Tuesday, December 29, 2009

CPSIA - Workshop on the Public Database Jan. 11/12

The CPSC has scheduled another two day workshop in January, this time for the dreaded and much-feared public database. This workshop comes on the heels of a lightly-attended hearing on the same subject held November 10 at CPSC headquarters. [You can watch the hearing at this link.] I testified at this hearing, one of two companies to participate (there were also a few trade associations presenters and the usual assortment of highly-motivated consumer "advocates"). There has been no response by the agency to this information-gathering exercise other than to schedule the workshop.

No never mind, they really want to hear from us. According to a blanket email I received from Scott Wolfson, "Education and advocacy are at the center of our priorities, which means strengthening partnerships with community leaders like you . . . . We hope for significant participation and we greatly value your input." Wow, I am touched.

Of course, it is nice that the agency is attempting to show an interest in dialogue and exchange of views with stakeholders. I certainly appreciate being afforded the opportunity to speak at these events. However, I find this particular workshop opportunity somewhat grating. Here are a few reasons why I am so easily annoyed:

a. I testified at the November 10th hearing at the request of the Commission. I was not planning to attend the hearing, as I have made many trips to Washington in the last year - all at company expense and at the sacrifice of my "regular" job. The CPSC staff made it clear that they not only wanted me to attend, but that I should present. This may have been particularly important because as of the beginning of the week of the hearing, there were only two people committed to speaking (including me). Okay, so I go to Washington, study up on the issue, write a little speech, and try to keep it short. They have a strict time limit, you see. This wasn't always a problem. At my first hearing (lead panel, Nov. 6, 2008), my speech was impromptu and they let me speak for 23 minutes (other speeches were longer). That flexibility is a mere memory now, as I learned at the tracking labels hearing (May 12) when I was cut off at the ten minute mark. And, drat, at the public database hearing, I again ran a bit over. Even with hardly anyone in the room, the time limit police stopped me at ten minutes, mid-sentence.

So I find it irritating that they asked to fly in to tell them my thoughts in November, but limited me to ten minutes, and now they want me to pony up for more flight and travel expenses, so they can . . . what, cut me off again?

b. I would take this process a bit more seriously if they gave ANY sign of listening at the last workshop. Why so cynical, Rick? Well, wasn't it this Commission who moved to act on the testing stay only three business days after we attended the LAST workshop (December 10/11, on the so-called "15 Month Rule")? There was no time to process the testimony at the 15 Month Rule workshop before the stay decision was made (those three days were devoted to complete chaos, courtesy of Henry Waxman and his unilateral amendment of the CPSIA). The fact that the agency spent two days intensively gathering information from 250 stakeholders on the impact of the 15 Month Rule and then the Commission almost immediately disregarded it in one of their most important decisions of the year made me feel the workshop was a SHAM. And if that one was a sham, this one promises to be an even greater sham. Since the last hearing has apparently generated no work product or further dialogue and since it was so lightly attended, the January workshop appears to be entirely for show.

I can talk to myself at home for free.

c. Finally, does the CPSC think drafting implementing rules for the CPSIA is some sort of hobby for the business community - or is it a plot to make the conduct of regulated business impossible? Do they really think any ordinary business can sacrifice its leadership to monthly trips to Washington to blather on to regulators who are only slightly interested in what they have to say? [Let's not forget about the CPSC's pet organization, ICPHSO, which bookended meetings in late October 2009 and mid-February 2010. ICPHSO meetings are essentially unofficial CPSC workshops/hearings.] Who can afford this financially, as a matter of priorities or allocation of scarce corporate resources? It seems obvious to me that the more frequently the CPSC holds these meetings, the fewer participants they will garner. The scheduling of meetings and hearings every month by the CSPC seems naive and sinister at the same time.

I won't be there.

All Roads Lead to Rome, as the old saying goes. Why the nuttiness here? I have the usual explanation:
  • an irrational, over-reaching law is impossible to implement sensibly;
  • the regulatory agency is left with no discretion under the new law and has no power to alter the ridiculous, irresponsible or impossible language of the statute;
  • Congress won't listen and would prefer that the CPSC make the problem go away, perhaps even at the expense of breaking the law Congress passed;
  • The agency gamely tries its best to carry on, with increasing chaos and market damage inflicted; and
  • Businesses (particularly small businesses) are the big losers, with the agency itself a close second.

So we have another two-day session to help the CPSIA create an over-arching database that will likely harm American businesses, create liability storms, eliminate jobs (except at plaintiff law firms and at consumer groups) and generally fail at whatever starry-eyed objective underlay its conception. A good time for all, no doubt.

Let me know how it goes.

CPSIA - Another Big Fine for L-I-P: What Does It Mean?

The CPSC today lashed out at RC2 Corp. for significant lead-in-paint violations on its Thomas & Friends wooden toys in 2007. The fine totalled $1.25 million. The facts of the case are relatively simple - an original recall in June 2007 of 1.5 million pieces was quickly followed by an additional September 2007 recall of 200,000 units. You can read all the details in the provisional agreement between RC2 and the CPSC. The agreement, however, doesn't mention the really famous bit, namely that the second lead-in-paint recall included some of the "bonus gifts" that RC2 sent out to people who returned items in the first recall. Not a real confidence builder, apparently . . . .

We probably owe the CPSIA to RC2 and Mattel, who together so shocked and motivated Congress (and my hometown newspaper, the Chicago Tribune) that nothing could stop that runaway train. Since Thomas the Tank Engine was such a beloved traditional toy, the public's sense of betrayal was understandable. Unfortunately, it is hard to believe that RC2 didn't see this coming. The law on lead-in-paint was clear and unambiguous. The righteous outrage and the perceived need for retribution eventually led not only to the awful new law but also to this fine.

Let's try to put it in perspective.

First, RC2 Corp. is a big company and won't feel much pain from today's action. It has peak sales of over $500 million and peak earnings of over $80 million. It has generated over $100 million in annual cash flow at least twice. In other words, they have pretty deep pockets. This fine is basically "walking around money" for them. They are even projecting earnings this year in excess of $25 million and cash flow of over $40 million - and 2009 was an awful year for the toy industry. As if that weren't enough evidence of the symbolic nature of the fine, RC2 recently raised almost $60 million in a stock offering. In no sense will this fine imperil or even perturb the business over at RC2 - as an official "big business", they seem structurally exempt from the pain we ankle-biters might feel.

That said, hasn't RC2 paid quite a bit for its folly already? According to their 2008 year end financials, they incurred recall-related costs of $28.3 million in 2007, $14.3 million in 2008 and a further $13.9 million in 2009 year-to-date. Those are total costs of $56.5 million, excluding the new CPSC fine. Arguably, the CPSC recalls induced or precipitated these costs. These costs presumably also take into account the impact of RC2's $30 million settlement of a class action lawsuit and related legal expenses.

[According to the provisional settlement agreement, in the wake of the publicity of the recalls, RC2 was hit with a number of allegations of injuries and claims from lead-in-paint, leading to lawsuits. I have no way of estimating the financial impact of these claims on RC2. The validity of the claims is also unknown. Welcome to America.]

These losses exceed RC2's typical annual earnings - most people would call that a pretty high price paid, something that gets your attention.

And as the CPSC slams the barn door long after the horses got out, the company must now reiterate that it learned its lesson . . . three years ago. The press, however, will frame this case as a remedy much needed: "Toymaker's fine in lead case tops $1 million. Oak Brook-based RC2 sold Chinese-made toys that were later recalled" [Headline from print edition].

With all this as background, I think the fine looks a bit different:

a. The fine cannot be justified as punishment, as the CPSC's previous actions induced a very high stream of costs for the company. It cannot be justified as an inducement to behavioral reform, as better safety practices at RC2 began in 2007. What is the purpose of the fine then? I think the fine is intended for political purposes, to make the CPSC look "active" and "tough". It hardly matters that the fine is opportunistic and coercive. [CPSC fines under the CPSIA are also arbitrary and hard if not impossible to negotiate.] Apparently, the RC2 recalls were not enough to satisfy the personified "Congress" - it wanted pecuniary revenge. This allows the Chairman and her fellow Commissioners to look "tough" to Congress and it allows the RC2 company to look "contrite". Two needs met, neither of which should be part of our law.

b. The fine (the supposed punishment for the "crime") is so detached from the time of the infraction that it has no actual connection as a "remedy". The passage of time sacrificed any moral high ground for the regulators - its fine is only a gratuitous penalty now.

c. By waiting three years to impose a high profile penalty like this, the CPSC deals the company a cruel blow to its market. The fine makes it look like RC2 needed more correcting three years after the fact - isn't that what any rational person would think? Yet RC2 already paid for its failings to the tune of more than $50 million out-of-pocket. [This does not include the significant loss of goodwill from the recalls, a tangible loss to RC2 business managers.] They also changed their safety practices, presumably quite significantly. The defective goods are long off the market. Yet, with the imposition of this high fine now, the company looks like a creep, again - even though there is no sign that it is anything but a good citizen today. As a consequence of the CPSC's action, RC2 must again counter with more PR to attempt to preserve its good name.

