Saturday, October 31, 2009
"Periodic Testing – On a related issue, the CPSIA requires that we issue a rule setting out further testing requirements within 15 months of enactment (November, 2009). The agency will not meet that deadline in spite of best efforts to do so. This issue is extremely complex and we need additional input from the affected public before we give answers. The staff will hold workshops on December 10th and 11th to seek public participation. A Federal Register notice will be published with details about the workshop and will also provide details for those who wish to submit written comments. In addition, a draft “Guidance Document on Testing and Certification” will be discussed with the Commission at a public meeting on November 9th. See http://www.cpsc.gov for webcast details." [Emphasis added]
This is good news for the business community on several levels. First of all, the CPSC is now communicating informally through at least one blog. While it increases the number of places to watch for legal developments, you can't beat candor and openness. In addition, the CPSC is doing the considerate thing - giving advanced notice of a material event (the delay in this much-anticipated and much-feared rule). They are being nice, which is MUCH appreciated.
Finally, the Commission is being candid and admitting a small failure. [In fact, the admission is being done in a bi-partisan way, as Democrat Tenenbaum presumably consented to Republican Nord announcing this development in her new blog.] It is somewhat more complex than that, in fact. This is probably not best understood as a failure of the CPSC (although they are going to miss a date). They are CHOOSING to miss a date. Why? My guess is that they realize how important this rulemaking is, and are probably troubled by what the rule would look like under the (defective) CPSIA. It's a public acknowledgement, the strongest in a long while, by the agency that it is genuinely troubled by the unintended consequences compelled by the new law. Withholding the 15 Month Rule is a sign of resistance against doing more damage in the marketplace.
The CPSC has heard from many stakeholders that this rule could be the final straw. I think it's fair to assume that they do not want to do more damage. It is a bi-partisan worry, too - which is in the character of the CPSC over the years. They have not traditionally been the enemy of the business community, so it is nice to see them act with consideration again. Rumorville has it that the CPSC Staff could not find the magic words to make this rulemaking "work". Good to admit it. There's a lot implicit in that statement, most of it very good.
In my comment to the Nancy Nord blog, I ask the Commission to use the plain English meaning of the statute to make their decisions. If they cannot make a sensible decision using the plain English meaning of the words (e.g., does "any" mean "any" or not?), then the Commission should go to Congress and ask for an amendment. A statutory scheme based on twisting words into pretzels does not serve anyone's interests. To understand our obligations, we go to the statute and read it. How can we run our businesses if there is a super-secret meaning to plain English words? Are we expected to master hundreds of pages of releases spread of months or years to discover the nugget explaining that "any" doesn't mean "any"? This kind of treasure hunt inevitably fails. [If you like treasure hunts, see my recent blogpost on resale shops.]
Importantly, the CPSC has announced a two-day meeting on the 15 Month Rule on December 10/11. This is a critical meeting for all stakeholders. Please try to make it. I will be there.
Bottom line, this announcement is another gratefully-received sign of a shift in the wind. Let's see whether more good follows in coming weeks. We now have more dots to connect. It would be wonderful to be able to trust the CPSC and the law again. Guys, please keep plugging away!
Friday, October 30, 2009
These hearings, if they come soon, will be the first opportunity for Congress to hear from business owners affected by this law since the law's passage. [I am disregarding last May's staged hearing at the House Small Business Committee that was nothing more than an opportunity for the Democratic leadership to launch yet another missile at the CPSC for not using "common sense".] It is shocking that Congress has dodged this necessary "sunshine" activity. I have always felt it is part of their message control where all problems are blamed on the CPSC, Congress naturally being faultless like any good omnipotent organization. The persistence of this Congressional attitude is exposing the CPSC to embarrassment as it attempts the impossible, sensible implementation of a defective law. The harder it tries, the more it twists itself into a tighter pretzel. Notwithstanding the unfortunate position it is in, the CPSC seems quite reluctant to challenge Congress (or even notify Congress of its own educated view of the matter). Care to guess who is stuck in the middle?
We can only hope that Congress will develop a renewed interest in fact finding, or the CPSC will finally stand up and deliver the unsolicited message that the CPSIA needs to be fixed. While that's hardly kneecapping Congress, I recognize that some members of Congress won't want to hear anything of the kind. Whether you call these changes "fixes", "amendments" or "tweaks", the fact remains that an incoherent, overreaching law governs the land, and its byzantine requirementes are making administration of safety almost as complicated as the tax code. The CPSC needs to educate and guide Congress on the changes necessary to create a robust but workable, effective but sensible regulatory system.
