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 – Nord/Northup DB Proposal REVEALED

The embargoed counter-proposal on the public database published this week by Republican CPSC Commissioners Nancy Nord and Anne Northup was briefly available online. During its fleeting moment in the sunshine, we were able to capture it and make it avaiable for your reading pleasure now.

The apparent reason that the Powers-That-Be took this proposal down was that Nord and Northup asked you to give “comments” on their ideas. Whoa, that’s across the line, baby! Comments solicited from the public must be authorized by a vote of the Commission, especially if the proposal was not written by a Democrat.

Unfortunately, I have not been able to verify what kind of Commission vote is required to READ public comments.

I suggest you send comments in to Nord and Northup urgently. I think they might even read them!

Read more here:
CPSIA – Nord/Northup DB Proposal REVEALED

CPSIA – What Are We Trying Achieve?

787 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 23 days left until Election Day.

Sean Oberle published a lengthy contemplation of the issue raised in my last post on the relationship between compliance and safety as objectives for regulators and for industry. Mr. Oberle’s essay speaks for itself, so I will not attempt to summarize it. He concludes with the following message: “Therein lies the frustrating and frightening aspect of product safety. Those of you tasked with ensuring product safety – industry rep, consumerist, and regulator alike – are trying to quantify ambiguity amid a chaos of demands … all of them in flux … I don’t envy you.”

Sean, boy are you right!

I think it’s worth discussing a few issues on compliance versus safety since Mr. Oberle devoted so much ink (or electrons) to the topic.

1. The law defines what the CPSC can and cannot do. It’s a shame no one told them . . . .

First and foremost, the CPSC exists because of the CPSA and its activities are governed by the CPSA. Recall authority is governed by Section 15 which limits the agency’s recall authority to “substantial product hazards”, namely a product that “. . . creates a substantial risk of injury to the public”. [Section 12 gives the agency additional powers to seek a court order for "imminent hazards".] In other words, the CPSC does not have the legislative authority to tilt at windmills – it cannot demand recalls for anything unless it presents a “substantial risk of injury to the public”.

Consider recalling 12 million glasses that the CPSC acknowledges in writing are SAFE. Substantial risk of injury?

Consider recalling more than seven million trikes sold over 14 years that caused six children to cut themselves. Children who were under three years of age and should have been under the care of attentive adults. Substantial risk of injury?

Consider recalling more than 400,000 Sarge cars because the little yellow dot on the wheel hubcap violated the lead-in-paint ban, and those dots were produced from two cans of paint. Substantial risk of injury?

One must distinguish between legerdemain and reality, between policy and what the law intended. It is a little focused-upon responsibility of the agency to exercise this judgment. Is it even possible for everything that happens to be a “substantial” risk? We know of cases where a single broken toy without an injury provoked an official investigation at the agency. Fair? Is this an activity that the CPSA authorizes? It is . . . if you are running the agency and you say it is. Arguably, the recall of the 480,000 Mattel Wheelies on September 30 was just such a case. Consumers apparently reported two broken cars with wheels that fell off, and no injuries were reported or implied. Substantial risk of injury? I question that.

2. The notion that we need all this supervision flies in the face of injury statistics. But it sure makes the CPSC look irreplaceable, doesn’t it?

I have already published and discussed ad nauseum the historical injury statistics from lead based on CPSC recall notices – ONE DEATH and THREE UNVERIFIED INJURIES over 11 years (1999-2010). If we were facing such a dire public health crisis, why weren’t kids dropping like flies from lead poisoning over such a long time period of “lax regulation”? If the harm was so widespread and so devastating, why aren’t any of these actual victims known? Names, addresses, photos, case histories?

A friend replied to me recently reasoning that there is no safe level of lead. Okay, I concede that lead can be dangerous but it is absolutely true that lead in present throughout our environment and in the air, food and water that we consume every minute of every day. So since we take in lead from several sources all the time, we know we are building up lead and this leads to several questions. If lead is so harmful at all levels, why aren’t we ALL showing the effect of our cumulative build-up of lead? How can you demonstrate that children’s products contribute meaningfully to the asserted “problem”? How can you prove that “fixing” children’s products will meaningfully change lead blood levels? And if you could prove those things (which cannot be done), how can you measure the return on investment of our multi-billion dollar annual investment? Remember, we can only spend those dollars one time – so is flushing them down the toilet on test reports REALLY our best use of scarce and irreplaceable dollars? How would you measure that?

