Cassandra that I am, I have been warning of many problems with the CPSIA for many months. It's a long list, I won't bore you. Among my bitter complaints are the CPSIA's wild penalty provisions and open-ended liability provisions. [Others have also written about the penalty provisions.] I have gone further and noted that since the law is so complex and overarching, the CPSC will be accumulating claims against everyone and will be able to pick and choose who to penalize, when and how. This process won't necessarily be fair or even-handed. The possibilities for coercion and abuse in assessing liability are rampant and obvious. At ICPHSO, Gib Mullan warned that penalties would be expanded significantly. Yeah, yeah, blah blah blah, right? Worrywart . . . .
Well, you decide. In recent days, the CPSC began to announce its penalty assessments for past lead-in-paint recalls. First, Mattel was forced to pay $2.3 million in penalties (95 items, 2 million units, @$1.15 per piece in penalties). [Of course, Mattel also previously paid millions of dollars in penalties to California and to a consortium of 39 States for the same recalls, but who's counting . . . .] Then OKK Trading was cited and paid a penalty of $665,000 (repeated violations over several years for several reasons). Earlier this week, the CPSC resumed its activities, citing nine companies ($530,000 in penalties, 13 recalls total). I understand there are more penalties in the hopper right now.
Here are a couple facts before we dive into the merits of these cases. First, did you know the CPSC has a FIVE YEAR WINDOW to impose penalties? Yessiree, that's the statute of limitations. It doesn't MATTER that they imposed a recall on you or even that the case is CLOSED. Nope, the penalty window remains open. Second, it's the Legal Department, not the Enforcement folks, who set the penalty numbers. My understanding about these last nine cases is that the penalty numbers were NOT negotiable, and if you protested, you were told that a mega investigation would ensue with subpoenas and a risk of referral to the Department of Justice (you know that that means). Of course, any idiot would realize that legal fees ALONE would eat up the proposed penalty in mere days if you were to choose to fight, and then you would still be left with a potentially yawning legal mess. In other words, the CPSC's deal is "Pay or else". That's due process under the CPSIA nowadays.
Before we overreact, let's see what these latest penalty assessments are all about. Perhaps there is a pattern here.
Cardinal Industries: One recall of a toy jewelry sold in vending machines, 900,000 units, penalty of $100,000 ($0.11 per unit). NO INJURIES.
Cardinal was turned in by a consumer. They were cited for a "knowing" violation of the CPSIA under Section 20(d) because they "failed to take adequate action to ensure" that their products were lead-free. [Congress' confusion, or worse, over the meaning and possible use of the term "knowingly" in Section 20(d) has been highlighted in this space previously. And ignored.]
Dollar General Corp.: Three recalls (1, 2 and 3), 494,000 units, penalty of $100,000 ($0.20 per unit). NO INJURIES.
Dollar General was turned in by the University of Ashland on one recall, and turned itself in on the other two recalls - as is required by law and by good corporate citizenship. Dollar General was cited for the same "knowing" failure under Section 20(d) for the same reason - "failed to . . . ensure". [Consider this quote from the Settlement Agreement: "Thus, Dollar General neither knew, nor should have known, of any potential problems with these products. However, as a result of industry changes and in an abundance of caution, Dollar General voluntarily commenced validation re-testing of toys to confirm initial test results. Dollar General tested hundreds of samples and, of those, discovered that two, the Sunglasses and Toy Cars, did not meet applicable standards. Dollar General notified the CPSC of the results and promptly initiated a voluntary recall of the items." Obviously, an excellent candidate for the CPSC to teach a lesson!]
Family Dollar Stores, Inc.: One recall, 142,000 units, penalty of $75,000 ($0.53/unit). NO INJURIES.
It's not clear from the Settlement Agreement how FDS's problem was discovered. Same "knowing" citation on the same grounds.
Hobby Lobby Stores, Inc.: Two recalls (1 and 2), 23,000 units, penalty of $50,000 ($2.17 per unit). NO INJURIES.
It's not clear how HLS's problems were discovered. Same "knowing" citation on same grounds.
First Learning Company, Ltd.: Two recalls (1 and 2), 24,400 units, penalty of $50,000 ($2.05 per unit). NO INJURIES.
The CPSC found one of the recalled items in a retail sweep. The means of discovery of the other problem is not clear. Same "knowing" justification.
