CPSIA – Unpublished Article Highlights CPSIA Benefits Felt by Testing Companies

Intertek Presses Toy Rules as U.S. Scrutiny Aids Testing Firms

2011-02-02 05:00:02.1 GMT

By Mark Drajem

Feb. 2 (Bloomberg) — When the U.S. Consumer Product Safety Commission last May proposed rules on how toymakers must test their products, Toys R Us Inc., Lego A/S and retail groups urged
the regulators to ease off.

One company took a different tack.

London-based Intertek Group Plc, the world’s largest consumer-goods testing company, argued that the rules should be expanded to require manufacturers to submit to further “engineering, chemical and biological analysis,” to ensure that the design of any toy is safe.

The filing demonstrates one consequence of increased government scrutiny of product safety: For Intertek and other testing companies such as Bureau Veritas SA and SGS SA the very rules that manufacturers and retailers say burden them with undue costs and paperwork mean more business.

“It’s just another opportunity to test,” said Larry Lynn, compliance manager at Learning Resources Inc., a Vernon Hills, Illinois-based maker of educational toys such as the Zoomy handheld microscope. The company estimates its testing costs jumped 10-fold since 2006.

“All the labs have seen a significant increase in the business because of the requirements of the CPSC,” said Rick Locker, a lawyer for the Toy Industry Association in New York. In the first months after a previous law went into effect in 2009, testing costs tripled, he said. While the expenses and
delays have receded, pending new requirements mean “you could see that issue come back again,” he said in an interview.

Back to Edison

Intertek, which traces its corporate heritage to Thomas Edison’s Lamp Testing Bureau, has more than 1,000 labs in 100 countries. In addition to analyzing consumer products such as apparel and toys, it tests or certifies chemicals, foods and minerals. It earned 103.7 million pounds ($167.3 million) on revenue of 652.6 million pounds in the first half of 2010, its most recent published results.

The U.S. testing requirements followed a rash of recalls in 2007 of Chinese-made toys, sold by companies such as Mattel Inc., which were found to contain lead paint. In response, Congress passed legislation in 2008 mandating that all toymakers curb lead and other harmful materials in their products and redouble testing.

While the rules apply to toys sold in the U.S., much of the testing takes place in China and Hong Kong, where many U.S. toys are made. The U.S. imported $25 billion in toys from China in 2009, making it the third-largest category of imports from the country, behind computers and household goods such as clocks.

European Testers

The largest consumer-testing companies are based in Europe. Among the bigger ones in the U.S. are Northbrook, Illinois-based Underwriters Laboratories Inc. and Consumer Testing Laboratories
Inc. in Bentonville, Arkansas. Both are closely held.

Intertek, Bureau Veritas and SGS, the world’s three largest testing companies, all say their revenue jumped after the new toy requirements began in January 2009. Intertek’s revenue from consumer-goods testing in the first six months of that year climbed more than 20 percent, almost double the overall company revenue growth, to 162.5 million pounds.

Its profit margin in consumer products was 33 percent, double that of the company as a whole. Intertek has more than doubled in London trading since the U.S. law took effect, and has risen 45 percent in the past 12 months.

Both Bureau Veritas, based in Neuilly-sur-Seine near Paris, and Geneva-based SGS are bigger than Intertek in revenue from all testing. Bureau Veritas shares have increased 54 percent in the last year. SGS, the world’s biggest overall product inspector, is up 15 percent.

Growth Ahead

While Intertek’s consumer-testing revenue fell 0.4 percent to 161.9 million pounds in the first half of 2010, the company predicts a U.S. requirement that a government-certified, outside testing company examine each children’s product will boost profits again over the next two years.

The new U.S. rule, as well as a European Union initiative in toy safety, “present further opportunities for growth in 2011 and 2012,” the company said in a presentation to investors in August. The Consumer Product Safety Commission voted yesterday to delay the next round of testing requirements until 2012 from later this year as initially planned.

Anticipating an increased need for testing, Intertek has introduced computer software for sale to manufacturers so they can meet the analytical and paperwork requirements the consumer-safety agency is scheduled to implement.