Even more outrageous, to squeeze in the fine under the wording of the CPSIA, the CPSC asserts that the RC2 violation was made "knowingly". [See par. 16 of the provisional settlement agreement.] I highly doubt that it was "knowing" in the plain meaning of the word and naturally, the company denies it, too. It's a ridiculous contention. However, the law defines "knowingly" to include imputed knowledge; if the CPSC deems that RC2 should have never let this happen (duh), they can assert the imputed knowledge of a reasonable man to convert the infraction into a "knowing" violation. Prest-o, change-o! Incompetence or organizational failure can thus be given the appearance of ill intent. Since virtually any violation can be deemed "knowing" with the aid of 20/20 hindsight under this terrible law, the CPSC now has an unwritten strict liability penalty policy at its disposal. That's sweet for an agency that is part legislature, part judge, part jury. As for companies cited for "knowing" violations, denials ring hollow. Frankly, it's a set-up . . . and when this happens to you, it will feel the same way.

d. The CPSC's apparent indifference to these factors will have a chilling effect on the children's product market. There is no question that business people tend to look at these cases as "there, but for the grace of G-d, go I". If RC2 can be hammered this way, what will happen to us if we make a mistake? There is just no way to tell. But, the RC2 and Mattel fines make it clear that "over" isn't "over" with the CPSC until the statute of limitations passes. This fine came more than three years after the recalls. When are you allowed to move on from your mistakes? Seems like never. The recent fines levied against Excelligence for $25,000 are of a similar vintage, so this can happen to small companies with small infractions, too. This is randomness run amok. The fact that the agency has been unable to issue final penalty factors in more than a year does not help matters.

Finally, of course, we private business people can't just stick our palm out to Wall Street for more money whenever we need to restock the coffers. The RC2 capital raise restores 100% of their losses from the recalls. Nice for them! Small private businesses have to go to their banks or our personal bank accounts to fund remediation of these problems. And let's hope your bank sticks with you after bad publicity. . . .

Could the CSPC be so myopic that it doesn't know how these risks affect the thinking and planning of small businesses? I can only conclude that the answer is yes.

Let's hope that the RC2 fine helps the agency and its leadership build up a suitably tough image. And for their sake, one can only hope that the architects of this law and the agency's penalty strategy are long gone, onto their next glories, before the cumulative impact of the CPSIA and its implementation are felt. And for the rest of us . . . good luck!

Monday, December 28, 2009

CPSIA - Are Toys Supposed To Be Fun Anymore?

In a wonderful Op-Ed last week, Windsor Mann lampoons the ridiculous CPSIA by announcing his intent to not give any presents this year. His plan is as simple as the subtitle of his essay: "Giving children what they need most - nothing". Mr. Mann expands: "As someone who loves to be a wonderful person for a brief period of time, I enjoy this season of temporary giving. I am obsessed with helping people, especially children, and the best way to help children is by not giving them Christmas presents."

Sadly, Mr. Mann observes that "toys are not something to play around with", noting the recent recall of toy darts because an 8-year-old almost choked on a dart that he was chewing. This is a real case. [This recall is eerily similar to a life-imitates-art spoof on The Onion entitled "Fun Toy Banned Because Of Three Stupid Dead Kids".]

Mr. Mann recounts in hilarious fashion various recent recalls illustrating the fact that we seem to have lost sight of what constitutes safety. [He even mentions the unfortunate Timberland ankle-high boots recalled for the lead-in-paint logo on their insoles.] To make his point, Mr. Mann notes the useful instructions provided by the CPSC in its "The Super Sitter" manual for babysitters. Here's some tips the government felt the need to give babysitters:

• "Keep the youngsters safe by preventing accidents."
• "Running or horseplay on [stairs] can lead to falls."
• "In the event of accidental choking, apply first aid measures to clear the child's airway."

He quips: "(In the event of intentional choking, do not apply first aid measures.)"

The fear of everything, railed at in this essay, is the philosophical underpinning of the misconceived CPSIA. There is no solution to this disease short of changing the law. In a world dominated by the fear of everything, nothing is safe and everything must be feared. Mr. Mann's strategy of not giving gifts seems to be an appropriate response in this environment.

It's a funny article, but it's not a funny problem for those of us stubborn enough to remain in the children's product market. I don't know how it comes as a surprise to anyone that misuse of products or the absence of individual responsibility may result in injuries, but that plague has descended on our industries. The issues inherent in this shift away from common sense are many:
  • Fear of liability creates a perception of COST that deters investment in products and markets. Random costs feed the fear.
  • Unjustified fear of injury by consumers translates into lower sales or higher costs in making sales. Markets shrink. Consumer needs become difficult to meet.
  • An atmosphere of fear affects regulators, who tend to recall more often and to assess more penalties (even if non-monetary) because it's politically-expedient or follows the trend. In other words, it's "safer" for regulators to err on the side of caution - but that cost is borne by somebody . . . businesspeople.
  • Rules tighten illogically, diverting attention from real issues, increasing the cost of participating in the market. All parties suffer from the consequences of complexity, including regulators.
  • Misallocation of resources (expending too much energy on unimportant things) leads eventually to true crisis, fueling the fire of the original proponents of the legislation. The obvious solution - even MORE government.

And the joke will be on you and on us, if we don't do something about it. Mr. Mann takes a lighthearted swipe at the silliness of your Congress, but it's really no laughing matter.

CPSIA - Anne Northup's Op-Ed in the Wall Street Journal

For those of you who may have missed it over the holidays, here is Commissioner Anne Northup's Op-Ed in Thursday's WSJ:

DECEMBER 24, 2009
12:07 A.M. ET

There Is No Joy in Toyland
The overreach of a child-safety law is killing American jobs and businesses. It's not too late for some common-sense changes.


With the unemployment rate stubbornly high and President Obama focused on job creation, it's a perfect time for Congress to revisit a law that's making our economic problems worse, and spoiling Christmas for many kids to boot.

Thanks to the Consumer Product Safety Improvement Act (CPSIA), small businesses like Baby Sprout Naturals and Whimsical Walney have already closed their doors. And some 40% of companies responding to a Toy Industry Association survey planned to eliminate jobs this year because the cost and complexity of compliance with this law is too great. For manufacturers and sellers of children's products, perhaps a renewed interest in saving small businesses comes in the nick of time.

The safety legislation, which passed with overwhelming bipartisan support in 2008, is a study in the law of unintended consequences. The new law reduced the Consumer Product Safety Commission's longstanding discretion to act in response to genuine risks, substituting instead the rigid, broad-brush, and unscientific judgment of Congress.

Though written in response to dozens of recalls of Chinese-made toys with lead paint, the law goes well beyond lead paint (which poses an undeniable risk to children) to ban all children's products that contain a component with more than three one-hundredths of 1% lead. This means such ordinary items as zippers, buttons, belts, the hinge on a child's dresser—and even that bicycle from Santa Claus—are outlawed.

These products often contain lead in excess of the new legal limit, but unlike lead surface paint, this lead is contained within the metal or other substrate material. The lead can rub off these items in miniscule amounts detectable only with sensitive lab equipment, but it is not "bioavailable"—meaning it is unable to be extracted and absorbed into a child's bloodstream. By failing to distinguish between easily absorbable lead in paint and not easily absorbable lead in other materials, the legislation was a dramatic overreach.

It gets worse. In addition to banning components that do not create a lead hazard for children, the law also imposes onerous product testing by outside labs that smaller manufacturers and handicraft makers simply cannot afford. Instead of spending money to expand and create jobs, companies have diverted billions of dollars so far to destroy innocuous but noncompliant inventory, as well as to understand and meet complex new compliance obligations.

Major charities, like Goodwill Industries and the Salvation Army, have publicly estimated lost inventory and disposal costs at $100 million to $170 million in secondhand children's clothing—such as winter coats with metal snaps—that's not affordable to test for compliance, yet still needed by many families.

Bicycle manufacturers have re-engineered dozens of parts from more expensive and less environmentally friendly materials to replace handle bars, spokes, tire valve stems and other harmless metal parts that contain lead.

To cope with annual testing costs running to half a million dollars or more, domestic retailers and manufacturers like Challenge & Fun, Inc., Constructive Playthings, and ETA Cuisenaire (a maker of educational tools), have reduced payrolls or limited product lines. Many small apparel companies, including JenLynnDesigns, have either closed shop or exited the children's apparel market completely.

In just the first eight months after enactment, the Consumer Product Safety Commission estimated that the 2008 safety law cost businesses in the "billions of dollars range," including: more than $2 billion in losses to the toy industry; $200 million in potentially violative inventory for members of one apparel industry group (the California Fashion Association); and an estimated $1 billion in annual losses reported by the Motorcycle Industry Council for lost sales of youth model motorbikes and off-road vehicles. Several popular German toymakers such as Selecta Spielzeug, whose products comply with stringent EU regulations, have stopped selling their toys in this country. Consumers are facing higher prices for a smaller variety of products that are no safer than before.

Some of the commission's decisions have made matters worse. Last month my colleagues in the majority interpreted one exclusion built into the statute based on the absorbability of lead so inflexibly that not a single children's product could qualify for it. That vote denied a petition for exemption to brass axle collars on toy cars even though—as one majority commissioner admitted—the commission's staff would have no concerns about letting their own children play with them. The commission thus decided that the law prohibits the sale of toys that impart less lead than the Food and Drug Administration allows in a piece of candy.

For the past several months, American businesses have been caught in the middle of a classic standoff between the federal commissioners in the majority, who argue that the statute ties their hands, and members of Congress, who claim they wrote flexibility into the law and blame the commission for any harsh consequences. Although the commission steadfastly refused to reach out to Congress to seek clarifications to the law, Congress has now reached out to us—asking the agency last week for a list of recommendations to amend the statute.

