CPSIA – Dan Marshall of HTA is Profiled in WSJ

Dan Marshall of Peapod Natural Toys and Baby Care in St. Paul, MN and founder of the Handmade Toy Alliance, was profiled in Saturday’s WSJ in an article entitled “Small Crafts v. Big Government“.

Let me give you a hint who is winning . . . it has the initials “B.G.”

Here is the body of the article:

This is a story about artisanal cheese and hand-polished wooden toys, organic spinach and exquisitely smocked baby dresses—the burgeoning small-scale economy so beloved by members of the “creative class.” But it’s also about another, much-discussed growth industry: the production of political cynicism among formerly idealistic Americans.

The story begins in 2007, an unusually good year for Peapods Natural Toys and Baby Care, in St. Paul, Minn., and many similar mom-and-pop businesses. Frightened by news that toys made in China contained unsafe levels of lead, customers were looking for alternatives to the usual big-box offerings. Just as organic farmers gain market share whenever there’s a food-safety panic, the lead scare boosted sales of artisanal children’s goods. “People wanted made-in-USA products, and we were the only place in town that had them,” says Dan Marshall, the owner of Peapods.

Vendors offering organic materials and a personal touch seemed poised to prosper. But the short-term boon soon turned into a long-term disaster. In response to the lead panic, Congress passed the Consumer Product Safety Improvement Act, or CPSIA, by an overwhelming majority. The law mandates third-party testing and detailed labels not only for toys but for every single product aimed at children 12 and under.

“It’s everything from shoes to hair bows, Boy Scout patches and bicycles—it’s everything,” says Mr. Marshall. But few people producing or selling artisanal kids’ products even realized that the CPSIA applied to them until months after President George W. Bush had signed it. By then it was too late.

Although big companies like Mattel could spread the extra costs over millions of toys, Mr. Marshall’s small-scale suppliers couldn’t. Unable to afford thousands of dollars in testing per product, some went out of business. Others moved production to China to cut costs. Many slashed their product lines, reserving the expensive new tests for only their top sellers. The European companies that used to sell Peapods such specialty items as wooden swords and shields or beeswax-finished cherry-wood rattles simply abandoned the U.S. market. The survivors jacked up prices.

Mr. Marshall and other entrepreneurs formed the Handmade Toy Alliance to try to get the law changed, without success. “When Ron Paul’s the only guy who votes against something it’s really hard to go back and fix it,” says Mr. Marshall, exaggerating only slightly. Neither political officials nor the mainstream media have been especially sympathetic.

“I’m a lot more cynical than I was,” says Cecilia Leibovitz, who owns Craftsbury Kids, an online shop selling handmade toys and children’s clothes, and also leads the CPSIA discussion group among Etsy.com’s online sellers. Mostly individuals producing one-of-a-kind items, Etsy crafters find it especially hard to comply with, or even interpret, the law’s requirements.

By contrast, consider the recently enacted Food and Drug Administration Food Safety Modernization Act. Like the CPSIA, it establishes expensive new labeling, record-keeping, inspection and reporting requirements. But, unlike the CPSIA, it carves out an exception for small operations.

The reason for the exemption is not that small farms are safer than big ones. It’s that a vocal, established and well-connected interest group didn’t want the law to put small farmers out of business.

Agriculture is a highly politicized industry, and proponents of small-scale farming are organized, ideological, and well represented in the elite media. Buying handmade toys may be nice, but eating produce from the farmer’s market is a quasi-religious ritual of group identity. The exemption is what Michael Pollan, the best-selling author and leading locavore, calls “a very important signal—that this is a different economy and it’s going to play by slightly different rules.”

Other artisanal businesses have gotten a less supportive signal. It’s not enough, they’ve learned, to light a single hand-poured beeswax candle rather than curse the mass-market darkness. Unless you have the right protection, Congress can easily snuff it out.

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CPSIA – Dan Marshall of HTA is Profiled in WSJ

CPSIA – Taking Advice from Idiots

In a recent article entitled “Advice on avoiding a toxic Christmas“, USA Today attempted to take Christmas paranoia to new heights. Naturally, the premise of the article is that companies are criminally irresponsible or venal and certainly can’t be trusted, and consumer advocates and any pediatrician that will talk to a reporter are better people, better informed and by definition trustworthy. In this article, USA Today’s Liz Szabo consults “experts” to reach the following conclusions:

a. “No one knows how much lead people absorb from holiday decorations, says pediatrician Bruce Lanphear, of Canada’s Simon Fraser University.” And if he said it, it must be true. [Of course, pediatrician Philip Landrigan, of Mount Sinai School of Medicine in New York, notes "In the whole scheme of things, is it a huge risk? No."]

