CPSIA – ICPHSO Update on Strategic Plan Panel Discussion

Next up (after audio problems are “fixed”) is the panel discussion on the Strategic Plan. The panel includes:

• Ken Hinson, Executive Director (moderator)
• Matt Howsare, Chief of Staff to Chairman Tenenbaum
• Cheryl Falvey, General Counsel, CPSC
• Jay Howell, Director, Hazard Identification and Reduction, CPSC
• Richard O’Brien, Director, International Programs and Intergovernmental Affairs, CPSC
• DeWayne Ray, Dep. Dir., Hazard Identification and Reductions, CPSC
• Marc Schoem, Dep. Dir., Office of Compliance and Field Operations, CPSC
• Neal Cohen, Small Business Ombudsman, CPSC
• Scott Wolfson, Dir., Information and Public Affairs, CPSC

Update on rulemaking (CF): Final rules issued in 2010 – crib rule, database rule (launching on March 11), “Children’s Product” rule and the civil penalty rule. Also, the mandatory recall rule, infant walkers and bath seat rules.

Draft rules: bike standard, two 15(j) rules on substantial product hazard list (drawstrings and hair dryers), component rule, 15 Month Rule and bassinets.

Rules coming up: cadmium rule (deferred for six months), toddler beds, lead paint and HD-XRF test methods, bed rails, bunk beds, swings, bicycle rules, testing and certification rules, 15(j) rules, 100 ppm lead standard, and notice of proposed rules on play yards and another “safe sleep” initiative category.

[One thinks that after they regulate bunk beds swings, bikes and so on that all the fun will be gone from childhood, bringing to mind an effective cure for cancer (killing the patient). Well, at least kids can still play with rocks . . . . OMG, rocks have lead in them!]

JH: They intend to double the number of rules in place in 1990. [Nice! More rules, more safety!] Rule-making activity is “abating” but have a growing compliance and enforcement workload. The burden is “shifting” to the compliance team. Working with all stakeholders to make sure they are compliant. [Safety is not the word used but instead "compliant". The notion is that compliance is tantamount to safety. Anyone want to discuss this topic?]

Why did the agency take such a “collaborative” approach to the Strategic Plan? MH – The “comprehensiveness” of the collaborative process was incredible. Went through all sorts of “painstaking” efforts to interview so many people in this room. [Perhaps Matt is referring to Raachel Weintraub - who else needed to be consulted, after all?] The Strategic Plan reflects the “consensus” view of the agency’s strategy. The “collaborative” process was designed to guarantee “buy-in”. The Chairman’s focus under the Strategic Plan is the preventative portion. Spoke of Neal Cohen’s area as a focal point. [There's an insight - we small business people are the problem! Thank heavens Neal Cohen can educate up.]

MH also points to “boots on the ground” in China as another feature of the CPSC’s efforts to prevent disaster. He did not say what kind of boots those might be. Jackboots?

Tell us about small business ombudsing, Neal! NC: Start by listening. There’s a lot of confusion, and there are ways to use the work done by the CPSC “to your favor”. [Hmmm, I'd like to know more about that.] NC: I’m not a policy maker at the agency. [RW - that's the rub, ain't it?] NC: I am spreading the word about the problems within the agency. NC has his own website (www.cpsc.gov/sbo). Putting out “plain English” documents to explain the law and the rules. Three tips on compliance: (a) know your product and your supply chain, (b) proactively educate your suppliers, and (c) don’t “assume”. [This is sound advice. It doesn't protect you from anything, however. Were you to follow Neal's advice, it would count for NOTHING if you get recalled. It should but it won't.]

All kidding aside, people have nice things to say about Neal. What he can achieve remains to be seen, however. I have yet to hear about him making problems go away. Most of the problems people are dealing with are nonsense, so if he could move heaven and earth, I think I would start to hear about him going to bat and getting something done for these beleaguered little companies.

International (RO’B): No sign of harmonization efforts in Mr. O’Brien’s presentation. He is leading the effort to get other world regulators to join us in our safety mania.

Scott Wolfson’s turn – “What about consumers and how do they fit into this?” SW: Pool Safely Initiative shows what we can do if we have money to get our messages out. [How have injury statistics changed, Scott? WS: Won't know for years. . . .] Concerned about “sustainability” ($$$). We’re hitting the road to get the message out. Have built a network to get info out. Working on a new logo.

Scott did not update us on Aston Kutcher. Maybe during the Q&A . . . .