Thankfully the commission responded, in part, by agreeing to extend the stay on testing and certification for lead content. This window gives Congress time to consider such common-sense changes as: allowing for higher lead content in products like bicycles where only a tiny amount could be absorbed; restoring the commission's longstanding discretion to focus its efforts in response to genuine risks; lowering the age range covered by the law so that products for 12-year-old children and 12-month-old babies are not treated identically; and eliminating the retroactive effect of the law—which disproportionately affects libraries and thrift stores. Hopefully, this request from Congress will result in real changes to the law, not a half-hearted effort on our part or Congress's to avoid responsibility for the problem.

President Obama could help this process along by urging Congress to pursue a bipartisan fix. We can protect children from harmful products without striking a blow against the teetering American economy—but we must act quickly. Otherwise, the CPSIA's Grinch-like rules will needlessly cost our country more jobs and reduce the opportunity for small businesses to help lead our country out of recession.

Ms. Northup is a Republican commissioner on the Consumer Product Safety Commission. She represented Louisville, Ky., in Congress from 1997-2006.

Monday, December 21, 2009

CPSIA - How Important is Testing After All?

Let's zoom up to 40,000 feet and look down on the CPSIA mess. If Martians were watching this affair unfold before their uncomprehending eyes, what would they think?

In 2007/8, a large number of toy recalls and jewelry recalls dominated the newspaper headlines. A closer examination of these recalls shows that they were largely restricted to lead-in-paint and lead-in-jewelry, but few people bothered with the details - hysteria was a lot easier. Sold on a rationale that it is "impossible" to know if something's safe without testing it, Congress wrote up legislation to require prophylactic testing of all children's products, a mind-boggling array of products ranging from pens to t-shirts to science kits to ATVs to shoes.

Being entirely unable to anticipate any problems with this brilliant construct, Congress was shocked to find that the CPSC couldn't implement these requirements without crushing small businesses (among others). A finger-pointing contest broke out, where Congress insisted that the CPSC had the power to implement the new law with "common sense" (read, make up law to make the whiners go away) and the CPSC pushed back that it lacked regulatory flexibility under the CPSIA and legally was forbidden to assess risk. Standoff!

Of late, a weary and perhaps more sensitive CPSC is now taking a more conciliatory stance, expressing an interest, in the words of Ms. Tenenbaum, "to get it right". Aside from soliciting feedback from stakeholders, the agency is clearly trying to draft rules permitting small companies to reduce their compliance costs. The net effect: testing is ebbing away. Now with component testing, it is possible for companies to get out of testing altogether for many of their products. Other rules, like flexible rules on rules on sampling and testing frequency, among other rules being crafted, are further reducing the testing burden. [I strongly support this movement by the CPSC, let there be no doubt.]

But I am confused now. Rachel Weintraub of the Consumer Federation of America famously taught us that "Businesses’ assertion that they’re having to test products they know are safe is absurd. You only know if a product is safe if it’s been tested." [Emphasis added.] Yet the CPSC seems to be pulling away from Ms. Weintraub and her wisdom on testing. Is testing critical or not? Is safety achievable in other ways (perhaps various elements in combination)? If testing isn't so essential after all, what's really going on here?

I have a theory to share on this question: The recent movement by the CPSC on testing is tacit acknowledgement of our argument that there is more to safety administration than testing. Furthermore, the ebbing of testing requirements is a further acknowledgement that we are not facing a massive public health crisis in children's products - and never were. Yes, that means poison zippers, brass bushings, ATVs, pens and bikes really is a joke, as you thought. So why the big fuss, why isn't everyone linking arms and singing Kumbaya, if there is acceptance that a lesser standard will be sufficient to ensure safety?

It's simple - the issues go beyond this law, and that's why the Dems in Congress will budge. In fact, we are pawns in a bigger game, namely the battle to establish the precautionary principle in the Toxic Substances Control Act (TSCA). This is Mr. Waxman's dream legislation, his effort to rein in the chemical industry. The folks behind the TSCA reform legislation are deeply suspicious of chemicals in our lives and want to regulate them on a precautionary basis, not entirely unlike the way we approve drugs. It's the "fear of everything" all over again but BIGGER.

How does this tie back to the CPSIA? We are the test case, kids. The CPSIA was the first skirmish in the TSCA war. The two substances regulated on a precautionary basis under the CPSIA, lead and phthalates, either make or break the case on TSCA. If the Dems give in to our demands and acknowledge that their precautionary scheme didn't work, that it ate up the regulatory agency (now nicknamed the Children's Product Safety Commission), then how can they win approval of TSCA?

This is why the Dems are so resistant to rational change of this ridiculous law. This is why they won't listen to reason or consider facts. The facts are contrary to their larger goals, so they need to ignore them or deny them. In this context, it is better to send us down the river than deal with our issues. Although their tough testing scheme is being unraveled, they won't admit that it means that the crisis never was; without a crisis to fix, the entire logic of the CPSIA and their precautionary trial balloon fizzles. The Dems must insist that the crisis is still severe and that there is only one solution, the precautionary principle. Otherwise, they don't get TSCA.

[Side note: There was a "telltale" in the Waxman amendment to the CPSIA last week on TSCA. A big issue in TSCA reform legislation is the possible use of "junk science" to justify removing valuable chemicals from use in our country. With all the self-appointed consumer representatives clamoring for a chemical-free world, there is good reason to fear manipulative use of science under TSCA to disrupt the chemical industry. It's no different than the misuse of lead toxicity and antimony health effects by consumer groups to attack toys and other children's products under the CPSIA. Some people have been insisting on a "peer-review" standard for these scientific challenges to chemical use - which Mr. Waxman fear may hobble his precautionary principle law. This term is used in Section 101 (b) in the CPSIA to make it more difficult to get exemptions - but was stripped out of the law in Mr. Waxman's unilateral amendment. See my first blogpost on his amendment. His "generous act" in removing this ridiculous stumbling block wasn't a signal of increasing sympathy with our problems. No, in fact, it was simply aimed at resolving one of his problems with TSCA.]

I have no easy answers for how this ends. If you feel your anger welling up, you're not alone. Actually, I think the regulators are sick of it, too. The CPSIA has truly consumed the CPSC and made the daily affairs of that agency some kind of purgatory for the staff there. I can't imagine it's much fun being a Commissioner either. Frankly, the biggest shame of all is that by Congress (the Dems, really) insisting on an unworkable scheme for reasons unrelated to children's product safety, the agency has been rendered ineffective, bureaucratic and stuck in gridlock. The CPSC's essential role has been mooted. That's bad for everybody - in a perfect world, the agency is free to do its job and look for real safety problems to solve. Instead, it has to spend its time figuring out whether water slides are primarily intended for children and the like. What a tragic waste.

In the wake of last week's demise of the Waxman amendment and the extension of the lead content Stay, we must retain our focus and continue to push hard for a change in the law. The facts are piling up and the excuses for inaction are fading. It's time for action - for the good of consumers, for the good of industry and for the good of the CPSC.

Thursday, December 17, 2009

CPSIA - The Votes Are In . . . (The Stay Was Extended)

The CPSC Commission ballot votes were announced today with the five Commissioners' statements released as well (Adler, Moore, Nord, Northup, Tenenbaum). The Commission made three decisions:
  1. Adopted the interim enforcement policy allowing the use of component tests (5-0)
  2. Lifted the stay on testing for bike helmets, dive sticks, bunk beds, and rattles (5-0)
  3. Extended the stay on testing for lead content to February 10, 2011 "date certain" (4-1, Adler dissenting)

These votes reflect a considerable effort by the Commission to pull together. Other than Mr. Adler's principled decision to opt out of the endorsement of a longer extension of the stay on lead content, the Commission managed to find common ground. The unification of the Commission, if it sticks, would be a positive development. I hope this is a sign of recognition that safety is not inherently political and therefore Democrats and Republicans can work cooperatively and productively together.

The extended stay ("Stay") will be of value to manufacturers without endangering consumers. This is helpful . . . but is not a complete solution. It's a compromise and may have to be revisited again. I believe the Commission was not able to agree on Ms. Northup's formulation of the extension (six months after the issuance of the so-called "15 Month Rule") because Mr. Adler's objected to it as too open-ended and expressed a concern that it might be pushed out indefinitely. So now we have a stay expiring on a "date certain" and an agency with another artificial deadline to meet. The 15 Month Rule was not made an explicit condition of the decision, which means that more market chaos is probable.

Let's step back at this point and think about the issues that this vote raises:

A. The notion that another year will be enough to tidy up the details on lead content is probably a pipe dream. A few points of reference:

  • Today is the one year anniversary of my first comment letter on civil penalty factors. When they finally came out in September, I sent in a second comment letter. To date, the new penalty factors have not been announced. We are in our second year of waiting.
  • The phthalate test standards are also in limbo. The agency has had two cracks at that one. The first one allowed testing of the entire product as a single part (based on statutory interpretation) and after a storm of protest from among others the CA AG, the CPSC reversed course and reissued the test standard requiring that each component, even internal inaccessible ones, be individually tested. No doubt this pleased Jerry Brown, candidate for governor of California, but it created (brace for it . . . ) another storm of protest. Yet more comment letters were submitted. And . . . nothing. Please NOTE that the phthalate ban was SO urgent that the CPSC allowed it to become effective RETROACTIVELY with exactly TWO BUSINESS DAYS NOTICE. Obviously, phthalates must be a serious problem right??? Well, the CPSC has twice investigated phthalates and given them a pass both times. A third CHAP is currently grinding away. You get the picture. Hurry up and wait - just like the Army.
  • On January 30, Nancy Nord issued her statement in support of the original stay. In that letter, she called for the issuance of the component testing rule. Have you seen it yet? The interim enforcement policy is the closest thing we have to a component testing rule. The birthday party for Ms. Nord's call to action is about a month away. Get the cake ready.