But the more that the CPSC enforces the law against “bad” corporations, the more they scam the public into thinking they needed the help all along. They talk about recall statistics but never put them in the context of injury statistics. The proponents never compare lead injury statistics to other injury statistics like swimming pools.

[Is a child injured by lead "worse" that a child killed in a pool? It better be - because we are spending billions to prophylactically eliminate the possibility of purported lead injuries while leaving swimming pools open to continue a continuing skein of killings of more than one child each day. That's okay according to our Democrat-run Congress. Tell that to the family of drowning victim - they can take comfort in knowing that their child didn't have lead poisoning thanks to the relentless and remorseless enforcement of the CPSIA . . . .]

So as the regulators abuse and confuse the definition of hazard, they create an atmosphere of dependence. Oh thank you Mother Government for saving me! What would I do without you?!

3. Mr. Oberle reminds us that “Lack of incidents may not mean a product is safe.” And just because you’re paranoid doesn’t mean they AREN’T out to get you.

Mr. Oberle does not take an offensive stance on this topic, btw. He is right, you can sometimes catch something dangerous before it creates harm. Presumably a quicker recognition of the hazard in Magnetix might have prevented injuries. Responsible companies need to always keep a lookout for insights that reveal latent hazards.

On the other hand, injury statistics are a useful tool. If, as is the case for lead, the assertion is that the hazard is widespread and present over a lengthy period of time, injury statistics become QUITE relevant. So, if lead was such a terrible problem in children’s products (putting lead-in-paint aside, long ago banned), injury statistics over many years would reveal a latent problem. Think of the breadth of the definition of “Children’s Products” and think of the years of recall data available for study. We are looking at TRILLIONS of interactions with children every year in the United States alone. Where are all the lead victims? We cannot say that we don’t know the scale of this problem. We have apparently been running an “experiment” on the U.S. public for decades in the period the zealots label as “lax regulations” or “lax enforcement”. If lead-in-substrate were so dangerous, wouldn’t you expect to see SOME evidence of it?

If we must imagine the scale of the danger, can we spend imaginary dollars to deal with it?

4. The compliance hawks want to frame this as a financial question – how much is your safety worth? I think that’s the wrong question – I think the question is “how long do you want to have a job?”

I have already reported that our compliance group is currently up to six people from a historical one or two, and of course, our products are no safer today than in the past. They were always safe and still are, but it costs us a lot more to operate. That’s not good for you or for me.

So how do we pay for all this new bureaucracy? We have not raised prices, that’s impossible these days. We are lucky to have customers and cannot spit in their faces with a price increase. Think of your business – it won’t fly.

We also need to hit profitability targets because we need to remain financable. We do not get money from “money fairies” – we have to deal with a bank, just like you. Our bank prefers to see that we make money. I know that doesn’t seem very civic-minded but I can’t fault them for their POV. In any event, I think it’s elementary that a business needs to make a profit to have the model sustain itself. Therefore, we cannot commit ourselves to ever-eroding profitability. When our costs rise, we cut elsewhere . . . just like you do.

Needless to say, we have skinnied up a lot since 2007. We have a much-reduced headcount and operate far more efficiently. This is how everyone behaved during the financial crisis and the jobs have not returned, in part because the economy remains sluggish. With our rising overhead relating to pointless regulations, what can we do? We must recover the money from activities that are focused on raising revenues. In effect, we are discontinuing activities that create growth to fund activities that are pure costs.

What’s the math behind this? Consider how we recover a dollar of bureaucratic cost from productive activities. If you are already operating efficiently and cannot wring out big productivity gains (as may be the case post-financial crisis cost reductions), then how do you pay for an additional dollar of overhead cost? When you eliminate a “productive” dollar of cost to pay for an unproductive dollar of cost (e.g., you trade a dollar of marketing promotion for a dollar of test costs), it’s not an even trade. No, because your dollar of productive cost creates gross margin whereas your overhead produces no profit whatsoever. Your productive dollar of cost produces gross profit which defrays your operating costs and produces marginal net profit on top of that. Wiping out the dollar of productive cost also wipes out the contribution to operating costs, so effectively, only the associated marginal net profit can defray the unproductive cost. Since profit percentages are generally low for most of us, the ratio of productive cost dollars needed to be sacrificed to cover unproductive costs is probably on the order of 2:1 or 3:1. Hire another QC person and fire the equivalent of two people elsewhere. In our case, we do it by attrition. We just shrink away.