Michaels Stores, Inc.: One recall, 310,000 units, penalty of $45,000 ($0.145 per unit). NO INJURIES.
Michaels was turned in by the University of Ashland. They were cited for the same "knowing" violation, same justification.
A&A Global Industries, Inc.: One recall of bracelets sold in vending machines, 4,000,000 units, penalty of $40,000 ($0.01 per unit). NO INJURIES.
A&A was turned in by a customer. They were cited for the same "knowing" violation, same justification. [From the Settlement Agreement: "A&A specifically denies that it failed to take adequate action to ensure that the Bracelets did not bear lead-containing paint exceeding the permissible limits set forth in the Ban. A&A's compliance program, at the time of the subject recall met or exceeded industry standards for ensuring compliance with the permissible lead limits set forth in the Ban. Likewise, A&A asserts that it acted responsibly and reasonably to respond to the Commission's concern regarding the Bracelets, including its prompt and voluntary implementation of a successful product recall of the Bracelets in cooperation with the Commission."]
Raymond Geddes & Co.: One recall of a pencil pouch with lead paint on the zipper pull, 84,000 units, penalty of $40,000 ($0.48 per unit). NO INJURIES.
RG may have turned itself in (not entirely clear). Same "knowing" citation, same justification.
Downeast Concepts Inc.: One recall, 18,000 units, penalty of $30,000 ($1.67 per unit). NO INJURIES.
DCI self-reported this problem as required by law and by good corporate citizenship. Same "knowing" violation, same justification.
Every one of the companies denied the "knowing" violation, for whatever good that did them. Not ONE of these companies was hit with the minimum penalty (that is, the lowest penalty above refraining from imposing any penalty), even the ones who turned themselves in or the one with a dab of paint on a pouch's zipper pull.
To me, these cases seem like "ordinary" breaches of the L-I-P ban. There is no indication from the publicly available facts that these are "bad" companies or that any of the cases show a pattern of abuse or disregard of the law. Several of these companies clearly were actively trying to make amends for their own errors. The penalties do not seem to correlate to corporate behavior nor do they suggest a formula for determining penalties. The amounts seems random and capricious to me. As noted above, the companies were effectively denied the right to negotiate a penalty on any basis (such as presenting mitigating factors).
It appears that the philosophy of these penalties is one of absolute liability (you are liable for a penalty if you violate the L-I-P ban, regardless of reason or circumstance). This is an an entirely new way for the CPSC to administer this law (and excessive, unrealistic and unfair in my opinion). It also seems clear that mitigation for acting promptly and cooperatively or for the absence of injury is no longer relevant in the determination of these penalties. NONE of these cases involved injuries or death. As I have previously noted on several occasions, only ONE recall for L-I-P in 2007-8 resulted in an injury (one injury only) and NO deaths. The good faith cooperation of several of these companies is described in their Settlement Agreements.
Can you begin to connect the dots here?
In my comment letter on the CPSIA penalty provisions (linked above), I opened with this suggestion: "We strongly urge the CPSC to reserve the imposition of penalties for only the most egregious and dangerous situations. Penalties under the CPSIA should NOT be to punish but instead to motivate better legal compliance. This is consistent with the mission of the CPSC - to protect the public. Notably, the CPSC does not have a mission to mete out 'justice' so the use of penalties should be purposeful and not motivated by retribution. . . . We are fearful that the power to impose high penalties will be used coercively by the CPSC, ending any notions that law-abiding companies can work openly and in partnership with the CPSC. At present, the CPSC encourages a practice of 'when in doubt, file'. In a regulatory environment where minimum penalties are $100,000, how many companies will take up the CPSC's suggestion to file 'when in doubt'? " This letter was submitted to the CPSC on December 17, 2008.
Now we know where the CPSC stands on my advice.
Near the end of my comment letter, I made the following observation: "All in all, the CPSC must be very careful to not create a menu of 'gotcha' penalties. The CPSC's penalty policy or rules will be part of the 'game play' between the regulators and the regulated companies. If the rules encourage cooperation, the CPSC has a chance to partner with industry to improve safety. If industry believes that penalties are viewed as a revenue source or are being handed out in a way disproportionate to the infraction, then interplay between industry and the CPSC will change for the worse. If the penalties are too great, companies will exit the business (find something less regulated to do) or start hiding infractions as a survival technique. This outcome would not contribute to the safety of American children, and must be carefully considered in crafting the CPSC's penalty policies."