I am skeptical that the "15 Month Rule" will come out anytime soon. As Ms. Northup notes, it is going to be wickedly complicated. EVERY such rule when issued has been a major speed bump in the implementation process. See above . . . . The CPSC is also not without its other challenges or little projects. There is, of course, the day-to-day business of the agency like hunting for shoes with lead-infused insoles. There are also unexpected emergencies like Chinese drywall. And then there's that endless time sink, the CPSIA, with its many unfolding requirements. Why just today, the CPSC announced yet another two-day workshop on the public database. Didn't we just have a hearing on this? Perhaps I should buy a condo in Washington . . . . Anyhow, these other obligations will get in the way of the master plan here. That's a certainty.

The consequences of these artificial deadlines for businesses are pretty severe. Our problems are largely with the "regulatory compliance exuberance" of our larger and more risk-averse dealers/retailers. This risk-aversion is principally driven by the excessive liability of the new law and the apparent predilection of the CPSC to hand out whopping fines. It is also related to speculation that it is only a matter of time before the agency or one of the State AGs decides to give the felony provisions a road test. Who will be first in line? Our larger customers have no interest in finding out. This may be why we have one customer who insists on testing EVERY item for lead-in-paint . . . even if it has no paint on it. And another customer who wants us to test EVERY item for flammability, even if the products are exempt (like paper-based items).

How do you think these customers will react to a "hard" deadline on testing? With little sympathy and a great deal of advanced planning. They will not want to speculate on whether we will get relief if the CPSC runs late on something important. Likewise, they will not want to stop and start. Some companies are ALREADY incorporating the August 2011 100 ppm lead standard into their requirements NOW - even though the CPSC has made NO determination that it will impose that (ridiculous) standard yet. A one year extension of the Stay means that the testing requirements will take form for us much sooner than February 10, 2011, and once started, will be hard to stop.

B. Some of the remarks of Commissioners at the hearing and in their statements seem detached from market realities. This is worrisome. The denial by certain Commissioners of information they have been provided (Adler: "While there will be some disruption in the marketplace no matter which date is chosen, no hard evidence has been brought to my attention that would require an even longer extension of this stay than two years from the passage of this landmark legislation") and the misconstruction of the impact of their decisions (Adler: "I know of no company that has indicated that it will withhold production until the 15-month rule becomes effective.") erodes confidence.

It's time to abandon pretense and role-playing. The decisions being made have very serious consequences for many people (perhaps this is why I am still up at 1 AM writing this blog) and must be handled with the utmost sensitivity. If the Commissioners seem to be stuck in a tunnel with no end, believe me, so are manufacturers. Let's not make the situation worse - particularly since there is NO crisis to resolve right now.

C. Of particular concern to me is that the agency seems to have lost its ability to determine what is safe and what is not. Today's recall of Timberland scuffproof boots is just an illustration of our broken compass. The CPSIA's famous "precautionary principle" holds that we cannot trust anything until it is proven safe upfront. Thus, the CPSIA subjects every product and every component in every children's industry to new regulation, and requires the CPSC to carve out exceptions. This MAXIMIZES workload, chaos and confusion because it requires in-depth inquiries into EVERYTHING. This approach multiplies complexity as regulations devolve from common sense guidelines into endless lists of exceptions. Look around you - this entire mess, the last 18 months of misery and the coming months of new misery, is the inevitable outcome of this defective way to regulate our markets.

The mounting exceptions are only part of the mess. Then there are the interpretations. There is simply no way to catalog all of these decisions. Every nuance needs a regulator's okay. Ms. Northup highlights the determination that a children's water slide is NOT a "children's product" because it must be designed to withstand the weight of an adult. Very good, quite a helpful decision, but HOW are manufacturers supposed to replicate that reasoning without taking undue liability risk? Isn't it obvious that such determinations are quirky and hard to apply? The trend to greater opacity is unstoppable under this regime.

As long as we ignore this fundamental problem, we will face a worsening environment at the CPSC. The cohesiveness of this Commission today will degenerate quickly. The morale of CPSC staff will decline further. The rules and interpretations will pile high into the sky and manufacturers will start to ignore them - or just leave the marketplace for sunnier climes. Ridiculous demands of retailers for testing will drive more companies from the market or just cripple the ability of U.S. companies to compete internationally. The flaws in the CPSIA will also likely spark a consolidation trend toward bigger and bigger companies as this kind of environment is deadly to small businesses and entrepreneurs.

Not a pretty picture. Thanks Congress!

So with this stay decision, I conclude that little has been accomplished to address the basic problems. We kicked the can down the road, which is fine, but the fundamental issues remain and will pop up again in short order. Until we put them to rest, the fighting will intensify, the agency will descend into gridlock and personal reputations and legacies will be harmed.

There is no need to stand idly by and let this carnage happen. As has been pointed out by many in recent days, the CPSC needs to tell Congress honestly what needs to be done to fix the law. Mr. Waxman has conceded a fix is necessary. We need now must tell Congress where they went wrong. I disagree with Ms. Northup that the CPSIA's flaws were mysterious in July 2008 - but whether or not that's true, they are pretty obvious now.

I wish the Commissioners and all my readers a restful holiday season, but after you have had a nice nap and a chance to catch up with the relatives, it's back to work. We need to put together the list of fixes and march over to the Hill.

CPSIA - Playing Footsie with Lead Standards

I have complained in this space from time to time about the recent success of Center for Environmental Health in inducing public officials to recall shoes for lead in their soles and insoles. In that case, CA AG Jerry Brown fell right in line and recalled seven items, including a pair of shoes and a pair of sandals for these frightening infractions. The CPSC, as far as I know, was not consulted - this was State AG enforcement of the CPSIA at its best! Did I mention that Jerry Brown is running for governor again . . . .

Of course, a mania over lead in shoe soles and sandal insoles is kooky. You would hope that the CPSC wouldn't fall prey to such nonsense. Of course, the insightfully-written CPSIA makes no such distinction in the wording on its lead content restrictions. This is one reason why the footwear folks are so concerned about the law. Still, the CPSC is not so reactive to recall shoes for this reason . . . are they?

Regular readers of this space know the answer already. Here it is, the CPSC saving the world from "dangerous" leather work boots for kids! This public menace was recalled because the "Classic Scuffproof Boots" have a logo stamped on its insole that exceeds the new lead-in-paint standard. Whoa! The notice warns that "Consumers should stop using recalled products immediately unless otherwise instructed" and later advises that "Consumers should immediately take the recalled boots away from children". The number of scuffproof work boots affected is 21,000 pairs sold for between $50-$70, or between $1-1.5 million in retail value. That's real money, guys. No doubt there'll also be a penalty in, say, three years.

Soooo, what are we looking at here? These are children's leather ankle high work boots with a logo ON THE INSOLE that might violate the lead-in-paint standard. [Personally, I STRONGLY doubt that Timberland uses paint for its insole logos - we believe it's made with an ink, thus not affected by the lead-in-paint standard.] Let me ask you an important question - have you EVER licked the insole of an ankle high boot? If you have, can you please send me a diagram of how you did it? While we're at it, do you believe a child ANYWHERE has EVER licked the insole of their ankle high leather work boot? Chewed off the yummy logo? Just curious . . . .

Man, are we safe now! Is it a huge stretch to contend that most people would not let their kids consume their scuffproof leather work boots, no matter how tasty? It is my distinct impression that many icky chemicals are used to make leather. That's a "watch out", if you ask me.

Furthermore, Timberland is a corporate "good guy". Their website practically oozes with enviro-friendly policies and social responsibility. In fact, they are famous for their personnel practices and activism. Here, for instance, is a portion of their mission statement:
  • Value. Humanity. Humility. Integrity. Excellence. These are the core values that we inject into everything we do, everyday.
  • Purpose. Creating positive change in our company, community and environment. Any way you can.

Clearly, the government needs to keep a close eye on these people.

Unfortunately, now that a lunatic law governs the country and CPSC leadership seeks to please a cartoon character Congress that "wants" products like this off the market, embarrassing and demoralizing recalls like this become commonplace. For business people, these irrational recalls only heighten the fear and amplify the lack of trust that now infect the regulatory environment. After all, if the CPSC would stick it to Timberland for this, what would stop them from wreaking similar havoc on you?

Somehow we have to stop this runaway train. If you don't want your country run like this, you better do something about it.

Wednesday, December 16, 2009

CPSIA - The Eyes Glaze Over . . . .

Sometimes I wonder if they have completely lost it at the CPSC. This evening we received the CPSC Federal Register notice on the Stay decision (actually entitled "Consumer Product Safety Act: Notice of Commission Action on the Stay of Enforcement of Testing and Certification Requirements"). I seriously wonder if anyone read it over in Bethesda. I have NEVER seen anything this dense and unintelligible come out of that office.