As if this weren’t bad enough, it’s also a recipe for disaster or business death in a worst case. The continued erosion of productive spending to finance unproductive spending has a dramatic impact on growth. Revenue flattens out or stays in a downward trend. It’s no surprise – you are starving your company of investment dollars as you spend at constant levels. You have simply shifted your spending from productive uses favoring growth to unproductive uses that will not create growth. Presumably, those of you with children have discussed the merits of eating fruits and vegetables versus eating potato chips. It’s no different for a business and how it consumes dollars. We will never grow up to be big and strong if Mother Government restricts our financial diet this way.

Sean’s right. I don’t envy you . . . or me. This makes me very pessimistic about the future.

I hope you are mad as hell and won’t take it anymore. In 23 days, you will get to vote. DO IT!

Read more here:
CPSIA – What Are We Trying Achieve?

CPSIA – Schylling Penalty Update

You may recall that I have written about the excessive penalty inflicted on Schylling for old and cold lead-in-paint infractions in the amount of $200,000. These infractions did NOT result in injuries. [As I have noted previously, I have no firsthand knowledge of this matter, nor do I have any direct relationship to the principals involved in this penalty.]

Well well now, some of the more astute observers of the CPSC may have noticed that poor ole’ Schylling did not actually end up paying the excessive $200,000 penalty. No, that agreement was apparently REJECTED in favor of a new agreement signed on May 18. The new agreement, which is virtually identical to the original agreement executed by the CPSC on January 19 (but for a non-substantive paragraph 30 and an order attached at the end) DOUBLES the penalty inflicted on Schylling to $400,000. The agreement was published for comment in the Federal Register on June 2.

Whoa.

So what happened?

It’s not entirely clear. The original agreement was announced by press release on February 4 and notes: “The penalty settlement, which has been provisionally accepted by the Commission, resolves staff allegations that the company violated the federal lead paint ban regarding toys with surface paints containing lead above the 600 parts per million (ppm) legal limit applicable at the time, and failed to immediately report to CPSC information about the non-compliant toys.”

The press release goes on to quote Ms. Tenenbaum sternly admonishing Schylling for violations that occurred between June 2001 and May 2003: “Manufacturers, importers, distributors and retailers have a legal obligation to ensure that no banned products are introduced into or distributed in the U.S. marketplace, and to inform CPSC as soon as they become aware of information that must be reported under our laws. We will continue to penalize companies that do not follow these basic requirements.”

The normal procedure is for the settlement agreement to be published for comment in the Federal Register, but that never happened. Although the February 4th press release states unambiguously that the settlement agreement had been provisionally accepted by the Commission, something derailed the agreement and back to drawing board it went. It’s possible that the Office of Public Affairs somehow jumped the gun with the press release, too. Nevertheless, the time between signing and press release suggests it had to be something else. But what? I cannot find the Public Calendar for this time period but there were probably at least two closed Commission meetings that could have considered this case.

Somebody was NOT happy with the size of the penalty for these old violations. Schylling apparently changed law firms to deal with the revived crisis (two different firms signed the agreements) and four months later, a new agreement doubling the penalty was signed by the parties.

There is no public record of who was unhappy or why. It could have been a Commission member. It could also have been one of the self-appointed protectors of the public good, our good friends the consumer advocates. Who knows? I will be submitting a FOIA request to see what I can find out. Watch this space carefully over the next several years to see if I ever get an answer.

Everyone feeling safe and happy? How about you manufacturers? Happy about justice being served?

Here’s another serious oddity: The statute of limitations for these violations had RUN by the time the agreement was signed. The CPSC should not have been able to assess penalties in this case. Hmmm. Let’s unpack this a bit further. There are really TWO kinds of violations here – (a) lead-in-paint violations, and (b) failure to timely report the violation. On the former, the statute of limitations is apparently quite clear – it had run out. The CPSC had no legal ability to hammer Schylling for lead-in-paint violations that were so old. Bummer for the agency.