RW: This all sounds good as far as it goes. Of course, he does not discuss the impact of OTHER decisions his office makes, like communication of “hazards” like cords on baby monitors or recalls of Shrek glasses. It’s all well and good that the CPSC has a couple billboards up about pool safety, but what about the mania on lead and their communication of those hazards?

Why does the CPSC need to train manufacturers? Why is it the agency’s role? JH: There are various levels of sophistication out in the marketplace. To drive the prevention effort, need to make sure manufacturers understand the rules of the road. [RW - this is one of my original suggestions for the agency in my first speech on the CPSIA. Failures in outreach is one of the main causes of the storm behind the CPSIA.]

JH: We are focusing our efforts around priorities to increase impact and to avoid dilution.

Jay Howell usually sounds pretty sensible. It would be great if the agency sounded more reasonable more of the time. Perhaps Jay can be an agent in that process.

MS: Trying to reduce the time taken to negotiate recalls. [RW: Two-edged sword here, since the concept of due process is flying out the window with the justification that they are "saving lives".] MS: If you’re right, you’re right – just convince us. Also need to get information out to consumers quicker.

RW: This is agency policy talking, probably not Marc Schoem.

SW: We are going out on all platforms, like Twitter, news media, Facebook, blogs – multiple times. MSNBC is doing a monthly “round-up” of recalls.

There was time for only two questions from the audience. Filibuster! I got to ask one of them. Here’s my question:

“I have testified five times at the CPSC, three times at your invitation. I have repeatedly told you that your policies and the CPSIA together are killing small businesses, killing products and killing markets. Last week, the bicycle industry testified that large bike manufacturers have reduced their product lines and small companies have left the market. Given this testimony, what do you think the agency’s responsibility is to small business and how does the Strategic Plan relate to protecting the right of small business to sell children’s products?”

KH: That’s why we have had such a collaborative process in the Strategic Plan. We need to identify hose issues and figure out a solution. RW: But we’re dying now. KH: We do what we do and violative products have to come off the market.

Read more here:
CPSIA – ICPHSO Update on Strategic Plan Panel Discussion

CPSIA – Mothering Magazine R.I.P. – Thanks, CPSIA!

Last week, Mothering Magazine announced that its print edition was kaput. [Thanks to the HTA for alerting me to this event.] This 35-year-old publication ceased publishing as a magazine for all the usual reasons . . . and one more: “Many of our advertisers have been hard hit by the economy. Toy manufacturers have been burdened by the cost of complying with the new regulations of the Consumer Product Safety Improvement Act (CPSIA). Many of our sling and baby-carrier advertisers experienced declining sales or went out of business altogether in 2010 as a result of loss of sales due to the Consumer Product Safety Commission (CPSC) recalls of infant carriers.”

More anecdotes, but sadly no evidence. Just another dead enterprise blaming the innocent and innocuous CPSIA for its troubles. I wonder if there’s a connection there somewhere . . . .

Read more here:
CPSIA – Mothering Magazine R.I.P. – Thanks, CPSIA!

CPSIA – Committee Press Release About CPSIA Hearing

FOR IMMEDIATE RELEASE
February 18, 2011

CONTACT: Press Office
(202) 226-4972

Commerce, Manufacturing, and Trade Subcommittee Examines Unintended Consequences of 2008 Law on Jobs and Small Businesses

WASHINGTON, DC – The House Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade, chaired by Rep. Mary Bono Mack (R-CA), Thursday convened a hearing to examine the unintended consequences of the Consumer Product Safety Improvement Act of 2008 on American job creators including small businesses and thrift stores. It reviewed the impact of the recent legislation on Consumer Product Safety Commission (CPSC ) resources and its ability to protect consumers. In addition to several small business owners, CPSC Chairman Inez Tenenbaum and Commissioner Anne Northup were also among the witnesses.

“As a mother, I have very strong, passionate feelings about protecting all children,” said Bono Mack. “But as a former small business owner, I know all too well how unnecessary regulations – even well intentioned ones – can destroy lives, too. This is a rare opportunity to put aside the differences that often divide this great body and put our heads together to make a good law even better.”

Rick Woldenberg, the operator of Learning Resources, Inc., a small business making educational products and educational toys, testified on the many difficulties associated with the new, burdensome requirements.

