday, March 3 at 9 AM EST. [The webcast can be found at this link.] This long-awaited rule has been the subject of comments on two occasions (once before any rule was produced and one after the first draft was released). The most recent draft was the subject of considerable controversy and created the potential for great unfairness to anyone subject to the awful 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

CPSIA – Commission Report to Congress on CPSIA Changes

The CPSC Commission issued its January 15 Congressional report on recommended changes to the CPSIA last Friday. As promised by Inez Tenenbaum, the Commissioners were afforded the opportunity to present individual statements to accompany the Commission report. Four of the Commissioners (Tenenbaum, Adler, Nord and Northup) chose to present their own statements. Adler also promised a supplemental statement on the subject of lead, which has not been released yet to my knowledge.

The Report and the accompanying statements make interesting reading. I do not propose to summarize the documents here, but have set out a few thoughts:

a. The Commission’s Consensus is Important. The Commissioners made a big effort to speak with one voice in the report. While they certainly did not agree on everything, their effort to achieve bipartisanship agreement in the report sends a good message. The Commission needs to work harder to find this middle ground more consistently and less fractiously. There is NO JUSTIFICATION for turning safety into a game of political football. If the Commission can work better together, confidence in their administration will grow and extremes will be avoided.

The prohibition against full Commission meetings in private (the Sunshine Act) is a hidden factor in the report. Since the Commission ill-advisedly voted down a public discussion of the report, the Commissioners were prevented from meeting in groups of three, four or five. When you read this report, imagine how it might have read if the five Commissioners were allowed to sit in a room and duke it out. It might have been a better document, more complete and more prescriptive.

b. Where’s the Functional Purpose Exception??? The report is as interesting for what it DOESN’T say as for what it does say. Most importantly, the functional purpose exemption is GONE. Rumorville has it that the functional purpose exception became more and more ornate and complex as the Commissioners struggled to write a recommendation until even its most ardent supporters had to concede that it wasn’t going to work. This was set up to be Waxman’s excuse to do nothing or nearly nothing. It’s not there anymore.

Too bad for Henry, huh?

c. The Commissioners’ Statements Reveal that Common Sense is Divided on Party Lines. The Commissioners’ statements reveal a lack of communication within the Commission. I know they were talking but it appears that some messages weren’t being heard. The statements of the two Democrats (Moore apparently did not prepare a statement) were straight out of Central Casting. Disappointingly, Ms. Tenenbaum chose to repeat a fairy tale about the law’s origins:

“In response to the flood of dangerous imported products, which were involved in tragic fatalities, poisonings and injuries involving children, Congress closely examined the needs of the CPSC and the statutory changes necessary to enhance the regulatory safety net maintained by the agency. Congress spent considerable time reviewing these needs and continually consulted with the agency’s leaders, staff, consumer groups, and the regulated community in order to carefully craft the proper legislation to achieve this end. Seeing a clear need to reauthorize and reinvigorate CPSC with new energy and purpose, Congress passed a sweeping law.” [Emphasis added]

The re-characterization of what was essentially an anger-fueled legislative mania into some sort of group hug is apparently the Democrats’ effort to justify a passive or inert approach to fixing the law. In addition, both Tenenbaum and Adler repeated the misleading togline about the dangers of lead, although I don’t think that’s news anymore. It’s also not really relevant to discussing the issues under the law – and their persistent refusal to acknowledge this is disappointing.

The Republicans (Nord and Northup) delivered rational and balanced statements that calmly and appropriately diagnosed the issues with the law. They are cognizant of the excesses of the law, the dramatic impact on both the regulated community and the hobbled agency itself. The Reps make no effort to prop up the CPSIA – you know, the law passed by REPUBLICANS AND DEMOCRATS ALIKE. There’s no pride of authorship by the Reps – to their credit, these Commissioners seem to be trying to restore a rational system of law and regulation designed to provide appropriate levels of safety at an affordable cost.

I am tired of the Dems on the Commission simply being good Dem soldiers rather than committed stewards of safety. The ANGER expressed in Massachusetts today is a strong message to the Dems – America is sick and tired of government aggressively inserting itself into every aspect of our lives, including by way of the CPSIA and its precautionary principle. See tonight’s Wall Street Journal for more details. It will be interesting to see if Massachusetts impacts the CPSIA amendment process.

d. Does it Matter What’s Safe Anymore? I am struck again by the absurdity of the debate over lead. As I see it, the debate is over which incidents of lead that are illegal should be permitted. This is different from defining what constitutes safe lead. This used to be a simple decision. Now the premise is that there is NO safe level of lead. Is that really TRUE?

Think of ALL cases where lead is found in children’s products. Now separate them into two piles, one that is labeled “safe” and one that is labeled “not safe”. How do these piles compare to the piles made by the CPSIA, FHSA and CPSA? Well, that question never comes up in the debate. The big question is about compliance with law, not safety.