Just as the FBI uses the device of failure to report income to put away gangsters like Al Capone, the CPSC has another trick up its sleeve. The other violation, failure to timely report, is in a grey area as far as the statute of limitation goes. Does the statute start to run when the company should have reported . . . or does it run from the date the company finally files a report? This has never been tested in court. The CPSC seems to have seized on this ambiguity to assert penalties against Schylling. To judge by the outcome, the company did not relish litigation with the Federal Government. The old rule that you should never litigate with someone with a printing press holds doubly true in conflicts with the Obama Administration. They clearly know how to print money.

So the CSPC doubled an excessive penalty on a hapless toy company without the means or the will to push back, and set a terrible precedent that could be used . . . against you. The due process rights of corporations are trampled again. Who is protesting? No one.

All this brings to mind the March 3rd Commission hearing on the new civil penalty rule. Commissioner Bob Adler took a very hard position on penalties:

“I do think that the regulated community deserves to know that we are making a ‘pivot’ with respect to enforcing the law [referring to the size of penalties] [28:20] . . . . I certainly agree that we have to have gradations of civil penalties depending on the gravity of the offense. I personally wouldn’t want to tie our hands by saying that the only time we can hit you with a big civil penalty is when there was a death or a serious injury. There may be an immense potential for death and serious injury which just through fortuity did not occur. So what I would like do is to retain the discretion on the Commission to say where you have done something REALLY BAD, and it could be a variety of factors, we are going to impose civil penalties. But there may be situations where what the company did was REALLY BAD but through fortuity, nobody was injured or nobody was killed. [32:00]” [Emphasis added]

Call it the “Adler Penalty Principle”. Schylling’s case did not involve any injuries, but perhaps under unforeseeable circumstances, a child or two could have been injured by the toys. They weren’t but that doesn’t seem to matter under the Adler Penalty Principle. The company also failed to report (see my original blogpost for details). another “crime” needing retribution. One cannot help wondering if Mr. Adler decided this was one of those “REALLY BAD” cases. It’s not clear how such an assessment is to be made. Adler explicitly rejected outcome as a measure of the severity of infractions. In any event, a massive penalty like this is clearly intended to terrorize the regulated community. The niceties of whether the company’s behavior merited this treatment seems to be a secondary consideration.

The penalty policy of this CPSC Commission is completely arbitrary, excessive and intended to be highly coercive. Practitioners in the CPSC Bar have regaled me with stories of the CPSC’s use of the penalty free-for-all to coerce all sorts of unreasonable settlements.

Every outcome can be justified in a world without rules or due process protections. Maybe that’s the pivot that Adler was referring to.

Read more here:
CPSIA – Schylling Penalty Update

CPSIA – Phthalates and Lead Limits in Waxman Amendment

Two minor but important points in the new Waxman Amendment relate to the ban on phthalates and the 100 ppm lead standard looming in August 2011.

Phthalates: The phthalates ban has been clarified to exclude “inaccessible” components, thus reducing the cost of testing for victims of this poorly-conceived law. The definition of “inaccessible” is based on foreseeable use and abuse by children. The term “reasonably foreseeable use and abuse” is defined, lest anyone misconstrue what the Waxmanis want it to mean, and hence new concepts have been incorporated: “breaking” as well as “the aging of the product”. In the past, “reasonably foreseeable use and abuse” has been interpreted to exclude intentional misuse. The term did not typically include aging since most worn-out products are either handled differently or discarded. The changes wrought by this amendment fundamentally alter the common meaning of “reasonably foreseeable” in quirky ways, making a confusing law all the more difficult to understand or apply.

If “reasonably foreseeable use and abuse” includes breaking the toy, it’s hard to know which parts will ever be considered “inaccessible”. Reading this language by its plain English meaning, I cannot imagine what might survive this legislative test. Worthless. I sense another rulemaking process for the long-suffering CPSC.

The amendment also clarifies that the CPSC can revoke this exception to protect the public health and safety. Remember, we are talking about a rule affecting mandatory testing of internal components that may or may not contain phthalates. Can anyone tell me what threats to the public health and safety could POSSIBLY result from an internal component made with phthalates? Phthalates have been in use in this country for more than 50 years – wouldn’t we know about “leaping phthalates” by now? Oh yeah, I’m sorry, i forgot that reasoning and science don’t matter anymore. . . .