As the Commission tucks itself into bed before an exciting day tomorrow in which it can either decently provide enough time for an orderly implementation of this mess of a law or send small businesses down the river, I hope somebody is thinking about the complexity of what they have wrought. Of course, rules always seem more complex when they apply to you than when they apply to someone else. Still, perhaps a quick scan of this document might enlighten the Democrat Commissioners who seem particularly dense on the subject of why businesses want more clarity before the rules go "hard".

I uncovered this while on a mission from a reader of this space. I had been alerted to the possibility that this document said that the lead content stay was LIFTED. This could not be true, since a ballot vote is definitely docketed for tomorrow on this subject. Even at a Waxman-dominated CPSC, it would be rather ballsy to issue a notice announcing a decision before the vote was tallied. With three Democrats "highly sympathetic" and "seriously considering" the opposing views but by all appearances having irretrievably made up their minds, it is not hard to imagine that skipping a step might have a certain appeal. Why bother waiting for the Republicans to lose (again)???

Well, incredibly, my reader was RIGHT - the document states that the date for the lead content rules to become effective is August 10, 2010, a "date certain":

"With regard to lead content, the Commission has determined that testing of children's products for lead content by a third party conformity assessment body and certification based upon that testing should begin on products manufactured after August 10, 2010 to allow component testing to form the basis for certifications for lead content and permit the staff to complete an interpretative rule on the meaning of the term 'children's product.' An interpretative rule on the meaning of the term 'children's product' would provide firms with additional guidance on when testing for lead content will be required by the Commission."

Apparently, no one updated this FR notice for this morning's motion to docket this decision for ballot vote tomorrow. Oops!

Remember the part in the hearing today where they discussed market disruptions and the need for businesses to have time to absorb and adjust to the new rules? Does anyone wonder why we have confusion in the market after you read this document? Please be honest. Myself, I experience shortness of breath when I read dense prose like this. I think the works of David Hume seem more accessible than this kind of thing - so why does the Commission delude itself that anyone undersands the mountains of rules and rulings it spews out? Market confusion is all but certain when implementation is handled this insensitively.

One reason is that some Commissioners hear what they want to hear, and ignore the rest. This is called "selective hearing"; I know all about this topic, as there is at least one person who lives in my house who has been regularly accused of this malady. [No names, please.] For instance, yours truly pointed out serious errors in the presentations by CPSC professional staff during last week's workshop as well as in the preceding December 2 hearing to a Commission staffer. I don't blame the CPSC staff nor do I consider these errors to mean much . . . other than the fact that the CPSC staff is supposed to know these rules better than anyone else, and if they make errors (understandable), what do they honestly expect of the regulated community??? If we make these errors, we get whacked with high fines or possibly, if the CPSC is riled up enough, go to the pokey. Isn't the occurrence of serious errors by CPSC staff an indication of over-complexity? This was all known to the Commission before today's hearing. Get this - the Emperor has no clothes.

Still not convinced? Try this passage on for size, and then TRY to imagine running a normal business catering to children and in your spare time attempting to comply with this law. Imagine trying to master this law as implemented by the CPSC, given that you are not a lawyer, can't afford a lawyer or a legal department, and don't have a few unoccupied months to study the mountains of paper the CPSC emits. It's something you have to do in between everything else you do in your job. And the CPSC says:

"In the months after the Commission issued the stay of enforcement, the regulatory environment has changed significantly [No problemo!], and both the CPSC and interested parties have increased their understanding of the CPSIA and its requirements. [Yes, bring it, baby!] For example, between February 9, 2009 and the date of publication of this notice, the Commission issued more than 20 FEDERAL REGISTER notices, statements of policy, guidance documents, proposed rules, interim final rules, and final rules pertaining to the CPSIA, and most of these documents pertained to testing and certification issues. [This is not a joke. I didn't write this part, either.] These FEDERAL REGISTER documents include:
  • "Third Party Testing for Certain Children's Products; Notice of Requirements for the Accreditation of Third Party Conformity Assessment Bodies to Assess Conformity with the Limits on Total Lead in Children's Products," 74 FR 55820 (October 29, 2009);
  • "Notice of Availability of a Statement of Policy: Testing and Certification of Lead Content in Children's Products," 74 FR 55820 (October 29, 2009);
  • Proposed Rule on "Safety Standard for Infant Walkers," 74 FR 45704 (September 3, 2009);
  • Proposed Rule on "Safety Standard for Bath Seats," 74 FR 45719 (September 3, 2009);
  • "Third Party Testing for Certain Children's Products; Notice of Requirements for Accreditation of Third Party Conformity Assessment Bodies to Assess Conformity with Parts 1203,1510,1512, and/or 1513 and Section 1500.86(a)(7) and/or (a)(8) of Title 16, Code of Federal Regulations," 74 FR 45428 (September 2,2009);
  • Final Rule on "Children's Products Containing Lead; Determinations Regarding Lead Content Limits on Certain Materials or Products," 74 FR 43031 (Aug. 26, 2009);
  • "Notice of Availability of a Statement of Policy: Testing of Component Parts With Respect to Section 108 of the Consumer Product Safety Improvement Act," 74 FR 41400 (August 17,2009);
  • Final Rule on "Children's Products Containing Lead; Interpretative Rule on Inaccessible Component Parts," 74 FR 39535 (August 7, 2009);
  • Proposed Rule on Requirements for Consumer Registration of Durable Infant or Toddler Products, 74 FR 30983 (June 29, 2009);
  • Final Rule on "Children's Products Containing Lead; Final Rule; Procedures and Requirements for a Commission Determination of Exclusion," 74 FR 10475 (Mar. 11,2009);
  • Notice of Availability of Draft Guidance Regarding Which Children's Products are Subject to the Requirements of CPSIA Section 108; Request for Comments and Information, 74 FR 8058 (Feb. 23, 2009); and
  • Interim Final Rule on "Children's Products Containing Lead; Exemptions for Certain Electronic Devices; Interim Final Rule," 74 FR 6990 (Feb. 12, 2009).

Additionally, the Commission has met with numerous parties to discuss various aspects of the CPSIA or educate interested parties about the CPSIA's requirements, and, on December 10, and 11, 2009, it held a two-day workshop to discuss issues relating to the testing, certification, and labeling of certain consumer products pursuant to section 14 of the CPSA (see 74 FR 58611 (November 13, 2009). [You know, the one last Thursday and Friday with simultaneous panels going on all day on both days. There has been no time to review or consider the data gathered at the workshop, or the written comments which will continue to come in for the next 25 days.] Given the issuance of many rules and other FEDERAL REGISTER documents, statements of policy, and guidance documents [OMG, there were other documents besides these?!], as well as increased understanding of the CPSIA's requirements, the Commission believes it is appropriate to phase in the testing and certification requirements as described in more detail below." [This passage is followed by pages of details of stays lifted, extended, partially extended, whathaveyou. It also includes the errant language on the lead content stay.]

I find myself scratching my head in wonder. What is going on here? Is this being staged for effect, or are they SERIOUSLY trying to regulate this way? Is ANYONE accountable over at the CPSC? Can they get away with anything and everything?

It is sickening that a discussion is even necessary for the extension of the stay on lead content. The Commission should hang its head in shame for foisting this mess off on an innocent manufacturing community. What on earth did we do to deserve this treatment? I am tired of this Commission bowing down to Henry Waxman and a howling pack of fear mongering consumer groups. Those people have never worked for actual operating companies and know nothing about the realities of the marketplace or manufacturing itself. It's time to stop sticking it to the manufacturing community.

The WSJ noted tonight that Congress and Mr. Obama have hit new lows in popularity. I particularly found interesting that 81% of the participants in the new poll considered this "a period of division where the parties held fast to their positions and showed little willingness to compromise" in Congress. Do we really want this export at the CPSC? As a member of the regulated community, I vote no!

Tomorrow's vote is going to tell us all a lot about this Commission and its leadership. Watch this space for news.

CPSIA - Tracking Labels Answer Received Today

The CPSC answered my letter of September 18 regarding tracking labels today. In a nutshell, my question was about how small businesses are supposed to ascertain "cohort information" from fungible products if we are permitted to not use lot markings. The answer to that question was not clear (to me) from the Tracking Labels Guidance.

In today's response, the CPSC seems to indicate more flexibility than I had read into the Guidance. Tony Cook of the Office of General Counsel states: "Your letter suggests that the manufacturer lacks flexibility regarding information that must be 'ascertainable'. As with the 'marking' requirement, the manufacturer's reasonable judgment and consideration of the manufacturer's particular circumstances, are guiding issues." He carries on helpfully: "Without such an approach, an absolute requirement to have ascertainable all required information would in effect swallow the Commission's considered course with respect to marking." This is the conflict that motivated my concern.

On the other hand, Mr. Cook states ". . . what can be marked and what can be ascertainable are separate questions". This is the rub, of course. This means that even if you can't mark the item, you might still have to be able to ascertain the cohort information. How do you do that? Well, you can't.

It all boils down to what is considered "reasonable judgment". In fact, I have never found this a challenging standard to meet in our business but that was before there were huge penalties and possibly jail time to consider.

In an environment where the regulators want us to exercise sound judgment, there needs to be some recognition that the incentive to take the risk of exercising judgment only makes sense when that judgment is PROTECTED. No one wants to risk huge fines for doing their job (or let their teammates incur this risk). Thus, I think the CPSC needs to look at the question about ascertainability again. The CPSC needs to say flat out that it will respect the judgment of manufacturers on how they determine which information, if any, can be ascertainable, as long as the decision on marking was deliberate, consistent and made on a good faith basis.