This is not a rational system for administering risk. First of all, if lead were so deadly that it needed to be eliminated in all cases in all children’s products, then presumably we would be even MORE motivated to remove it from our food, water and air (not to mention dirt). After all, we consume food etc. and the lead in the food gets into our bloodstreams. But this isn’t an issue today because the CPSIA didn’t make it illegal – and apparently the CPSC does not feel lead is dangerous in food, water or air (or else it would have acted on the threat under the FHSA). It gets worse – consider that lead paint is illegal on children’s products but not on cars. If lead is so dangerous and mere contact with lead-in-substrate is so dangerous that it is utterly intolerable in a modern, sophisticated society likes ours, then why does the CPSC permit kids to touch or even ride in cars? After all, the zipper pull on a kid’s golf bag is illegal if it has a dot of lead paint on it. But a whole car dripping with lead paint, that’s fine.

The answer – it doesn’t matter what’s safe when it comes to lead, it only matters what’s legal. The Dems prefer to portray what’s illegal as unsafe, and imply that what’s legal is safe. [Call this the All-Knowing Congress argument.] It’s hard to take this seriously. It’s time for them to drop the precautionary principle pretense and start being accountable for the rationality of their regulatory positions. If lead is a crisis as they say, then please ban everything with lead in it, including our entire food chain. I am ready to be safe, finally.

e. What Has Been Accomplished in the Last 18 Months??? Does it bother you as much as me that so little has been accomplished by the last 18 months of chaos? The many steps and achievements documented in the report and statements might make a bureaucrat blush with pride but how have injury statistics changed? [Recall statistics are a poor measure of the effectiveness of safety rules.] How much did we pay as a society for these extremely meager achievements? If you add in the cost to our society of a crippled safety agency, the price we paid is staggering. The waste is sickening. It’s not possible for me to read the recounting without a sense of loss.

f. Does Anyone Else Want An Exemption? Umm, Yeah! It’s important to note that the low number of exemption requests does not reflect a lack of interest in exemptions. Exemption requests are very expensive to prepare and are complex. In many cases, the exemption request will obviously be rejected or is too broad to state in any compelling way. For instance, educational products span so many categories that it is impossible to state a coherent exemption request. More importantly, the real inhibition to filing is a fear of losing the request. For many companies, it just doesn’t pay to ask for permission – they prefer to beg for forgiveness if a problem ever arises.

Anne Northup correctly notes in her statement that it is bad law to require that regulated companies line up for exemptions. She is not arguing on behalf of the companies – she focuses on the huge burden these requests place on the CPSC and the Commission. She is TOTALLY correct. The idea that we should have a safety system based on exceptions would only appeal to the IRS. Somebody needs to listen to Northup on this point.

g. The Report Whitewashes Ineffective Help for Resale Shops. It is a sad joke to assert that coaching resale shops with the CPSC’s guidance document and a few workshops is somehow a solution to the massive problem caused by the CPSIA. For one thing, it is quite clear that this message has not reached its audience. The CPSC’s approach is inherently inefficient and unlikely to bring relief to many affected stores. A better law is the necessary solution. Second, it is apparent that the CPSC’s efforts did not relieve anxiety – the stores are still dropping children’s items. This lack of accountability begins to look cynical when you consider that only last week, Scott Wolfson was warning people not to sell cheap jewelry on auction sites or in resale shops. Hmmm, that sounds very reassuring, doesn’t it? Problem solved!

If the Commission truly cares about resale shops, then a more effective approach (including a communication strategy) needs to be implemented.

With the issuance of the report and statements, the shuttlecock has been batted back to Congress. The next step is to work on a long-needed amendment of this awful law. Stay tuned.

Read more here:
CPSIA – Commission Report to Congress on CPSIA Changes

CPSIA – Report on the CPSC’s Recommended Changes to the Law

There has been an eery silence emanating from Bethesda over the upcoming report due to Congress on January 15 listing needed changes to the CPSIA. As you know, last week the Commission voted 2-2 to NOT discuss their report in front of you. So we’ll get to see it when it’s final, done and cannot be changed. The People Have Spoken!

Late last week, I published my recommended changes to the law and my list of other changes to process and procedure at the CPSC that I believe are necessary to restore rationality to the safety law governing children’s product safety. It is important that you also express your views on this topic to the Commissioners. There isn’t MUCH time left to influence the Commissioners but it’s worth a try. You are welcome to use my list for inspiration or as a shortcut.

The Commissioners’ email addresses are:

Inez Tenenbaum: itenenbaum@cpsc.gov
Robert Adler: radler@cpsc.gov
Thomas Moore: tmoore@cpsc.gov
Nancy Nord: nnord@cpsc.gov
Anne Northup: Commissioner_Northup@cpsc.gov

Thank you!

Read more here:
CPSIA – Report on the CPSC’s Recommended Changes to the Law

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