Thursday, December 3, 2009

CPSIA - Hearing on Testing Stay and Interim Enforcement Policy

There was an important hearing yesterday at the CPSC on the testing stay as well as on the announcement of another interim enforcement policy on component and lead-in-paint testing (their third). I was able to watch about 1:40:00 of the hearing before I lost the signal. I think I got the gist of it, and wanted to give some highlights here.

First and foremost, the tone was relaxed, friendly and open. I want to compliment the Commission and CPSC Staff for making an effort to change the "feel" of their communications. I have not lost sight of the fact that substance matters . . . but so does choice of words, actions and tone. In this space, I have criticized Gib Mullan for this in the past. I would now like to publicly acknowledge Gib for taking pains to communicate his new enforcement policy in a reasonable and business-like tone. There were no threats; quite to the contrary, Gib portrayed the interim policy as flexible, reasonable and measured. I appreciate that.

The Commission and the CPSC Staff are also asking better and more sensitive questions, like whether there is enough lab capacity to do all the tests when required (for instance, there is apparently ONE lab approved to test bikes), how much lead time industry needs to adjust to the component testing rules, whether people are testing components now, and so on. Jay Howell even advised the Commission to weigh the impact on regulated industries when considering how or to what extent to lift the stay. This line of reasoning is another sign that we are being heard, and the issues confronting regulated businesses are on the radar . . . finally.

The content of the hearing was essentially technical. This lengthy discussion was all about compliance with the new requirements. The rules implementing the blessed CPSIA are ornately complex. Mullan in fact informed the Commission that his new interim enforcement policy is replete with footnotes - in other words, the micro-print is now getting smaller. NONE of the discussion involved SAFETY or any discussion of risk.

Let's consider what that might mean. The CPSC seems obsessed with paperwork now. The two hours I watched were all about how companies might comply, whether they could comply, what forms they had to fill out, who had to perform tests and when, and so on. Of course, that is a critical subject to discuss . . . but it struck me as odd when these details droned on and on without a single mention of the purpose of the discussion - making kids safer.

It is hard to see how this byzantine structure will achieve better safety. To me, the new scheme is all about bureaucracy divorced entirely from purpose. This is the CPSC that the Commission apparently thinks Congress legislated - a bureaucratic agency, one no longer empowered to allocate its resources to prioritized safety threats, instead relegated to paper pushing. Congress has redesigned the agency to be administrative in nature as it relates to children's products. By defining "safety" precisely in the CPSIA for the CPSC to administer, it forbade the agency from exercising judgment. Likewise, we in the business community are no longer trusted to exercise judgment or operate without governmental supervision. The Nanny State knows best, better than the business community or even the CPSC, and insists now that the CPSC stop thinking and just administrate.

With this new focus, the conversation about safety has taken a bizarre turn, in my opinion. The discussion is principally about how companies can comply. That is the standard against which the new CPSC policies seem to be evaluated. Is there enough testing capacity? Can companies afford it? Can a "home crafter" find paint that was tested by the manufacturer? [By the way, this is a so-called voluntary test - Congress in its INFINITE wisdom decided that makers of children's toys must test paint, not people who actually produce the paint, thus the CPSC has to hope and pray that paint companies will test their paint. Nice!] Which components need to be tested on a little dress? Only the buttons, yippee! No mention of safety or the purpose of this exercise. The high point occurred when both Chairman Tenenbaum and Gib Mullan volunteered that most paint is already certified to be lead-free. This was stated without irony, despite the 20 minutes tortured lecture on how to test paints to ensure compliance. Safety, what's safety?

So are things now as simple and easy as portrayed? Robert Adler asked if any groups besides the Handmade Toy Alliance had contacted the CPSC with concerns about the lifting of the stay. Jay Howell said no. [My ego survived this minor bruising!] Putting aside the massive failure of business people and trade associations to effectively lobby on this issue, this seems to portray business people as accepting of the lifting of the stay, or at least highly unmotivated on the subject. Ergo, it's fine to let it go.