Intertek also is making sure its voice is heard in Washington. It hired former CPSC chief of staff Joseph Mohorovic as a vice president, and paid the firm of former CPSC chairman Hal Stratton $240,000 last year to lobby on its behalf, according to government records.

No Regrets

Gene Rider, president of Oak Brook, Illinois-based Intertek Consumer Goods in North America, said a combination of increased consumer awareness and growing global outsourcing is sparking
demand for Intertek’s testing services.

“One of the misconceptions is that regulation drives our revenues,” Rider said in an interview. “All the rules are asking manufacturers to do is to demonstrate good manufacturing practice.”

As for its petition to the CPSC, Rider said he has no regrets. Most recalls are caused by design flaws, not faulty materials such as lead paint, and those won’t be found without new government requirements, he said.

“It’s all about designing the product to avoid injuries or fatalities,” Rider said.

To contact the reporters on this story: Mark Drajem in Washington at +1-202-624-1964 or mdrajem@bloomberg.net.

Read more here:
CPSIA – Unpublished Article Highlights CPSIA Benefits Felt by Testing Companies

CPSIA – Why the Waxman Amendment MUST BE REJECTED

As we face the dilemma of what to do about the Waxman Amendment 2.0, I want to point out recent quotes by Sam Zell, a Chicago-based real estate entrepreneur. At a recent panel discussion of the Urban Land Institute, Mr. Zell bemoaned how our federal government governs these days: “[What's] going on now is frightening . . . Up until this administration, you knew the rules and had a very stable environment . . . If the current situation is indicative of the next half century, I think we’re screwed.”

Screwed. Mr. Zell’s words ring in my ears.

In the wake of Friday’s contentious meeting with the Waxmanis on Capitol Hill, the Dems announced that a new draft of the Waxman Amendment 2.0 would be released on Monday. In their usual bullying style, Waxman staff issued yet another ultimatum, advising this time that after release of that next draft, we all must “decide” whether or not to support the amendment. If we won’t support it, they say they have better things to do.

The meeting produced no breakthroughs. The fundamental flaws in the law remain unaddressed, and meager goodies meant to partially salve the wounds of a limited number of companies remain the focus of the legislation. The goal of this legislation is to split the group protesting this law, peeling off the ATV’rs, the book industry, the crafters and mass market retailers. None of these groups is a clear winner, either. The rest of us, namely the Small Business community, will be left as roadkill.

A request by the ranking Republican for hearings was rejected on the grounds that there has been too much “jawboning” already. We are apparently all Chatty Cathies. Shame on us.

This reasoning behind the limited intent of the legislation was on display at this week’s Senate Appropriations Committee hearing attended by Illinois’ own Senator Dick Durbin and Maine’s Senator Susan Collins with only one witness, CPSC Chairman Inez Tenenbaum. Don’t watch the hearing on a full stomach . . . . Among other things confirmed by this hearing was that the functional purpose exemption embedded in Waxman Amendment is supposed to benefit a “narrow class” of products (in the words of Ms. Tenenbaum), namely bikes, ATVs and books. Lucky them.

Sadly, the hearing also confirmed the bizarre impression held by members of Congress that the small business issues are limited to crafters, for some reason a particular source of angst. Our company happens to also be a small business, although we no longer operate out of a bedroom or a garage – and we face major issues caused by this law. While I share concern for the tiniest of enterprises, the economic problems don’t end there. In the words of the Chicago City Treasurer Stephanie Neely: “We are truly an economy of small businesses. And it’s important that they thrive. They do a lot of employing. . . on a day-to-day basis, these are people who are employing one, ten, thirty people, and and it’s important that we help them.” Oh yeah, jobs.

The Waxman Amendment should be REJECTED until comprehensive legislation to fix the law is brought to the floor. If we let them pass this law, organized resistance to this law will be greatly diminished, and any opportunity to restore a sensible rule of law may be lost . . . permanently.