The dark clouds are gathering, guys. I am not sure how much more evidence is needed to prove that the cards are stacked against industry under the CPSIA - notions of "common sense", fairness or equity seem to have no place in a CPSIA world. If you think this is a great development for your business or your market, then rub your hands in glee - you are getting your wish. If you think the CPSC is going to too far or the rules empower the agency too broadly, I think you may want DO SOMETHING ABOUT IT. The few of us engaged in pushing back on this law CAN'T DO IT OURSELVES - we need your help. Get out there. Before you get whacked by a vengeful government . . . .
Thursday, July 9, 2009
Wednesday, July 8, 2009
CPSIA - Updated Toy Recall Data
The TIA has published an analysis comparing first quarter and first half 2009 CPSC toy recalls against comparable period statistics for 2008. Total recalls are down 75% in the first quarter and 60% in the first half of this year. The comparison by units recalled and by category of recall is equally impressive.
So what does this mean? My guess is that the fundamental problem unearthed in 2007/8 was . . . compliance issues. There was NO safety issue, there was no defect in the law, there was no problem with a hobbled agency. This was, plain and simple, a case of companies ignoring or being ignorant of the law. There were also a couple of notorious and avoidable quality control breakdowns. Now, with the microscope placed over its head, the toy industry's safety issues are basically gone. Don't forget that this miraculous recall reduction occurred during a period in which the legal standards were still unchanged (first quartner 2009) and entirely in a period in which product testing IS STILL NOT REQUIRED. Does that suggest the possibility that the strictures of this law are OVERKILL? Well, I think so.
What would work fine is the prior law with better administration. Among other things, the penalties should be reconfigured (certainly to eliminate felonies except in the most egregious cases) and the self-reporting on violations should be scaled WAY BACK. The ASTM F963 standard should be also returned to voluntary status to keep things simple and focused from a regulatory standpoint. Lead-in-paint testing should REMAIN mandatory but a materiality standard (or official practice) should be adopted for violations.
Most importantly, the agency should recognize the need, the absolute URGENCY, of a liaison function with industry and of an educational mission. [This is old news.] The CPSC must take control of awareness of its rules and invest in better compliance through an enhancement of its relations with industry. Becoming the "cop on the beat" will NOT work to motivate compliance - it will motivate fear and loathing, deception and non-compliance. Good safety practices are economic for industry - because bad safety practices leads to high and unbudgeted expenses from tort and recall liability and higher insurance costs. It's in everyone's interest to behave responsibly, as long as the rules are reasonable and tailored to the need. The educational investment is no less pertinent than it is for the "Click It or Ticket" campaigns. This can be the salvation of the agency - and the children's product industry.
As Congress heads toward hearings on the CPSIA (finally), these new statistics deserve attention and analysis. A common sense approach to fixing this law can save a large industry and an important agency of the federal government while preserving the gains in compliance earned in the last two years.
So what does this mean? My guess is that the fundamental problem unearthed in 2007/8 was . . . compliance issues. There was NO safety issue, there was no defect in the law, there was no problem with a hobbled agency. This was, plain and simple, a case of companies ignoring or being ignorant of the law. There were also a couple of notorious and avoidable quality control breakdowns. Now, with the microscope placed over its head, the toy industry's safety issues are basically gone. Don't forget that this miraculous recall reduction occurred during a period in which the legal standards were still unchanged (first quartner 2009) and entirely in a period in which product testing IS STILL NOT REQUIRED. Does that suggest the possibility that the strictures of this law are OVERKILL? Well, I think so.
What would work fine is the prior law with better administration. Among other things, the penalties should be reconfigured (certainly to eliminate felonies except in the most egregious cases) and the self-reporting on violations should be scaled WAY BACK. The ASTM F963 standard should be also returned to voluntary status to keep things simple and focused from a regulatory standpoint. Lead-in-paint testing should REMAIN mandatory but a materiality standard (or official practice) should be adopted for violations.