“Children are our business and the safety of children is our number one priority,” said Woldenberg. “The CPSIA, unfortunately, purportedly to protect children from vaguely-defined dangers, has dramatically impacted our business model, reduced our ability to make a profit and create jobs, pared our incentive to invest in new products and new markets, and generally made it more difficult to grow our business. Given these considerable sacrifices, I wish I could say the law made our products safer, but the fact is that it hasn’t. Our company, Learning Resources, Inc., has recalled a grand total of 130 pieces in a single recall since our founding in June 1984 (these products were all recovered from the market). Our management of safety risks was highly effective long before the government intervened in our safety processes in 2008. The government’s ‘help’ has not raised our safety game but it has reduced our bottom line and cost some of our employees their jobs.”

CPSC Commissioner Northup testified on the exorbitant costs to small businesses, stating, “In March 2009, Commission staff reported that the economic costs associated with the CPSIA would be ‘in the billions of dollars range.’… Small businesses without the market clout to demand that suppliers provide compliant materials have been hit the hardest. Many report that the new compliance and testing costs have caused them to cut jobs, reduce product lines, leave the children’s market completely, or close… According to a brief small business analysis by our agency, the cost to test one toy could range from $3,712 to $7,348 – not taking into account that the toy will likely change to stay competitive for the next Christmas season, or sooner, and every material change triggers a whole new set of tests.”

Jolie Fay, owner of Skipping Hippos, which makes handmade children’s ponchos provided some emotional testimony, stating, “Our businesses were born from the desire for safe children’s products. We make them with care and attention, most often from materials purchased from our local craft stores. Our dreams were to build heritage products that will be cherished and remembered, and saved for generations… The CPSIA makes no provision for these businesses to be able to operate.”

Fay went on to elaborate on the challenges that confront many small businesses. “For example, at the Hollywood Senior Center in Portland, there is a small retail shop. The items in the shop are exclusively made by their members. Handmade trucks and planes are made by retired loggers in their 70’s and 80’s. They are on an incredibly small fixed income and would never be able to afford a single ASTM laboratory test. The workmanship that has developed over a lifetime helps contribute a small, but very substantial supplement to their monthly income. These projects keep them active and give them meaning to each day. These are artisans, but this law makes them criminals.”

Chairman Upton, who pledged to address the problem, stated, “We all care deeply about our children and their safety – nearly every one of us on this dais has a child or grandchild. No one wants to put little children at risk. But this law may be doing exactly that. By dictating so much of the Commission’s work, in too many cases we have shifted its attention to products that pose little or no risk and away from more significant issues. At the same time, we have deprived the Commission of the flexibility to develop common-sense solutions to the problems of implementation. The retroactive effect of the law has caused the Salvation Army, Goodwill Industries and thrift stores across the land to destroy used products, including even winter clothing that is sorely needed by millions of American children.”

Read more here:
CPSIA – Committee Press Release About CPSIA Hearing

CPSIA – Congressional Hearing Testimony

The hearing held yesterday by the Subcommittee on Commerce, Manufacturing and Trade can be watched at this link. I will be posting snippets from this video soon if you want to wait to watch highlights.

Testimony of the participants:

Panel 1
The Honorable Inez Tenenbaum
Chairman, Consumer Product Safety Commission

The Honorable Anne Northup
Commissioner, Consumer Product Safety Commission

Panel 2

Ms. Jolie Fay
Founder, Skipping Hippos; Secretary, Handmade Toy Alliance

Mr. Wayne Morris
Vice President, Division Services, Association of Home Appliance Manufacturers

Mr. Rick Woldenberg (oral testimony and written testimony)
Chairman, Learning Resources, Inc.

Ms. Nancy A. Cowles
Executive Director, Kids In Danger

Read more here:
CPSIA – Congressional Hearing Testimony

CPSIA – News Round-up Ahead of Hearing

There’s a lot happening! Here are a few highlights:

a. Fox News is reporting that today’s hearing is the beginning of an effort by House Republicans to restore common sense to the CPSIA. Be still my heart! Of course, readers of this space knew that the cavalry was coming. Lots of good people are pulling for change right now but the path forward will not be easy. On the one side, we have Republicans: “‘There are parts of (the children’s product safety law) that need to be peeled back and thrown into the trash,’ said one Republican source close to the process.” And on the other side, you have the fear mongers: “‘When the first children get sick from using a product with lead, it will point out the folly of their ‘common sense,’ said Nancy Cowles, executive director of Chicago-based Kids in Danger, who is testifying at Thursday’s hearing. ‘It’s common sense to most people not to have lead in their products.’”