Consider the consequences if this amendment is passed:

- Our national safety law has changed from risk-based to standards-based. Mindlessly focused on lines in the sand, the new law’s definition of safety has been completely rubbed out. Without this compass, the world of safety has become an unpredictable, unstable random walk. The Senate hearing included (incredibly) a rehashing of the “dangers” posed by Zhu Zhu Pets, the need for BPA recalls, the potential risk posed by triclosan and the CPSC’s ability and interest in initiating recalls for these “dangers”. Given that we no longer can figure out what’s safe and what’s not, every possible threat brings up discussion of recalls.

Try to run a business under conditions like that.

The risk of this reactive form of government CANNOT BE OVERSTATED. On April 13, Representative Edward Markey proudly sent out letters to 13 companies demanding that they stop using the antibacterial compound triclosan. The list of targets was almost certainly supplied to him by consumer groups. Mr. Markey, for all his power, is not a regulatory agency and does not have authority, resources or expertise to act as a regulator and his consumer group buddies are also not empowered to regulate our markets (thankfully). He is only a Congressman (up for reelection in November, btw). However, nowadays, that’s apparently enough to regulate. I would not want to receive such a letter. I also do not cotton to this style of government.

- The complexity and volume of safety law being spewed out is truly breathtaking and overwhelming. I literally cannot keep up anymore. i can’t read it all, watch it all, digest it all or even write comment letters. [Unfortunately, I still have job responsibilities, too.] On a recent Friday, the CPSC expelled almost 600 pages of new rules – and they were IMPORTANT. They included the new so-called 15 Month Rule – have you read it yet? This 100+ page rule has been written to control children’s products as though we were merchants of death. We are not. The April 15 hearing to review this regulatory morsel was a mere five hours long, so lengthy that the CPSC has only posted one hour of the fun so far. Ironically, this hearing wasn’t broadcast live, as it conflicted with broadcast of the first meeting of phthalates CHAP. Can’t broadcast two mega-hearings at once.

Do you get it yet?

By my reckoning, the rules applicable to generic children’s products is now nearing 2500 pages. If you take into account childcare items and other ancillary matters, the number of pages is probably well in excess of 3000 pages. We are clearly heading to a place where the rules total many thousands of pages. And WHY are there so many rules? It has nothing to do with actual safety. The injuries (one) and deaths (one) from lead in 2007/8, the highest outbreak of recalls in our history, were simply nominal for a country 300 million people.

In any event, you are going to have to know and bear the risk of ALL of those rules. And the new rules keep coming, very often overruling the rules you already mastered. For those you who are tempted to support Mr. Waxman’s Amendment, please THINK about this.

- When the CPSC is done with its rulemaking, it is going into enforcement mode. That was a clear message of Ms. Tenenbaum’s testimony in front of the Senate Appropriations Committee.
Her Compliance initiative will feature another 41 employees at a cost of $4,7 million to catch you violating rules. In addition, the resources of the existing agency will also shift to catching you. If you have read any of my writings about penalties, perhaps you can figure out what that means.

Bottom line, having divorced their mission from common sense or any notion of risk, the CPSC built an ornate and truly incomprehensible set of safety rules that even mega-corporations have admitted exceeds their capacity to manage. For small businesses, not merely the home crafters, compliance will be simply impossible. If those businesses are unable to understand the rules or afford to comply (while staying in business), they won’t be able to follow them, and if the agency is bent on catching them, well, the results will be grim.

If you can’t see this coming – my friend, you are blind.

The Testing and Certification stay ends on February 10, 2010. Don’t expect this Commission to extend it again. The meter is running.

IF you support the Waxman Amendment because you really want the meager relief they are dangling, you will be conceding that you are prepared to endure what I have described. You are not ready for that, and you know it. Support for revising the bill comprehensibly will be greatly diminished at the same time, and even our most steadfast supporters in Congress will give up on us.

As painful as it may seem, you MUST decline to support this legislation. We must, as a community, insist on a true fix, one that addresses the real problems caused by the CPSIA. Nothing short of a total fix will suffice. The ornate rules needs to be simplified and refocused on real issues. The needless self-destructive imposition of blinding costs needs to be reversed. Excessive bureaucratic processes and exemptions only for big industries and big companies must end.

