Friday, August 21, 2009

CPSIA - Avery-Dennison Volunteers to Collect a CPSIA Tax

When I was the only representative of an operating company to testify before the CPSC Tracking Labels panel on May 12, I warned that the Section 103 requirements would turn Learning Resources into a "tracking labels company", as opposed to our current role as a developer and marketer of educational materials. I predicted that we would need a full-time label staff, considerable extra expense on labeling and testing and a brand new tracking labels software application. I explained that the tracking labels provision cannot be implemented without considerable data collection and retention. As my recent video blog confirms, the CPSC has ambitious expectations for everyone's data retention. By "ambitious", I mean "total, complete and permanent" and by "everyone", I mean "everyone". No relief was offered, IMHO.

[Ironically, I shared the podium that day with a tracking labels software maker who openly pandered for business during his "testimony", going so far as to assert that he was personally so concerned about the "safety" of his granddaughter's earrings that he would prefer them marred by an obvious tracking label than take the risk of not knowing their "co-hort" information. This remark was greeted by widespread snickering in the room.]

Soooo, how crazy am I? Avery-Dennison answered this question recently with their exciting new software/hardware solution that you can buy to label your goods to comply with Section 103 and to retain your production data. I am going to guess here . . . but I think this solution will cost you some money and may need you to add to your staff . . . . Like any ambitious company attempting to take advantage of ridiculous government rules, A-D will very likely (certainly?) charge by the piece, thus collecting a tax on each piece you sell from now on. [Anyone recall the time when Microsoft openly pondered charging a small fee for each email sent using its software?] This is nothing more than an "inefficient tax" - in other words, a government rule causes a market inefficiency solved by paying a fee to an enterprising third party, not the government. This type of inefficient tax is common in quota situations (you buy quotas from soneone who has them, rather than paying the government for the right - have you ever heard of "cap-and-trade"?). In this case, A-D and other companies stepped forward to collect the tax and deploy it for the benefit of their shareholders and employees. The only losers - you and your customers.

Does an inefficient tax benefit society? Taxes tend to depress economic activity by raising costs and either depressing earnings (reducing capital growth for future investment) or causing prices to rise (reducing demand). This additional cost is not accretive to society unless it is less than the cost of the ills "eliminated" by the new rule. Hey, I know all roads lead to Rome - the question remains "How much should we citizens be willing to pay for tracking labels?"

If I put on my consumer hat, I think I would be willing to pay zero for tracking labels for most things. First of all, as a consumer I have had virtually no experience with recalls other than cars (and those items are already tracked). Most of the items I buy are either consumed (they are gone now) or are too low in value to be worth tracking. I say this because if everything was tracked, I would have to pay for the effort to implement tracking on everything I buy. I happen to believe that few if any of my low-value posssessions will ever be recalled, thus I do not want to pay for this service (it's a waste of my money). If an item I possess is recalled and is of low value, I am better off (upfront) agreeing to discard it when in doubt than paying for this detection system that I don't expect to ever use. In fact, I incur costs even trying to figure out if an item is subject to recall. This is one of the points I have made repeatedly about resale shops - it is simply too expensive for them to check every piece against the CPSC website. That requirement is completely absurd and unrealistic, and likewise you aren't going to do deep research on an old item that you have used for 18 months and cost you $12. You are going to toss it or forget about it.

The only exception I can think of is for high value items or durable items that present particular known dangers (high value items intended for the use of infants or toddlers, a very vulnerable class of consumer). Since it is expensive to throw away a crib or playpen, I think those items should be marked.

With this analysis in mind, you can perhaps understand why I view the "opportunity" to use A-D's system as nothing more than a private tax being collected by a small number of companies at the pleasure of the Federal government. Calling it anything else is to obscure the reality of the situation.

The tracking labels fiasco is a good "poster child" for the CPSIA problems. The new rule has completely distorted and redefined the public debate. Lost in the shuffle is the point that the value of tracking labels is questionable at best. This point is not relevant in the eyes of the CPSC since the law was passed by (our all-knowing) Congress; the agency sees their job as "vigorously" enforcing the CPSIA. Sadly, they are right, the CPSIA is the law of the land, even if it is ridiculous, and the CPSC does not make the law. Since the CPSIA is now law, making a rational argument against it seems somehow off point. That's unfortunate. There was a time (two years ago, for instance) when I naively thought the government would listen to you and that our legal system was rational, more or less. Today, I find myself doubting this conclusion on a daily basis. Most frustrating, I find that I have lost ANY confidence in my ability as a citizen to get our government to listen. They made up their mind and moved on. [This is not true for everyone in government - we have the sympathetic ear of a minority of members of Congress but unfortunately, in today's Congress, it doesn't matter what anyone thinks other than about six people. . . and they don't give a darn about the problems discussed in this blog.] This is how we end up with bad rules like Section 103 and find that we can't do anything about it. That's not right, but that's how Mr. Waxman and Ms. Pelosi want it these days.