Perhaps concerned that the CPSC was running out of things to do, the authors added yet another rulemaking on “inaccessibility” for this new exception. They are free to adopt the definition already set for lead. It’s up to them. Study up, guys! Can’t wait to give comments . . . .

Can you say . . . mania?

It is worth noting that in taking this route to “resolve” the pain points on phthalates, the Dems have chosen to NOT address a pending issue between the CPSC and California. Attorney General Jerry Brown of California sent a hot letter to the CPSC last year indicating his unwillingness to accept testing of the entire product for phthalates ban purposes. In the wake of his letter, the agency reversed course and rescinded its rule permitting a single test on the entire product. This would have been inexpensive for manufacturers.

It is pure fantasy that the Dems would take on Jerry Brown since our Congressional overlords are largely from CA (Waxman, Pelosi, Boxer, Feinstein) and are busy trying to California-ize the rest of the country. Henry Waxman would certainly never preempt Jerry Brown for the national good. Hence the half-a-loaf approach here.

Lead: The Waxman Amendment makes the pending 100 ppm lead standard prospective. This is a tiny bone thrown in our direction. You may consider it a nod of acknowledgement of your pain from the retroactive application of the lead standards and phthalates ban. Nonetheless, this is all you will get.

Again, this is only half-a-loaf. A more thoughtful and helpful change would have been to draw a FIRM LINE under the 300 ppm standard, eliminating the 100 ppm standard altogether as well as the rule ratcheting down the lead standard in the future (forgot about that one, right?). They could have said that the CPSC would be free to lower the lead standard in the future if necessary to protect public health and safety (taking into account the cost and benefit of any such new rules). But they didn’t.

The Waxmanis have no interest in such concessions. Whether out of zealotry or pride of authorship, no amendments will emerge if they reflect any concession of error or misjudgment in the Perfect Legislative Process. Thus, the 100 ppm standard can’t be removed because they put it there for a reason. We must live with it . . . so they say.

Rumorville has it that the Waxmanis are about to deliver a message to leaders of the business community to fall in line behind this “wonderful” amendment or else . . . they’ll get NOTHING. Don’t you love this? And I used to think THEY worked for US. What an idiot I am!

And on that note, I encourage you to read ONE more blogpost about this toxic amendment. I still need to show you how the authors are trying to deceive you and gut the system that regulates safety of safeguards against governmental abuse. That is, abuse of the interests of your businesses. It’s really something to see.

Read more here:
CPSIA – Phthalates and Lead Limits in Waxman Amendment

CPSIA – ICPHSO Update on Public Database

Remarks of Ming Zhu and Chad Tompkins, Office of Info Technology, on the Public Database. This presentation will apparently be posted online at www.saferproducts.gov.

• They are very excited about the database. They acknowledge that they are IT guys, not lawyers. Gotcha.
• Will give access to “far more” product info than previously available. Will provide much faster access to the info.
• Corporate participants can also get incident reports much more quickly and act much more quickly. [This is an obvious set up for an opportunity to judge the speed of your surveillance and response. I think it's best understood as the basis for compelling a certain helter skelter speed to respond. The populace demands it . . . .]
• Chairman Tenenbaum noted that www.saferproducts.gov has gone live, although the database is not yet functional. She says you can track the progress of the database on the website and kick the tires of its new design before its March 2011 rollout.
• They are looking forward to enhanced early detection of hazards.
• Consumers will have access to all consumer reports and manufacturer replies when making consumer product choices. Oooh, this is a good one. I am so glad I gave comments on this database. Why not just let us put our comment letters through the shredder ourselves?
• Will capture info on the submitters and the incident on the site.
• Phase I is to “turn on the fire hose” and phase II is where the agency improves its infrastructure to handle it. They recounted the overall IT improvement plan.
• Will use Social Media to drive traffic. Earlier in the day, Cheri Falvey noted the popularity of the video showing a carrot being severed by a stroller. Cute!
• They want us to talk about our website at our Tupperware parties. Something to think about.

Read more here:
CPSIA – ICPHSO Update on Public Database

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.

Read more here:
CPSIA – ICPHSO Update – Remarks of Gib Mullan, Head of CPSC Enforcement

CPSIA – ICPHSO Update (Remarks of Cheri Falvey, General Counsel)

The annual ICPHSO conference in Washington, D.C. takes place this week, and today is “CPSC Day”. The first speaker was Cheri Falvey, the General Counsel of the CPSC.