b. Rep. Mike Pompeo (R-KS) is introducing (or introduced, not sure) an amendment to the Continuing Resolution currently on the floor of the House to DE-FUND THE DATABASE! Hurray for Mike Pompeo. This move is garnering strong public support from other Republican leaders in the House. Cross your fingers. Again, there’s a long road ahead. Here is the amendment:

AMENDMENT TO H.R. 1

OFFERED BY MR. POMPEO OF KANSAS

At the end of the bill (before the short title), insert the following:

SEC. __. None of the funds made available by this Act may be used to carry out any of the activities described in section 6A of the Consumer Product Safety Act (15 U.S.C. 2055a).

c. The Democrats are going away meekly on the CPSIA. Yesterday, Henry Waxman together with Subcommittee Ranking Member G.K. Butterfield put out a press release entitled “New Poll Shows “Very Strong” Support for Federal Consumer Product Safety Efforts“. Bringing to mind popularity polls released by Idi Amin back in the waning days of his Emperorship, the poll commissioned by Consumer Reports indicates that 98% of consumers “agreed strongly or somewhat that the federal government should play a prominent role in improving product safety”. If they included my vote . . . . The Waxman/Butterfield press release references three Pompeo amendments but it is my understanding that only the database amendment above will be introduced.

The Pompeo amendment and this absurd push poll are related events. You can examine how “out of touch with reality” we apparently are by checking out the amazing poll details at this link.
d. Inez Tenenbaum has also been commissioned to push back on Pompeo. Yesterday, she posted a joint blogpost with U.S. PIRG on the topic of the database. As Carter Wood of NAM’s Shopfloor blog pithily tweeted: “Hard to imagine #CPSC Commissioners Nord or Northup ever co-blogging with NAM or Rick Woldenberg the day before a cmte hearing.” Carter makes an interesting point. I am not hurt, by the way . . . . He also notes: “Tenenbaum’s co-blogging at the site of a leading left-leaning activist group immediately before the hearing almost looks like a conscious poke in the eye to committee members.”

Should be another interesting day today!

Read more here:
CPSIA – News Round-up Ahead of Hearing

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 – My Remarks at House Working Session on CPSIA

STATEMENT OF RICHARD WOLDENBERG
Subcommittee on Commerce, Trade, and Consumer Protection
Committee on Energy and Commerce
United States House of Representatives
January 6, 2011

Thank you for the opportunity to present my views today. My name is Richard Woldenberg. I am Chairman of Learning Resources, Inc., a Vernon Hills, Illinois-based manufacturer of educational materials.

Despite its lofty goals, the CPSIA has had little impact on safety while severely disrupting markets and sharply raising operating costs. I have previously testified that our testing costs rose 8 times between 2006 and 2009 and are expected to multiply again. We have also cut back on our marketing and sales expenses to pay for the increase in our QC department from one to five.

This so-called “toy law” was designed to solve a problem that frankly didn’t exist. In 2007/8, there were some notorious toy recalls for lead-in-paint violations – yet there were almost no injuries. The CPSIA was an almost hysterical over-reaction to a simple compliance issue concerning a small number of companies.

Ironically, the CPSIA has already “cured” the compliance problem in the toy industry despite the glacial pace of implementation. Today, 30 months after passage of the law, lead-in-substrate testing is still not mandatory – yet toy recalls have fallen dramatically. How did it happen? I believe publicity, industry outreach and the commitment of new resources by industry improved compliance. Revised lead standards had NOTHING to do with it.

The CPSIA is causing a lasting trauma in our market. Small businesses left the market in droves. For instance, we decided not to enter the toddler market with new educational products. While foregone business opportunities don’t produce a pile of bodies, the economic damage is still severe. In an efficient marketplace, capital is redeployed and products and companies just move elsewhere. We need to fix this problem pronto.

The solution to the CPSIA problem lies in fixing the four horsemen of this apocalypse: (a) cost, (b) complexity, (c) risk and (d) government intrusion.

The worst CPSIA cost impact relates to needless and repetitive testing. Mandatory testing for everything but lead-in-paint should be dropped. An amended CPSIA should apply ONLY to those products specifically identified as presenting a substantial risk of injury or death from lead or lead-in-paint at the specified mandatory standards. This will sensibly knock out the vast majority of products subject to this law. The CPSC Commission should be mandated by law to rigorously apply this rule – the agency should bear the burden of proof.