We can only hope that America will wake up from its fog soon . . . before too much damage is done.


Anonymous said...

Again as a resale store owner, I any reputable shop already keeps recalled items of their shelves. It takes 2 seconds to check an item. You don't check every item because it is already your business to KNOW what has been recalled. You do not need an expensive (XRF) machine to do this. I would imagine ALL shops have an computer w/ internet connection. I don't know how you'd do business without one.

I realize thrifts have special challenges, but I think it is important that people know reputable children's resale stores sell safe children's products, unless of course you are talking about non-recalled hazardous substance containing products. Those can not reasonably be screened for.

Anonymous said...

Unfortunately, the resale store owner is in the dark. Were it so simple. To my knowledge there have been no recalls for lead in substrate, yet; therefore a 2 second check is worthless if he/she means checking the CPSC data base for a recalled item. However, as one who has used an XRF gun on a variety of products, you can bet that many hard plastics, fabrics and metal items that appear in toys and childrens products as well as everyday household goods have levels of substrate lead above the current 300 ppm limit. We found 'em, including some on decorations that bakers put on birthday cakes! Many more products will become "violative" in 2011 when the limit is dropped to 100. (Fortunately, at 93 ppm we will still be able to eat Rose Garden dirt.) As a resaler, your responsiblity is not just to avoid selling recalled items; it also includes not selling anything that is violative, whether recalled or not.

Rick Woldenberg, Chairman - Learning Resources Inc. said...

I think you would find that many if not ALL such positive readings are FALSE. This is possible to determine by careful retesting or laboratory validation. I do not believe we have ever found one instance of lead-in-substrate in hard plastic that exceeded even 100 ppm. XRF is sadly only "directional" and can only be used as a screening tool. For a resale shop, there are few alternatives, which leaves you sort of "high and dry". I did't write the law . . . .

Anonymous said...

Anon, I believe you have misunderstood me. I am no fan of the CPSIA.

Trust me, I'm not in the dark. I'm well aware of the different requirements of the CPSIA unfortunately. I wish I could claim ignorance.

What I think is important though is to differentiate what is reasonable vs. unreasonable for resale shops to do. The comment mentioned that it was difficult for resale stores to keep recalled products off their shelves.

We need to focus on what is true. It is easy to keep recalled products off the shelves. We need the focus on what needs to be fixed.

It is impossible to test all items for lead or to guess what contains lead or not. It is simply not feasible to run a shop, pay the bills, and comply with the new lead law. Impossible.

Recalled and non-recalled products are two different issues.

I guess no matter, really however hard we try we will be operating, if we continue to operate, illegally.

Anonymous said...

Sadly, the XRF results reported on in my earlier post were confirmed by Intertek testing, and the spectrometry results in ppm were surprisingly close to those given by the XRF. I don’t know whether the Pb was in there as a colorant or for stability. The good news for us is that it only cost us a few thousand bucks (on top of the testing costs) when we threw this perfectly safe merchandise out. Some of these items were much too large to pass through even an adult’s alimentary canal, so the actual risk was nil.

I’m no fan of the CPSIA either. We live in an age where reason and reasonableness do not prevail, and emotion is king (correct me, queen). My point is that no matter how diligent you may be in checking for recalled items, you will almost inevitably be re-selling “tainted” merchandise because lead is everywhere. The only practical difference is how much jail time you might do. Basically, with this law, we’re screwed.

Kathleen Fasanella said...

Like any ambitious company attempting to take advantage of ridiculous government rules, A-D will very likely (certainly?) charge by the piece, thus collecting a tax on each piece you sell from now on.
Sadly, this was common in the apparel industry (Reece button holers anyone?). It still is as it relates to proprietary technology, exacting what amounts to a licensing fee per-use. I'm not saying this isn't a problem but AD has some competition. Let's hope the open source community steps in with some home-grown solutions. I know pathetically little about barcoding but it was really easy to configure a data dump from my keychain barcode reader into a text file. Not saying it's elegant, but it'd be easy to then cut and paste into a spreadsheet and load the file on a website. But the point is made, this isn't tenable for larger enterprises who'd have to pay the "tax". Smaller enterprises will still pay the tax (of CPSIA) albeit indirectly. Annoying and costly.

If I put on my consumer hat, I think I would be willing to pay zero for tracking labels for most things.

This is something I feel is getting short thrift; too little attention is paid to the impact on consumers. The presumption is that this is all free; that somehow, the costs of compliance will be pulled out of our heady profit margins, magnanimously side stepping consumer pocket books. The issue is value, do consumers feel this value is sufficient and for which they agree to pay? Your exceptions noted, I would agree they/we do not.