She recommends that we “get over” the testing requirements and start to focus on the public database. Hmmm.

Other salient points:

• Stay on testing and certification doesn’t mean you can stop testing. This is a simple point – you need to comply with the standards, and if you don’t test, you won’t know. No shock here, and presumably, not an issue for responsible companies.
• No certification will be required on tracking labels. This is “definitive”.
• Component testing WILL be allowed but final rule is not available. Interim guidance permits it.
• Lead exclusions relieve you from testing. Good news for all you ruthenium users!
• Phthalate testing is ONLY required for “plasticized component parts” and paints. This is news to me – do any of you know where this is written? In any event, this is literally what Falvey said, so tell your testing labs. Please note that this means you DON’T have to test the entire product.
• The CPSC staff is still working on inaccessible components for phthalate tests. That said, you STILL need to test inaccessible parts for phthalates until they figure out how to give you a pass.
• The CPSC has “gotten incredibly positive feedback” on the new public database. This means your silence is being taken as your tacit approval. Happy?
• 48 Federal Register notices have been published by the CPSC since the awful CPSIA was passed. Bureaucrats everywhere take note: that’s some serious paper pushed.
• Mandatory recalls require disclosure of factory identity. Whether this applies to voluntary recalls has not been determined.
• Several rules to come out in the next four weeks: Civil penalties, meaning of “Children’s Products” under CPSIA and the meaning of “Toy” and “Child Care Articles” under the CPSIA. The big issue for “Children’s Product” is how to deal with the “intent” aspect of the rule, and she is focusing on the “primary” intention of the “manufacturer”. The definition of “Toy” may diverge from the ASTM F963 definition. She seems to be hinting that the definition of “Toy” may be BROADENED (“things made for children”).
• They will also bring out rules on “public accommodation” under the Virginia Graeme Baker Pool and Spa Safety Acts, as well as process and procedures for the awful Public Database.
• The Public Database will “increase the pressure” on the agency to “run down everything”. So the Public Database is projected to be used to create a more rigid and unforgiving system, a tacit strict liability safety regime. Happy? Think of the first Tuesday in November.
• CPSC is discussing cadmium with State AGs and is studying the current voluntary standard for cadmium or other heavy metals in the surface coatings of toys. They are looking at whether to drive the standard into the substrate. Book it, Danno!
• Chemical regulation is coming. BPA is an example of the beginnings of this effort. They are looking at whether the rules on cadmium and other metals as a maximum soluble migrated element test (EN71) total content test (a la lead-in-substrate). The agency wants feedback on this.
• Dialogue with State AGs are ongoing and joint efforts are being considered. Not sure if this is good or bad, but it has the potential to reduce the risk of wild cards. That said, the State AGs are often wacky on safety and so there is a lowest common denominator risk here.

I have omitted Falvey’s comments on cribs, drywall and other issues tangential to the issues discussed in this space over the last year.

Falvey didn’t mention anything about the impact of these many new rules on the marketplace. That seems to not be her concern. I certainly hope this doesn’t mean she is oblivious to the issue. I know our CFO and sales reps aren’t. She did articulate a system to put an end to small businesses however, when she urged us to think about tracking labels on everything, integrating certifications, testing, labels. No mention of what this would achieve or why it would be worth the expense (the top priority for devotion of our limited capital) or how small businesses could start up in this environment. Love them Democrats! Think of this as their latest jobs program.

One thing she was seemingly obsessed with is Twitter. She brought up the possibility that we were tweeting perhaps ten times. Does this mean she knows we’re going to tell you what she said, or that she resents it? Not clear. It may have been funny the first time she did it (may . . . have . . . been) but it wasn’t funny as she repeated herself. Intimidating free speech is unbecoming for a General Counsel.

The negatives in her presentation seems to confirm the increasingly political nature of the CPSC where safety is a secondary concern to political winds. Is phthalates such a danger that it needs to be driven out of all children’s products? The provision made its way into the law because of the work of Diane Feinstein, not a well-known scientist. Now this Californiazation effort has taken on a life of its own. Get used to creep in these rules. That’s the conclusion I reach from listening to Falvey.

Read more here:
CPSIA – ICPHSO Update (Remarks of Cheri Falvey, General Counsel)

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