NOTHING that I am suggesting will or should amount to a retrenchment in safety for children or anyone else. It is no “free pass” for industry, whatever that might mean. It is simply means a return to sanity.

That may be too much to ask for this Congress or this Commission. I am not optimistic. Make me a believer this week – REJECT THE WAXMAN AMENDMENT.

Read more here:
CPSIA – Why the Waxman Amendment MUST BE REJECTED

CPSIA – Letter to CPSC Re Continuation of Testing and Certification Stay

Dear Chairman Tenenbaum, Commissioners Adler, Moore, Nord and Northup:

I am writing to strongly urge the Commission to vote to extend the CPSIA testing and certification stay (the “Stay”) originally implemented on January 30, 2009 and due to expire on February 10, 2010. The Stay should be continued for at least one year PAST issuance of final implementing rules and regulations relating to testing frequency, sampling, component testing, re-testing requirements, testing standards for phthalates and ASTM F963, enforcement policies and certification of sufficient laboratories to handle the market’s volume requirements.

The Stay has served its purpose well. When originally adopted in January, the Commission intended to create a pause to allow the issuance of implementing rules and further permit market adjustment to those new rules. The Stay was needed to avoid confusion and chaos in the marketplace. Unfortunately, the task of issuing implementing rules to fully realize the goals of the Stay has not been completed. The incomplete state of the full range of testing rules and related activities (like test lab certification) has prevented full implementation of testing and certification in the marketplace. While many companies are testing aggressively, as the much-reduced toy recall rates attest, the market is simply not ready for full implementation. No one knows what full implementation even means.

Many critical tasks remain incomplete:

• The “15 Month Rule” was not issued when due on November 14th. The stakeholder feedback from this week’s workshop on the “15 Month Rule” has not been received, much less reviewed or digested.
• Comments on the “15 Month Rule” are due on January 11. These comments have not received yet.
• The CPSC has not even solicited comments on the lifting of the Stay from stakeholders.
• Component testing rules have not been promulgated, despite calls by Commissioner Nord in her January 30th Statement on the Stay.
• The CPSC has not issued its phthalates test standard.
• The CPSC has not certified any testing laboratories for the phthalates test standard yet.
  The CPSC has not certified labs for ASTM F963 testing yet.
• The CPSC admits that it has not certified enough labs to handle a full burden of testing for many product classes or safety tests.
• The CPSC acknowledges that fixed testing costs are creating a serious burden on small businesses.
• The CPSC has not defined “children’s product”, “toy”, “play” or “childcare article” yet.
• The CPSC acknowledges that many companies have not acted to fill market gaps like component testing because the rules are not final (or even drafted in this case).
• The CPSC is on its third enforcement policy on lead and lead-in-paint.

Other serious issues relate to the practical impact of the rules on the marketplace. First, the current rules are complex and disorganized, having been released in several places and formats. Even video testimony includes unique statements of agency policy. Some “rules” contradict other rules. Many important industry questions posed to the CPSC remain unanswered months or more than a year later. The task of mastering the vast array of FAQs, letter rulings, rules, exemption requests and so on baffles even the largest companies. Notably, Mattel officials complained of this very problem in a recent meeting with Commissioner Adler and speculated on the practical impossibility of compliance by small companies. The timing of the lifting of the Stay in February will clearly affect small businesses adversely.

Second, manufacturers and their supply chains need time to adjust to new rules. Many of these new rules are not even drafted yet, much less ready to be issued in final form after public comment. This delay is not the fault of the manufacturing community . . . but the consequences could be quite significant for manufacturers if the Stay is lifted suddenly. Most legislative programs that involve a significant change in process or requirements include time for adjustment by manufacturers. It is not unusual for supply chains to receive two or even three years to shift to the new requirements. For instance, U.S. Customs started working on its new “10+2” program in June 2004, issued final rules in November 2008, has been running seminars nationwide for more than a year, and will only fully implement 14 months later in late January 2010 (compliance date). A reasonable lifting of the Stay requires at least a 12 month lead-time from implementation of the last component of the testing rules. Furthermore, to ensure successful implementation, the agency will need to make considerable investments in supply chain education and training during that 12 month lead-time. The agency must also make sure that the final rules are clear, simplified and understandable. Anything less will expose most businesses to the constant risk of conflict with 51 different regulators – regardless of their corporate efforts to comply.