In the case of our business, tracking labels serve no particular purpose except to slow us down and waste our money. We have recalled 130 pieces since 1984 (out of an estimated one billion shipped, all units believed recovered) so the risk to consumers, at least thus far, seems controlled. I would like the authority to decide how much to spend on tracking labels and information retention/accessibility, based on my knowledge of our products, our market, our track record and our legal obligations. Then, if we exercise good faith and are reasonable and consistent in our approach to markings and cohort information, the CPSC should respect our decisions. thus, a failure to mark or ascertain would not be held against us unless our balancing of the equities is demonstrated to be unreasonable.

None of this would be necessary except for the ridiculous penalties and fines possible under the CPSIA. The indiscriminate manner of penalizing under the law makes minor issues (even inconsequential errors) into potentially serious problems. In addition, given that the CPSC recent practice of doling out penalties for long ago settled disputes, the long tail of 20-20 hindsight makes this dilemma particularly uncomfortable.

I appreciate the CPSC's effort in replying to me, and look forward to working with them to bring more clarity to this very important point.

CPSIA - Commission Delays Vote on Lead Content Stay for One Day

In this morning's hearing on extending the testing and certification stay (the "Stay"), the Commission opted to carve-out lead content from the Stay. The decision on how to handle lead content under the Stay is docketed for a ballot vote tomorrow. [Just to clarify, other aspects of the Stay were extended today including situations where the rules and certifications have not been completed, such as ASTM F963 and phthalates.]

Frankly, the demise of the Waxman CPSIA amendment throws a HUGE curve ball at the Commission. Now that Waxman's fractious process derailed his attempt to "fix" the CPSIA, however ham-handed that attempt may have been, it seems that change is in the air. Will the Commission plunge on ahead with its big decision as though nothing has changed? Your guess is as good as mine. Unfortunately, things are happening so fast that events are literally overlapping - the news about the dead amendment came as the CPSC was completing its morning hearing. It seems to me that the Commission must now take even more time to carefully consider its next steps - this historic opportunity to force common sense change should not be squandered.

It seems equally important that the Commission reject partisanship and pull together, even if it takes more time and more debating (off-line and in the public eye). The poisoned partisan atmosphere of Waxman's House Energy and Commerce Committee sadly seems to have migrated to the CPSC Commission. In today's hearing, Commissioner Northup called for more effort by the Commission to reach 5-0 votes. What a timely call THAT was! The failure of the Waxman amendment can be interpreted as Congressional rejection of partisan control of safety by the Democrats alone. Over the course of the past year, partisan hubris led to extremism, culminating in a small number of Democrats co-opting the law as self-appointed defenders of the "will of Congress". Safety belongs to everyone - it's not political. The call to action now is for the Commission to act as one. Whatever damage the Waxman fiasco caused to working relationships needs to be rapidly repaired through the individual leadership of the Chairman and the other Commissioners.

The Commission has balloted Anne Northup's motion to delay lifting the Stay on lead content until six months after the issuance of the so-called "15 Month Rule". This proposal, acknowledged by Inez Tenenbaum to be based on "common sense", is not likely to be adopted without a gentle shove. Ms. Tenenbaum herself stated that manufacturers had asked for a "date certain" when the Stay would be lifted. [One can only hope that she was confusing a reasonable request for certainty, as in knowing what the rules are and when they will be imposed, with a request for a deadline. I cannot imagine who would demand a compliance deadline from the CPSC without knowing what the rules actually are, and if such a (neurotic) person exists, I would like to speak to him/her to better understand WHY they think this would be helpful.]

Even more worrisome, Commissioner Bob Adler contended that "Congress" wanted to be sure that everyone is in compliance with the law. [This personification of Congress is very troubling, especially since the Waxman fiasco makes clear that the original CPSIA votes no longer reflect the will of Congress today - or else how was an amendment by the powerful Henry Waxman stopped? This kind of thinking needs to be revisited.] Mr. Adler further asserted that based on feedback from small manufacturers, the most serious concern today is component testing which will be addressed by the CPSC's new interim enforcement policy. Adler was rather dismissive of the market impact of the 15 Month Rule beyond component testing and he even asserted that the VAST MAJORITY of manufacturers would be "just fine" with lifting the Stay today if they got effective protection for component testing. I question Mr. Adler's research on this point.

The lines are drawn for tomorrow's fight. Mr. Adler has stated a preference for a date certain of August 14, 2010 for full implementation of the testing and certification rules. Ms. Tenenbaum says she would vote to extend the Stay again if the 15 Month Rule is not completed by August 14, thereby signalling her approval of Mr. Adler's formulation. [Market chaos be damned?] Mr. Moore generally follows the party line so you can count him in, too. If the Dems don't move off these positions by tomorrow, we are looking at a date certain of August 14 for lifting the Stay on lead content. This would sadly be more of the same. [Makes you wonder why we all took two days out of our lives to go to the CPSC to give comments at last week's 15 Month Rule workshop, or even more bizarre, why the CPSC called for comment letters on the 15 Month Rule by January 11 - if the Commission is seriously thinking of voting tomorrow to lift the Stay without considering ANY of this input. So - which process is a sham, the workshops and the comment letters, tomorrow's vote, neither . . . or both?]

The problem with the August 14 "date certain" proposal is that the following matters have not been resolved:
  • Testing frequency
  • Component testing
  • Re-testing requirements
  • Sampling requirements
  • ASTM F963
  • Lab certifications

It was noted in today's hearing that only EIGHT certified laboratories have been approved for lead content in children's non-metal products, three on the West Coast and the rest overseas. Here's the list:

  1. Bureau Veritas (three China lab locations)
  2. CTC Group
  3. Intertek (two China lab locations)
  4. Istituto Italiano Sicurezza Dei Giocattoli S.r.l.
  5. MSR Laboratories, LLC
  6. SGS (one China lab, one U.S. lab, one India lab location)
  7. Specialized Technology Resources Ltd. (one China lab location)
  8. Union Technology Research & Service Center

For perspective, consider these long lists of locations for three leading labs: SGS (worldwide), Intertek (China list only) and Bureau Veritas (China list only). That's just the tip of the iceberg of the testing market (admittedly not all of these labs focus on or serve the children's product industry). One lab we use, not on the above list, reportedly can't seem to get someone from the CPSC to visit them to certify them for lead content testing. It's understandable - the effort to process all these (pointless) certifications is taking a lot of the agency's resources and time. The CPSC is just not ready to manage this enormous bureaucracy even 16 months after passage of the law. Eight labs to serve the worldwide children's product industry for access to the U.S. market by August 14 - that's a BAAAD joke.

With the Waxman amendment behind us, the Commission has a great chance here to focus its efforts in the right direction. The recent Omnibus Appropriations Bill (H.R. 3288) contains these instructions: "The CPSC is directed to assess enforcement efforts of [CPSIA] section 101(a), including difficulties encountered, as well as recommendations for improvement to the statute, and to report to the House and Senate Appropriations Committees, as well as the House Energy and Commerce Committee and the Senate Commerce, Science, and Transportation Committee, no later than January 15, 2010." This report should be the focus for the Commission at this time. The Stay is secondary to this historic opportunity, and as such the Commission should not get caught up in the moment. MANY legitimate concerns have been raised by manufacturers relating to the lead content aspects of the Stay. We are not all guilty until proven innocent - why can't these valid doubts justify taking the time to "do this right" (as Ms. Tenenbaum called for in a November hearing)?

With change in the air, the Commission needs to seize the moment and lead us out of the wilderness by calling for a technical amendment to the law. The January 15 information request is the golden opportunity. The agency should not simply respond with something designed to please Henry Waxman - that would fumble the ball. Instead, the agency must offer up suggestions designed to meet the will of Congress expressed this week - namely, a proposal to fix the flaws in the CPSIA while providing reasonable protection to children.

It's time to do the hard work. I am ready to help - are you?

CPSIA - Waxman Language Dropped from Defense Bill

In a triumph for rationality (?), the Waxman CPSIA amendment has been DROPPED as an attachment to the Defense Appropriations Bill. It is dead and will not become law (the bill is posted on the House Rules Committee page and does not include this amendment). The people have spoken! Apparently, no one particularly liked the process dreamt up by the Waxmanites, and with full rebellion by various industry groups, certain CPSC Commissioners, other House Democrats, the Senate and of course, the slighted Republicans, the language was killed.

Notably, the very fact that Waxman himself proposed this amendment is a strong concession that something needs to be done legislatively to fix the law. This is also an acknowledgement from the top that the CPSIA can't be fixed by the CPSC alone. Furthermore, it is clear that the language didn't go nearly far enough to address the many well-known issues or put the CPSC in a position to take sensible steps to fix the mess. Finally, I sense a growing desire among legislators to work cooperatively and in a bipartisan way to fix the law. Perhaps more than a year of vicious fighting is wearing everyone down. Let's not forget that the CPSIA was originally the product of bipartisanship. The withdrawal of the Waxman amendment is a strong vote AGAINST poisonous relations across the aisle, at least as it relates to safety.