Most importantly, the agency should recognize the need, the absolute URGENCY, of a liaison function with industry and of an educational mission. [This is old news.] The CPSC must take control of awareness of its rules and invest in better compliance through an enhancement of its relations with industry. Becoming the "cop on the beat" will NOT work to motivate compliance - it will motivate fear and loathing, deception and non-compliance. Good safety practices are economic for industry - because bad safety practices leads to high and unbudgeted expenses from tort and recall liability and higher insurance costs. It's in everyone's interest to behave responsibly, as long as the rules are reasonable and tailored to the need. The educational investment is no less pertinent than it is for the "Click It or Ticket" campaigns. This can be the salvation of the agency - and the children's product industry.
As Congress heads toward hearings on the CPSIA (finally), these new statistics deserve attention and analysis. A common sense approach to fixing this law can save a large industry and an important agency of the federal government while preserving the gains in compliance earned in the last two years.
CPSIA - Do-Gooders Playing a Role in Train Crashes?
Consumer Groups, media and panicky politicians led a feeding frenzy last year over toy recalls that resulted in remarkably broad legislation restricting the presence of lead in children's products, yes our old friend the CPSIA. Of course, the determined "do-gooders" in the consumer group corner have asserted that there is "no safe level" for lead and thus, it makes "sense" to eliminate it totally from children's products (and the world at large, if possible). Remember, you can't be too safe . . . . A leader of this charge was a staff person at the American Academy of Pediatrics who presented unchallenged statistics in September 2007 to a House Subcommittee. With the lilly-white AAP backing of this notion, Congress swung into action and outlawed lead effectively from all children's products. Sounds good, right? Well, as with most manias, the "unintended consequences" have been terrible. This has been well-documented in this space.
Interestingly, I found an article recently that suggested that elimination of lead from circuitry (solder), courtesy of our friends in EU bureaucracy, may have played a role in the recent terrible Washington, D.C. Metro train crash. [Lest we forget, it is worth noting that the motivation behind the EU's elimination of lead from solder was protection of the environment, not a fear over direct human poisoning, the basis of the current U.S. mania.] This article points out something that the amateur scientist fear mongers may not have known, which is that lead plays a useful role in solder, and in its absence . . . more "unintended consequences". In this case, the consequence is something called "tin whiskers", a phenomenon created by "untamed" tin in solder. Tin behaves differently in the absence of lead, and will grow "whiskers" that create electrical shorts. The article suggests that this explains the intermittent electrical failures of the crash detection system on the Washington Metro. Other deadly accidents have been linked to tin whiskers. Precautionary, indeed.
Among the many things that disgust me about the lead mania is the illusion (delusion) that controlling lead-in-substrate in children's products will have any material impact on exposure to lead. In fact, it's just a way to put blinders on. By publicly and notoriously addressing the "lead problem" - problem solved!! This is absurd, of course, but has only encouraged the maniacs. Take, for example, the recent hubbub over the Obama's "lead-contaminated" vegetable garden. Incredibly, the lead levels detected in the White House garden (presumably by people with too much time on their hands) was 93 ppm. Our dear friends at the AAP assert that background lead levels in dirt is 40 ppm. This was the rationale behind the recent Illinois lead labeling legislation profiled in this space. As the Obama article makes clear, the controversy over lead in dirt is just politics, not science, and is WAY out of proportion to both the health threat and the presence of lead all around us. Dr. Kimberly Gray, Director of the Environmental Sciences Program at Northwestern University comments: "It’s inflammatory. 93 ppm is well below background lead for an urban environment. It’s what you’d expect just from atmospheric deposition." The article continues: "Atmospheric deposition is lead particles that fall out of the sky, from things like auto emissions." You mean there's lead in the air, too - oh, no!
The do-gooders have infinite justifications for their bans of lead in children's products, their current obsession, but (other than economic devastation) what has actually been accomplished for the American public by their handiwork? Only the illusion of "better safety". The legislation markets the idea that elimination of insoluble lead from substrate makes a marginal, incremental difference to health, as though it were the only (or principal) source of lead in our bodies. This flawed logic also underlies the dangerous Proposition 65 in California. The labels required by Proposition 65 sounds sensible, intended to advise consumers of the presence of "toxins" in their products (even if legally there) so they can decide whether to expose themselves or their families to the "deadly" substances. Who could object to that? Well . . . the selective presence of these labels gives false comfort to consumers who may believe that the labels highlight the ONLY places where the noted risk occurs. The implicit reasoning goes like this . . . why would the government require lead labels on lip gloss if the government knows that this risk is miniscule compared to MANY other sources of lead in daily life? Aren't they requiring labels on EVERYTHING with lead? And, if so (the government wouldn't let us down!), isn't this buying decision critical, a highlighted choice that might make the difference between good health and some form of miserable, painful, lingering death?! That's the implication, however erroneous.