The excesses of the current “precautionary principle” era cannot be allowed to continue. Lax application of the “substantial product hazard” law has created real doubt about the meaning of our safety laws. Strict adherence to this rule should be mandated by Congress to eliminate the many artificial crises spawned by the CPSIA. Discretion to set age limits, the applicability of the phthalates ban, tracking labels and the reduction of the lead standards should be subject to the same rigorous rule.

To preserve the competitiveness of American schools, special exemptions must be made for educational products (particularly science and special needs items).

The phthalates ban should be limited to products for children three and under to sharply reduce CPSIA compliance costs. This is a reasonable compromise pending resolution of any remaining doubts over the safety of these specific chemicals.

Complexity must be sharply reduced. The old rules were a manageable 100 pages or so but now top 3000 pages and growing. We need to return to a “keep it simple” set of rules with limited reporting requirements. Congress or the CPSC must choose top priorities, and promulgate limited and focused rules. I can assure you that no one understands the moving target of CPSC rules anymore. This MUST be remedied in any amendment of the CPSIA.

Needless bureaucracy should be eliminated, such as CPSC certification of labs, including in-house labs. Fraud and/or incompetence in testing have always been rare. Customs involvement in the CPSC supply chain should be shaped by a cost-benefit basis. Dealing with product safety like the prevention of terrorism is absurdly disproportionate to the risk and far too costly.

Implementation of the public database should be delayed until reasonable protections of due process rights of manufacturers are in place. Congress never intended to create an indistinguishable mixed bag of truths, half-truths and falsehoods – that’s what we have the Internet for. The adopted “anything goes” rules went way too far, and will accelerate market exits.

Government intrusion and excessive government power casts a pall over the children’s product market now. Open-ended penalty provisions allow for emotional and disproportionate punishments. The Commission has also asserted unprecedented powers to retroactively ban products and to mandate their replacement. Clearly, strict procedural controls and protections are missing. The era of “death penalties” without oversight must end.

Some CPSIA fixes are not legislative. Among other things, the CPSC needs to embrace industry as its partner in safety. As the past two years demonstrates, engaging industry is the key to long term improvements in safety.

Notwithstanding the media’s misrepresentation of our industry, we have an enviable record of safety. This is not a case of bad people, venal companies or lazy regulators. The problem is one of misapplied resources and ineffective regulatory strategy. The solution doesn’t require more money or more chest thumping. A well-designed law, combined with good education and industry outreach practices, will create the safer market that everyone wants.

Thank you for considering my views today. I would be happy to answer any questions you may have.

Read more here:
CPSIA – My Remarks at House Working Session on CPSIA

CPSIA – My Written Testimony at Senate Hearing 12-2-10

Read more here:
CPSIA – My Written Testimony at Senate Hearing 12-2-10

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 – Besides THAT, Mrs. Lincoln, How was the Play?

776 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 34 days left until Election Day.

The Cato Institute published its study of the Foreign Manufacturers Legal Accountability Act yesterday entitled: “‘Consumer Safety’ Bill Could Boomerang Against U.S. Manufacturers”. I have written about this latest self-destructive attack by Congress on our economy many times in the past.

[I am beginning to think of this Congress as some form of national auto-immune disease. Is there a pill we can take to get rid of it? If only . . . . The "pill" is called voting on November 2nd.]

Here’s the conservative think tank’s take on this legislation in a nutshell:

“Americans damaged by faulty products, whether made abroad or domestically, should be able to seek compensation through the courts. But the approach advocated by supporters of the FMLAA would not solve the problem. It would create a false hope of collection for damages while bypassing existing procedures that have proven to work in most cases. The approach would potentially violate constitutional protections available to citizens and non-citizens alike as well as existing commercial agreements with other nations. It could potentially disrupt global manufacturing supply chains, putting American production and employment in jeopardy.”

Now that’s a good reason to vote sponsor Betty Sutton (D-OH) back into office, isn’t it?

But then there’s the inflamed EU, Canada, WTO, importers, blah blah blah. Who cares? Not this Congress. I am told now that the FMLAA will not be addressed before the Election, but watch out for the lame duck session.

Nice of Congress to keep us on our toes with threatening legislation pending all the time. Really nice. I wonder if there’s time to send out another solicitation for funds for the Republicans tonight . . . .

Read more here:
CPSIA – Besides THAT, Mrs. Lincoln, How was the Play?

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