Because of its evident flaws, the demise of the Waxman amendment is a very positive development, although I would (of course) prefer to see the law fixed. But fixing the law needs to be done the right way. It's time to move beyond message control and the false notion that any amount of lead is dangerous somehow like uranium. We are all adults here, and know that something less than an outright ban of trace levels of lead would work just fine to protect consumers. There may be legitimate consumer concerns over toy safety and the safety of other children's products, but the CPSIA (a law borne in anger) is misconceived as a solution.

Perhaps this crash-and-burn will bring about real change. The best outcome would be an overall change in atmosphere. There is NO REASON that all the stakeholders must continually fight like cats and dogs. When it comes to safety, this is a particularly ridiculous situation. The common interest of all adults is to protect children - NO ONE opposes safety. However, the issues in safety are procedural and economic in nature, which must be acknowledged, and the solution is more complex than may be apparent. It is my belief that a reconsideration of the CPSC's relationship with the market may provide the best "pop" for safety. A reinvigorated CPSC committed to industry outreach and partnership would work wonders. Rebuilding a genuine sense of mutual trust, rather than a mutual sense of fear and loathing, will provide the best long term protection of consumer interests.

This is NOT a pipe dream! In the wake of the demise of the Waxman amendment , we need to move forward TOGETHER to recast the law to facilitate the strength of the U.S. marketplace while protecting the legitimate interests and rights of consumers. No one needs to lose in this process. And a lot of jobs can be saved - if we act promptly and with insight.

Tuesday, December 15, 2009

CPSIA - Zhu Zhu Pets Win the Battle But Lose the War

In the modern game of forming public opinion by fanning fear, victory by over-zealous consumer groups and political zealots is all but assured. With an incurious media all too ready to fall in behind unfounded accusations, destruction wreaked by these defenders of our rights is hard to prevent.

I submit as evidence an article in today's News Journal (DelawareOnline.com) entitled "Choose toys not only for fun value, but safety value" which continues the irresponsible and debunked attack on Zhu Zhu Pets. The article began:

"Zhu Zhu Pets may be the hottest holiday gifts for kids right now, but an investigation into whether the toy is dangerous was enough to deter Lilian Latan from buying one. Latan, who lives in Middletown, has two daughters, ages 6 and 4. She reads safety labels before buying toys and games and pays attention to investigations and recalls. 'Especially with the 4-year-old, I still have to be very careful' about her putting things in her mouth, Latan said. 'I read everything about a toy, and if it's small and if it's something that looks like candy, I won't buy it.'"

The article carries on:

"Still, there have been some high-profile recalls and investigations. The commission recently opened an investigation into the popular Zhu Zhu Pets after the consumer watchdog group GoodGuide reported that the toy hamsters contain higher-than-allowed levels of antimony. If ingested, the heavy metal can sicken children. Cepia, the maker of Zhu Zhu Pets, has disputed the findings."

In fact, as you know, the CPSC cleared these toys last week. Oops!

This is a current news article. Apparently, the News Journal didn't know that the CPSC cleared this toy, nor did Lilian Latan, the consumer. They both knew of the ironicly-named "GoodGuide" and its defective test report, however. That's the problem.

This kind of damage is almost certainly irremediable. Zhu Zhu Pets lost Lilian Latan through no fault of their own. Even the highly-publicized efforts of the CPSC to stop the unfair damage to the year's hottest toy couldn't stop this permanent loss of goodwill and good reputation.

It's time to tell the consumer advocates to stop the game-playing. The toy mania, ongoing for almost three years now, helped identify the abusive practices that we, the consuming public, must resist and oppose. While you are at it, demand more of your news outlets. Newspapers and other news outlets need to ask more questions and make sure they get the story right.

You don't need to live in a tabloid world - make your opinions heard!

CPSIA - Hearing on Stay to be Webcast Tomorrow

The CPSC Commission will hold a hearing tomorrow in which they will debate the extension of the Stay on testing and certification, among other things. Here is the listing from the CPSC's current public calendar:

Commission Briefing/Meeting

Wednesday, December 16, 2009
9:00 a.m.-12:00 noon (EST)
Hearing Room 420

Open to the Public
Matters to be Discussed
1) Pending Decisional Matters: (a) Interim Enforcement Policy on Component Testing and Certification (of Lead Paint and Content); (b) Commission Action on Existing Stay of Testing and Certification; (c) Final Rule Registration Cards
2) Lead in Electronic Devices
3) Mandatory Recall Notice Final Rule

A live webcast of the Meeting can be viewed at this link.

CPSIA - The Latest Gossip

1. The CPSC issued a recall for 50 million blinds. This is one of the five largest recalls in U.S. history. More on this later.

2. The Waxman amendment has not been circulated to the House Rules Committee yet. This delay is supposedly related to last minute maneuvering among the Democrats and possible wording changes. Speculation is that Mr. Waxman may offer a few words, but no new concepts. Republicans remain on the outside involuntarily. In fact, even Senate Democrats are claiming to be marginalized by a process in which they were supposedly presented with a take-it-or-leave-it amendment on an hour's notice by the Waxmanites. Apparently, Senate Democrats represent too much of a risk for Mr. Waxman and his "no discussion" motif for legislation. It's all about control, not safety. I imagine Mr. Waxman was NO FUN in the sandbox as a kid . . . .

3. There is an interesting procedural sidelight to this amendment. The House has a rule prohibiting authorizing legislation on an appropriations bill. This rule can be waived, of course. The House Rules Committee apparently waives it (as a point of order) before the appropriations bill hits the floor for debate. [If you are asking yourself what the purpose of the rule is if it is waived as a matter of course, PLEASE try to maintain decorum out there. Mumbling to yourself is unbecoming!] The Senate has different procedural rules - it's a bit more of a free-for-all. Rumorville has it that one miffed Senator is threatening to invoke a point of order against this appropriations amendment for being legislation. Will it happen? Perhaps. It also may be some form of negotiating ploy for different language. Will risk assessment rise from the dead? Don't bank on it (you fat cat bankers!).

4. The Stay will be voted on by the Commission as early as tomorrow. What will they decide to do? Silence . . . . Again, rumors circulate that they will lift the Stay for certain products and certain rules,and continue it for others. The dimensions of what they will do is just not known. Your letters and emails have been read - but do they care? I guess we'll see . . . soon.

Monday, December 14, 2009

CPSIA - Missing the Point

I hate to beat a dead horse but something is amiss in the debate over safety policy in the community interested in the CPSIA debacle. As readers of this space know, Sean Oberle and I have engaged in a spirited exchange of views lately. In his latest short reference to me and my opinions, he criticizes my choice of words: "I stand by my criticism. I believe that certain words -- visceral terms like terrorist, rapist, murderer -- should be reserved for the actual perpetrators of heinous and brutal acts of violence. I believe that using them otherwise, no matter how justified the user's anger, is inexcusable."

I wanted it noted for the record that I have not used the terms "rapist" or "murderer" in this blog to my knowledge. "Terrorist", certainly, but not those other terms.

Frankly, if I can dish it out, I have to be able to take it, so I have no problem with Sean having his own views on the subject of my diction. However, whether or not my words are offensive, the big issues in my blog do not relate to how I express myself. In this case, the issue I raised was the behavior of self-appointed public representatives (the consumer advocates) who wreak too much harm IMHO. To counter my clear argument with a continuing attack on my choice of words is to miss the point entirely.

I think the debate over safety and over the way we govern ourselves is just too important to be trivialized by arguments over whether I used a "bad" word. Let's stick to the issues and try to resolve them. In this case, the consumer groups are misbehaving, seriously misbehaving. You have CEH turning in sandals for lead in the insoles, GoodGuide turning in Zhu Zhu Pets for failing an invalid test (and hyping an imaginary health risk that presents virtually no chance of causing harm to anyone), Illinois PIRG criticizing toys with lead levels above ZERO, and Kids in Danger promoting the notion that small companies are "the Trojan Horse" of big business and big chemical companies who are poised to swoop down and gut the law for their own benefit. The coordinated hype of these groups, irresponsible individually and collectively, is terrorizing the public, whether Sean Oberle likes the term or not. THAT'S the issue.

Feel free to ignore my words . . . but please heed my message.

CPSIA - Waxman Amendment Update

A few tidbits:
  1. The Waxman amendment is expected to be attached to H.R. 3326 Department of Defense Appropriations Act, 2010. It has not been added yet, but will be done just before it goes to the floor of the House, presumably sometime tomorrow. It is expected to appear on the House Rules Committee website at that time. Speaker Pelosi is apparently going to Copenhagen on Wednesday which is also expected to be the last day that the House is in session this year. Thus, this amendment is expected to pass into law by Wednesday as part of this unstoppable appropriations bill.
  2. Despite a flurry of frantic back room conversations, there appears little likelihood of change in the pending amendment language or terms. Mr. Waxman's staff is telling one and all that the amendment is the "best we can do" and if we don't like it, too bad for us. As noted, this amendment was written unilaterally by the Democrats with the cooperation of the Democrats on the Commission and without even showing the language to the Republicans on the House Energy and Commerce Committee or on the CPSC Commission. Hearings, naturally, are OUT OF THE QUESTION. Nancy Nord commented on the Democrats' slight today: "While the amendment is less than clear legislative drafting, with its passage, Congress does acknowledge, for the first time, what many of us at the agency have been saying for many months–the inflexible nature of the CPSIA has limited the ability of the CPSC to minimize the unintended consequences of the law–hurting product sellers and limiting consumer choice while not advancing safety. This amendment was drafted in a closed and partisan process, without input from relevant stakeholders and its shortcomings reflect this flawed process." [Emphasis added.]
  3. The subterfuge of Mr. Waxman and his allies on the Commission has resulted in almost no media attention to this critical amendment. The press has barely picked up on it (there was a tentative mention in the Product Safety Letter tonight, but that's it as far as I can tell). This plays right into their hands by keeping the dissatisfied members of Congress at bay, something that's not particularly difficult when there is so much attention diverted to "fat cat bankers" and health care legislation, among other things. Still, keeping it out of the papers helps quite a bit.