What’s the problem with Xmas lights, you say? Lead in the PVC. According to Alicia Voorhiess, a mom with a blog, manufacturers “use it” in the PVC. Right – you got us! Don’t worry, though, after much digging, she found two companies that offer Xmas lights which comply with Restriction of Hazardous Substances (RoHS), a European standard which limits the presence of lead in lights.

Ummm, Alicia, RoHS is a standard to designed to prevent leaching of heavy metals to protect the environment and only applies to electronics. This MEANS that the lead is restricted in the bulbs and fittings, not the PVC. Whatever, it sounds safer, doesn’t it?

The author of the article quotes Dr. Alan Greene (my college classmate) saying that you should handle your Xmas lights with gloves. Why stop there? Moon suits, anyone?

b. Artificial Christmas trees are made of PVC, too, and we know what manufacturers are wont to do with PVC. The solution – use a real tree grown without pesticides.

I find this a most uncreative solution, myself. Here’s a few more:

• Post a picture of a beautiful tree near the spot you might have placed your tree. Keep it away from the fire, however.
• Consider just displaying your Xmas lights in their packaging. No touching!
• Use an artificial tree, but place under a glass enclosure or something air tight like Saran Wrap. Stand at least five feet away at all times.

All of these remedies will protect you from lead. That said, please remember there is NO safe level for lead. And a holy, jolly Christmas to you, too!

Shame that USA Today didn’t focus in on the fact that there is lead in the air, in our water and in our food. OOPSIE! In fact, lead in water is conveniently piped into Washington, D.C. homes for kids to drink in their own bathrooms and kitchens. Nice! Somehow USA Today missed this. Shocking . . . .

c. Candles with metal wicks might also have lead in them, or then again, maybe they won’t. In a blow to poorly-researched newspaper articles, the CPSC apparently banned these wicks in 2003. Who knew the CPSC actually tried to its job before the CPSIA? Somebody should have told Congress.

According to this all-knowing newspaper, candles also contain paraffin, a wax made from petroleum. Not sure why I should care about that, but it sounds ominous. And some fragrances in candles have phthalates in them “which can affect the hormonal system”. Isn’t knowing nothing about science FUN???

The solution – The author of this article actually recommends that you use pure beeswax candles. Happy hunting! They also suggest you “poke cloves into oranges”. Ah, the old clove poking trick! That sounds like fun but IS IT SAFE? This article says oranges have lead in them. NO! And, for an extra kicker, it also says they have cadmium, too: “If the soils contain toxic metals like lead, mercury and cadmium then the consumers may be poisoned as happened in the “Ouchi-ouchi” disease in Japan . . . and similar episodes.” Wow, Ouchi-Ouchi! Scott Wolfson, do you hear a bell ringing? [Eating oranges didn't cause "Ouchi-Ouchi" but then again, researching these things is sooooo time-consuming.]

So there you go. Skip Christmas this year, too dangerous. I wonder if a Festivus pole is lead-free . . . .

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CPSIA – Taking Advice from Idiots

CPSIA – USA Today Highlights Damage Inflicted by CSPIA

Lead testing can be costly for mom and pop toy shops

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CPSIA – USA Today Highlights Damage Inflicted by CSPIA

CPSIA – Video Clips from Q&A at CPSIA Hearing

I am working on getting you access to the entire video file of the hearing, stay tuned. To whet your appetite, however, here are three clips from the Q&A session. Dan Marshall of HTA, Rachel Weintraub of Consumer Federation of America and yours truly fielded some important questions about the excesses of the CPSIA. There are some really good nuggets in here, but my favorite is this exchange between Rep. Joe Pitts (R-PA), Dan Marshall and Rachel Weintraub:

Rep. Pitts: “Let me ask you then, do you think American toy distributors should be able to sell European toys that are compliant with the European [EN71 safety] standard?”

Dan Marshall: “Yes. I don’t think anyone here is going to argue that a toy that’s been tested to EN71 standards is not safe for the American market.”

Rep. Pitts: ” Does anyone disagree with that? Ms. Weintraub?”

Rachel Weintraub: “This is a complex issue, one of trade issues and harmonization of standards and I am not an expert on those issues. But there are reasons why the absorbability concept of lead has been rejected. And for those reasons, and I could get into them, but for those reasons, the U.S. has rejected looking at lead from that perspective.”

[Ed. Note: To quote Ralph Kramden of the "The Honeymooners": "Hamana-hamana-hamana-hamana"]

Rep. Pitts: “So you do not think the EU adequately protects their children?”

Rachel Weintraub: “Umm, no, I’m not saying that but in terms of looking at how the test is conducted, it’s very different than how the CPSC does.”

Priceless!

Enjoy the clips.

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CPSIA – Video Clips from Q&A at CPSIA Hearing

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

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

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