Some suggestions have been made to lift the Stay in piecemeal fashion. We strongly urge the Commission to lift the Stay in the “right way” all at once after offering the regulated community a clean, complete, coherent package of rules, regulations and certifications sufficient to put manufacturers in an adequate position to successfully and efficiently comply with the new rules. Rolling out testing rules one-by-one with a similar ramp-up of compliance will only ensure that no one understands the rules for as long as possible.

The confusion engendered by a piecemeal implementation of the new testing rules will not only constitute a form of regulatory water torture, but will certainly cause regular conflicts between (a) the CPSC and its regulated community, (b) consumer groups, regulators and regulated companies, (c) State Attorneys General and regulated companies, and (d) regulated companies and their dealers/retailers. By lifting the Stay under these uncertain conditions, the Commission would be risking complete market chaos. The misery suffered by regulated companies and industries would be matched by equal misery at the CPSC. Under these circumstances, the agency would face a steady stream of crises caused by testing controversies and confusion without end. I fear that a drip-drip-drip implementation of the testing and certification requirements will render the agency crippled with overwork, inefficiencies and wear-and-tear.

These poor outcomes are avoidable by dynamic Commission action to delay the lifting of the Stay.

Manufacturers of children’s products are good law-abiding citizens who want to follow the law. Until the CPSIA rules are clearly written and implemented, following the law is an impossible task. Please take bold action to support the lawful activities of the regulated community by promptly continuing the Stay for one year past the issuance of final implementing rules and regulations relating to testing frequency, sampling, component testing, re-testing requirements, testing standards for phthalates and ASTM F963, enforcement policies and certification of sufficient laboratories to handle the market’s volume requirements.

Thank you for consideration of my views on this important topic.

Sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.

Chairman
Alliance for Children’s Product Safety

Read more here:
CPSIA – Letter to CPSC Re Continuation of Testing and Certification Stay

CPSIA – An Open Letter on the Testing Stay

To all of my loyal readers:

You may not realize it, but we face a serious crisis right now. Last week, the CPSC held a hearing that discussed the possible extension of the testing and certification stay. The Commission is under pressure to ramp up implementation of the awful CPSIA and this therefore puts the testing stay in peril. Chairman Tenenbaum has heard the concerns of regulated businesses that some advance warning is needed, so Rumorville in forecasting a quick consideration of the question – possibly as early as next week. Commissioner Nancy Nord commented on the implications of the stay in her blog last week. At least one Commissioner, Bob Adler, is openly hostile to continuation of the stay. This is a big deal to companies regulated by the CPSIA.

What kind of disaster would the termination of the Stay in February mean to you? Let me count the problems:

• The “15 Month Rule” was never issued when due on November 14th. The “15 Month Rule” was supposed to address testing frequency, sampling regimes, the need for additional testing, component testing rules, etc. [Component testing rules were cited as critical by Nancy Nord when the original stay was issued on January 30, 2009. How time flies . . . .] There is a workshop to be held on Thursday and Friday this week to solicit feedback from stakeholders. More than 200 people will attend and many more will watch and participate online in the web simulcast. Presumably this feedback needs to be fully digested before the Commission acts on the stay.
• Comments on the “15 Month Rule” issues are due on January 11. For perspective, the original comments on the penalty factors were due in late December 2008, and a second round of comments were due on October 1. The revised penalty factors have not been released, and we are now within days of a full year since the first comment letters were received. With this as precedent, we are clearly MANY months from a completed “15 Month Rule”. Arguably, without a fully articulated “15 Month Rule”, an active testing requirement will be incomplete and utterly confusing.
• The CPSC has not issued its phthalate testing standard.
• The CPSC has not certified ONE phthalates lab yet.
• The CPSC admits that it has not certified enough labs to handle a full burden of testing for many product classes or safety tests. They have not provided any quantification of this deficit besides acknowledging that for bikes, based on current accredited labs, it would take a full year to complete testing on all bikes on the U.S. market. That’s one round of testing only, btw.
• The CPSC has not certified labs for ASTM F963 testing yet.
• The CPSC has not defined “children’s product”, “toy”, “play” or “childcare article” yet, making the application of the rules completely opaque.
• The CPSC has not leveled the playing field, acknowledging that fixed test costs place a disproportionately high burden on small businesses. This competitive disadvantage has no ready solution under current rules.
• The CPSC has acknowledged that many companies have not acted to fill market gaps like component testing because the rules are not final (or even drafted in this case).
• The CPSC is on its third enforcement policy on lead and lead-in-paint. With the enforcement-policy-of-the-week, the agency ensures that companies will have devote considerable resources to relearning the rules that they had previously mastered, leading to confusion and exhaustion. Imposing a further layer of incomplete, vague and unarticulated testing policies and plans will only reinforce chaos as the working standard for the children’s product industry.
• The rules that the CPSC has implemented are so ornate, confusingly worded, scattered among multiple documents, letters, and even video testimony, that only the most obsessive observers can claim an accurate understanding of every nuance. This group would not even include me, even though I have given up sleeping in favor of the CPSIA.

The Commission’s sense of urgency to get this irritant off their plate is creating rumors that they intend to act as soon as the next business day after the workshop. As outrageous as this might seem, it’s really worse – the workshop is not about the stay. The workshop is about component testing, frequency of testing, sampling schemes, when to require additional testing, etc. The CPSC has not asked for comments about the lifting of the stay but at least one Commissioner has reasoned that if it was a “big deal”, the CPSC might have heard from more than the Handmade Toy Alliance. [Apparently, both Bob Adler and Jay Howell believe that the CPSC has had not heard from anyone other than the HTA on the stay, which is certainly not true.] This kind of thinking is worrisome in the extreme.

If the stay is lifted on two months notice with all these rules open, undrafted or in process, utter chaos will break out, not only between CPSC regulators and their regulated companies and industries, but also between (a) consumer groups, regulators and regulated companies, (b) State AGs and regulated companies, and (c) regulated companies and their dealers/retailers. By lifting the stay under these uncertain conditions, the Commission is risking complete market chaos. While this would rain down misery across all regulated companies and industries, there is cold comfort in knowing that the Commission would eat its own cooking, suffering a devastating drop in reputation for taking such an economically insensitive and irresponsible act. It would also create whole new class of crises for the agency to deal with, rendering the agency crippled with overwork, inefficiencies and wear-and-tear. Not exactly a magic pill for good agency morale. If the Commission chooses to take this step, it will be shooting at the agency’s feet as well as ours.

We need your help to stop this terrible step. First, it is ESSENTIAL that everyone attending the workshop SCREAM BLOODY MURDER on the issue of the stay. If the stay is lifted, you will be held responsible for complying with unwritten rules by your customers, your local newspaper, your State AG and the like. Your arguments with that cast of characters will get even more intense and distracting (if that’s even possible). The upcoming workshop is your unique opportunity to make your voices heard.

Second, you need to let the Commission know directly how you feel. Here are the email addresses of the five Commissioners – send them an email THIS WEEK expressing your deep concern over the possible lifting of the stay. Please feel free to cc. me at rwoldenberg@learningresources.com.

Chairman Inez Tenenbaum itenenbaum@cpsc.gov

Commissioner Bob Adler radler@cpsc.gov

Commissioner Thomas Moore tmoore@cpsc.gov

Commissioner Nancy Nord nnord@cpsc.gov

Commissioner Anne Northup anorthup@cpsc.gov

Make your voices heard – don’t let this issue catch you napping. We all have the power to help ourselves. It’s time to take action on behalf of your company, your customers, your suppliers, your teammates. Please help us by contributing your voice to this critical issue THIS WEEK.

Read more here:
CPSIA – An Open Letter on the Testing Stay