I do not accept that this is the only way to run a sensible society. Canada has attempted to truncate our fancy new safety system, by tailoring it to a narrow and specific class of products or situations. That seems like a good place to start. It's time for all concerned to acknowledge that the "perfect legislative process" had a faulty outcome. Real leaders are prepared to admit error and to do the right thing for their troops. Congress???
Interestingly, I found an article recently that suggested that elimination of lead from circuitry (solder), courtesy of our friends in EU bureaucracy, may have played a role in the recent terrible Washington, D.C. Metro train crash. [Lest we forget, it is worth noting that the motivation behind the EU's elimination of lead from solder was protection of the environment, not a fear over direct human poisoning, the basis of the current U.S. mania.] This article points out something that the amateur scientist fear mongers may not have known, which is that lead plays a useful role in solder, and in its absence . . . more "unintended consequences". In this case, the consequence is something called "tin whiskers", a phenomenon created by "untamed" tin in solder. Tin behaves differently in the absence of lead, and will grow "whiskers" that create electrical shorts. The article suggests that this explains the intermittent electrical failures of the crash detection system on the Washington Metro. Other deadly accidents have been linked to tin whiskers. Precautionary, indeed.
Among the many things that disgust me about the lead mania is the illusion (delusion) that controlling lead-in-substrate in children's products will have any material impact on exposure to lead. In fact, it's just a way to put blinders on. By publicly and notoriously addressing the "lead problem" - problem solved!! This is absurd, of course, but has only encouraged the maniacs. Take, for example, the recent hubbub over the Obama's "lead-contaminated" vegetable garden. Incredibly, the lead levels detected in the White House garden (presumably by people with too much time on their hands) was 93 ppm. Our dear friends at the AAP assert that background lead levels in dirt is 40 ppm. This was the rationale behind the recent Illinois lead labeling legislation profiled in this space. As the Obama article makes clear, the controversy over lead in dirt is just politics, not science, and is WAY out of proportion to both the health threat and the presence of lead all around us. Dr. Kimberly Gray, Director of the Environmental Sciences Program at Northwestern University comments: "It’s inflammatory. 93 ppm is well below background lead for an urban environment. It’s what you’d expect just from atmospheric deposition." The article continues: "Atmospheric deposition is lead particles that fall out of the sky, from things like auto emissions." You mean there's lead in the air, too - oh, no!
The do-gooders have infinite justifications for their bans of lead in children's products, their current obsession, but (other than economic devastation) what has actually been accomplished for the American public by their handiwork? Only the illusion of "better safety". The legislation markets the idea that elimination of insoluble lead from substrate makes a marginal, incremental difference to health, as though it were the only (or principal) source of lead in our bodies. This flawed logic also underlies the dangerous Proposition 65 in California. The labels required by Proposition 65 sounds sensible, intended to advise consumers of the presence of "toxins" in their products (even if legally there) so they can decide whether to expose themselves or their families to the "deadly" substances. Who could object to that? Well . . . the selective presence of these labels gives false comfort to consumers who may believe that the labels highlight the ONLY places where the noted risk occurs. The implicit reasoning goes like this . . . why would the government require lead labels on lip gloss if the government knows that this risk is miniscule compared to MANY other sources of lead in daily life? Aren't they requiring labels on EVERYTHING with lead? And, if so (the government wouldn't let us down!), isn't this buying decision critical, a highlighted choice that might make the difference between good health and some form of miserable, painful, lingering death?! That's the implication, however erroneous.
I do not accept that this is the only way to run a sensible society. Canada has attempted to truncate our fancy new safety system, by tailoring it to a narrow and specific class of products or situations. That seems like a good place to start. It's time for all concerned to acknowledge that the "perfect legislative process" had a faulty outcome. Real leaders are prepared to admit error and to do the right thing for their troops. Congress???
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