One can only hope that these tactics will backfire. This much appears clear - the legitimate interests of the regulated community, the well-documented issues of businesses (large and small) under the CPSIA, have been totally ignored. Only a small group of politically-connected industries had the power to jump the queue. Nice for them, but lousy for those of us left behind.

Sunday, December 13, 2009

CPSIA - Still Steaming Over Mr. Waxman and His Unilateral CPSIA Amendment

I am still trying to unpack what happened late Friday when the Waxman amendment to the CPSIA leaked out. Since the news is so fresh and so few of the actors have come forward to account for themselves, let's be conservative and analyze only the most positive possible scenario:
  • Mr. Waxman now accepts that some aspects of the CPSIA need to be fixed.
  • Mr. Waxman now accepts that the CPSC cannot fix the law through rulemaking alone.
  • Mr. Waxman is being a "good guy" and showing his "good faith" by allowing a change to the law.
  • Ms. Tenenbaum believed that something is better than nothing and made a practical judgment to support the Waxman amendment as a step in the right direction.
  • Ms. Tenenbaum concluded that fighting with Ms. Waxman might worsen the situation for the agency and for the victims of the law.
  • Ms. Tenenbaum thought that getting an amendment now might open the door to more amendments later.
  • Ms. Tenenbaum thought the Commission could use this "loophole" to ease pressure on at least some victims of the law.
  • None of this affects the good vibrations that emerged in recent weeks with the CPSC who has noticeably softened its rhetoric and reached out to the regulated community to find amicable solutions to the perplexing issues caused by the CPSIA.

I think that's about as sympathetic a portrayal as I can paint of the Waxman amendment and the way it was generated. With that sunny scenario in mind, how would I now interpret the events?

  1. Waxman is in control, and will not relent. Both minority members of Congress and minority Commissioners have been largely disenfranchised for the future of this law. His need for control made impossible redress of the many other issues documented by the likes of resale shops, education companies and apparel-makers.
  2. Waxman will dictate precisely the speed and dimension of fixes to the CPSIA. The pain and disruption in the market does not influence him. As the terms of the original law indicate, he does not regard economics as a factor in setting safety policy. [An economist would characterize this outlook as irrational.] Political pressure does influence him, hence the meager effort to appease the ATV and publishing industries. This amendment is consistent with the longstanding position of his staff - so there is little to indicate further flexibility. If you believe the "one bite at the apple" crowd, this is grim news and contradicts the concept above that one amendment might lead to other amendments.
  3. Waxman has no intention to publicly debate the issues under the law. Likewise, he has no intention of possibly losing control of the discussion or the message. Given his stated interest in reforming the Toxic Substances Control Act, it remains critical to portray the CPSIA as a success and as an advance in regulatory "theory". The Waxman amendment makes clear that the legitimate concerns of the regulated community are taking a permanent back seat to a political agenda set by consumer groups and the California contingent. Again, not good for us. . . .
  4. The CPSIA is now clearly the Democrats' law. Republicans have been exiled from the safety debate. It is shocking that party lines now define the children's product safety debate since injuring children is not a political issue. Yet, any notion of bipartisanship has been crushed.
  5. Whether for political gain, sympathy with the original design of the legislation or for practical reasons, the Democrats on the Commission have fallen in line with the Waxmanites. The teamwork on this amendment makes them appear to be allies. If this means that the Waxman views on implementation will also hold sway, it forecasts grim developments ahead for regulated companies.
  6. The appearance of appeasement or even complicity by Ms. Tenenbaum is inescapable. Even in the friendliest interpretation of events, Tenenbaum comes out as a weak defender of the legitimate interests and concerns of the regulated community. And "common sense" seems forgotten. What kind of partner does that make her? Do her statements on consulting with stakeholders and open dialogue seem somehow self-serving now? Right now, it is very hard to know when or whether she will toss regulated companies overboard. This makes partnership with her difficult because you must give to get . . . now that the "get" is in doubt, how can the regulated community become comfortable with the "give"? I also think it's reasonable to ask why Ms. Tenenbaum allowed this provision to be negotiated in the dead of night. That's not how a partner behaves.
  7. There is a BIG issue of trust within the Commission here. The very public way in which the Republican Commissioners received notice of their irrelevance will cause lasting injury to relationships. It is hard to see collegiality restored quickly on the Commission after this betrayal. Of course, I can't help but recall the mantra repeated by many pro-CPSIA advocates - that the CPSC needs a five-person Commission. Doesn't the amendment "process" expose this as a joke? If Tenenbaum and Waxman are going to ignore the Republicans, was Congress really saying that the CPSC desperately needed three Democrats in a majority position? Gosh, I think the Republicans that voted for the law might take issue with this . . . .
  8. The inclusion of lead labeling for excluded items confirms the zealotry of the Waxmanites, the impotence of the resistance movement and the persistent disregard for the needs of innocent victims of this law. Of course, difficult-to-obtain exclusions are quite anti-small business, as are the lead labels. The labeling is even more incredible if you take into account that exclusions will only be granted in circumstances where the inclusion of lead will have virtually no conceivable health impact. So if the Chairman would sell us down the river with a useless and extraordinarily-limited amendment without addressing ANY of the other pressing issues or demanding the right of the Commission to assess risk, then what else can we reasonably expect from here on out?

That's the $64,000 question, isn't it? Frankly, this amendment and the behind-closed-doors process which excluded all corporate stakeholders and many political stakeholders, sharply erodes trust in all directions. Doing this behind everyone's backs - during a two-day workshop purportedly designed to solicit stakeholder feedback and get everyone on the same page - seems remarkably disingenuous. You can safely assume many recent conversations in retrospect seem less than candid or straightforward.

To work out the difficulties with this law, leadership on the Commission (Democrats) and in Congress (Democrats) need to come to grips with the fact that the law is incredibly misconceived and destructive. The dream that the Precautionary Principle actually works to anyone's benefit has been debunked. To cram down this noxious law despite the legitimate concerns of the regulated community will NOT snuff out opposition - but instead will inflame it. The problems won't go away, and cannot be buried. The issues will fester and rot until addressed.

If the issues marbling the law are allowed to linger long enough, the Democrats can ensure lasting damage to the agency and market catastrophe. I will repeat myself: there is a legacy issue for Tenenbaum and the Dems - and having jettisoned the Republicans, it's all theirs now. The CPSC can be rendered ineffective and wholly bureaucratic, with all the attendant damage that entails, or it can be restored to glory. The choice is theirs and the stakes are high. Interestingly, the regulated community will support an effort to restore effectiveness at the agency, but that will necessarily involve restoration of risk assessment and political independence at the agency. Hard to see Waxman going along with that.

Do we have the leaders for this effort on the Commission? Time will tell. Like everyone else, they will be judged by their results. You and I are along for the ride, whether we like it or not.

CPSIA - More Details on Bogus Zhu Zhu Pet Scare

Forbes.com published a fascinating article about the Zhu Zhus by the editor of STATS.org, an affiliate organization of George Mason University. In this article, Trevor Butterworth thoroughly debunks the fear mongering of the so-called "GoodGuide" in their inept scientific "analysis" on Zhu Zhu Pets. Among other things, he compares the levels of antimony on the nose of the Zhu Zhu Pet with that of a mattress (antimony is found in certain flame retardants and has been carefully studied by the CPSC for this reason). His conclusion: "You would need to upgrade Mr. Squiggles from a hamster to a pet Ox and sleep on him for 8 hours a day for a decade to simulate [the] negligible exposure [in mattresses]." So the fact that "[d]epending on the level of exposure, antimony can lead to cancer, lung and heart problems and impacts on fertility" oft-repeated by an uncomprehending media in reporting on Zhu Zhu Pets is completely inappropriate. It has been put out there just there to scare you . . . or else the consumer advocates (protecting you!) have absolutely no idea what they are doing. Let me see, which makes more sense to me . . . that's a tough call, frankly.

For the record, I believe the Zhu Zhu Pets scam was first exposed by the TheSmartMama.com in this post. Isn't it ironic that a "green" activist is the one to expose the lousy work of the so-called "GoodGuide"? Jennifer Taggart has been an active and useful participant in the debate on the CPSIA. Apparently, the politics of keeping everyone so, so, so safe does not prevent her from standing with the victims of this law. Hmmm. Mr. Waxman, are you listening (or do you even care)?

To close this politically-incorrect essay, I want to again quote from Mr. Butterworth's article in Forbes:

"In the face of unreasoning, unjustified terror, there is, perhaps, only humor. When the story broke about Mr. Squiggles in the United Kingdom, one American from Jacksonville, Fla., posted the following comment after a related news story: 'Dear England, I must apologize for my idiot brethren in San Francisco. You see, in San Francisco they are afraid of everything. There is absolutely nothing that doesn't terrify these people.'"

Can't top that!