What might a lifting of the stay mean? We'll all have to test. Test what? Ah, that's the rub. It's so complicated that I can't begin to attempt to explain it here. It took them Powerpoint slides upon slides to lay it out, and it is full of asterisks and exceptions. A taste: there still is no phthalates standard or any approved phthalate testing labs or any approved ASTM F963 testing labs. [Makes me wonder what I have been paying for all these years in our tests against F963. . . .] So testing will only be required against some rules, not all, and as new rules come into effect, you will have to figure out what additional tests are required over time. Good luck getting it right.

Sadly, the agency avoids the issue of complexity by focusing on whether it's POSSIBLE to comply. They put up a photo of a little dress, announce with satisfaction that only the buttons need to be tested, and then assert that button companies will test those buttons to preserve their market. Okay, let's concede that point - it's probably true. Does that solve the problem? Not if the rules are so complicated that no one understands them. Even if you understand them, will the people you deal with understand them the same way (your customers, your consumers, consumer groups, the CPSC, Customs, 50 State AGs, the Chicago Tribune, and so on)? THIS ISSUE I have raised again and again (so when the Commission asks about complexity, I want a plug!] Very few people understand these rules so is it realistic to assume they will follow them (even if they are able to comply)?

A typical problem for people who are immersed in something complex and highly-specialized si forgetting that everyone else is not as immersed in the details as they are. It's a big wide world out there, but the CPSC may only be dealing with people who have invested the time and energy in understanding the complex rules as they have. This may make it look like EVERYONE gets it but in fact, they don't. The 800 lb. gorilla here is the silence of the majority. What do they know and understand? Not much. This is where the expression Keep It Simple, Stupid (The K.I.S.S. Principle) comes from. The new rules are anything but understandable AND the CPSC tries to solve each identified problem by adding more and more complexity (more rules and exceptions).

So what have we here now? We have a much more congenial and seemingly well-intentioned CPSC that finally grasps the nature of the mess with the regulated community and is trying hard to change course and create a workable solution . . . but all within the context of a law that makes no sense. So to do that, they are building an entirely unworkable sets of rules, unworkable because no one could possibly understand them. Each rule violation is the possible subject of a lawsuit by an eager plaintiff's attorney, a newspaper investigation spurred on by a consumer group or the subject of a fine or possible jail time, or all of the above. Fear of these externalities will scare people out of the market, simply because they know they can't control their business environment. This is real. I personally fight these fears every day - and I am someone obsessed with these rules and know them well. But not perfectly. Of course, we could do something else with our time, our resources and our people - but we don't want to. We are very devoted to the education business and are trying to defend our right to engage in that endeavor without undue risk.

The sad fact is that the CPSC cannot create a workable solution, even with a smile on their faces and good intentions in their hearts, without addressing the deficiencies of the law. A nonsensical law cannot be fixed with implementing rules. At some point, the CPSC is going to figure this out when they see that compliance is very low, and they are overflowing with violations. The rabid and compromised consumer groups have demonstrated their utter lack of character in hunting down technical violations, like sandal insoles, and then mobilizing self-interested local politicians to enforce without even talking to the CPSC. We can certainly expect them to continue to hound innocent makers out of this market.

The details of this hearing are also interesting. The CPSC will be releasing a definition of a "children's product", "toy" and "childcare item". This is a possible hint that some items or product categories may be excised from the law, perhaps including certain educational items used in schools, some kinds of apparel, ATVs and so on. The CPSC Staff has crafted some interesting solutions to testing of lead-in-paint and components, that will help lower costs significantly. They also are aware of the heavy load carried by small volume manufacturers with fixed testing costs and are trying to find an economic solution. They even acknowledge that larger companies also make low volume products, meaning that solutions need to take EVERYONE'S situation into account. All of this is good, it's progress . . . but it's not enough. The Commission needs to attack this law and push Congress to get it fixed. If this Commission does not want to leave behind a neutered and impotent CPSC, crippled by a hornet's nest of ineffective rules, it needs to take on this ultimate battle.

I certainly hope they won't duck this very important pitch.

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