Oh, to dream . . . .
CPSIA Casualty of the Week for October 27:
As this CPSIA Casualty of the Week illustrates, the CPSIA continues to wreak havoc in our marketplace. Congress and the CPSC need to address the problems with CPSIA implementation to help small businesses by restoring "common sense" to our nation's product safety laws.
Wisconsin media reported on October 12, 2009 that because of CPSIA, the Middleton, WI police department will no longer use stuffed animals to comfort children who have gone through traumatic events. Middleton Police Sgt Don Mueller said that the police for years could hand out stuffed animals or other toys to “help children feel a little better.” Now because of CPSIA, the police department is switching to books from stuffed animals “because of the chemicals they might contain….to make sure they're in compliance with new federal regulations.” As Sgt. Mueller puts it “[we] get older toys that come in and they're perfectly fine to give out, but we don't know if they were made under the new requirements." A much-needed comfort program has been converted into a misplaced literacy effort. (Editors note: Those books better be made after 1985. CPSC announced that “it cannot determine” if children’s books made before 1985 do not exceed the lead limit because of the ink and will issue guidance on this issue “soon”).
Office of the Small Business Ombudsman
Thursday, October 29, 2009
I thought I would share a few tidbits from the meeting:
Chairman Tenenbaum's Keynote Speech: Chairman Tenenbaum addressed the conference on Wednesday morning. Her speech is posted on the CPSC website. The speech included a few hints of movement toward accommodation of businesses under the CPSIA, but unfortunately, it is only provides hints at this point. It is worth noting that sidebars at the conference suggest that there is more sensitivity to business concerns than CPSC public statements might suggest, but then again, we can only rely on real action, not just words. The next development to look for is a change in tone and a change in actions. When we can triangulate from words to actions, and see a real easing of the intense pressure on businesses, then we can take the off-line assurances more seriously.
Some highlights from the speech:
- The "good": The "15 Month Rule" is due soon. Tenenbaum promised a special two-day workshop on this rulemaking IN ADDITION to normal public outreach. She emphasized that they want to "get it right". [Ed. Note: Rumorville has it that this rulemaking will be delayed, and the two day workshop may precede the issuance of the draft rule. Likewise, there is growing suspicion that the testing stay may therefore have to be stayed. There are multiple reasons why this may have to happen.]
- She emphasized a need to minimize the burden on small businesses. [Minimize is a relative term, let's not get too giddy yet. Need to see what they have up their sleeves.]
- The CPSC is reaching out to SAGs to make them partners in the safety process. She wants to minimize competition between the CPSC and the SAGs. I consider this a major advancement in CPSC practice and a nice contribution by Ms. Tenenbaum in the early days of her administration. Arguably, the 2007-8 crush of State legislation and SAG grandstanding evidenced strong State feelings of isolation and legal impoverishment (in addition to a general desire of local politicians to appeal to the populace before elections). A proactive approach by the CPSC to working with the SAGs is the best chance for ANY OF US to neutralize or minimize the disruptive behavior of States and SAGs in the future.
- Ms. Tenenbaum announced a substantial change to the penalty factors when she said: "In cases where CPSC may impose a financial penalty on a U.S importer for violations, CPSC may to take into account whether the importer has safety or compliance programs in place and whether they conducted pre-market and production testing to minimize safety risks." Gib Mullan also acknowledged that the penalty factors will be changing. This is another faint sign that we are being heard. The penalty factors were very harsh in the first draft. After a bit of an uproar, it appears now that the agency is going to moderate its approach somewhat. If this turns out to be a "real" shift, it is good news indeed.
- The "bad": The overall tone of the speech remained harsh and somewhat threatening, at least that's how it felt to me. Phrases such as the following were reminders that the CPSC has a big club and intends to use it:
- "Chinese suppliers and U.S. importers are now on notice from both governments that it is a mistake to depend on good intentions and a few final inspections to ensure compliance with safety requirements."
- "We will enforce in a firm but a fair manner the new federal law that puts strict limits on lead and phthalates in children’s products and makes all toy requirements mandatory." [The emphasis was hers in the live speech.]
- "As I have consistently stated, we intend to enforce this law that Congress put in place in a firm but fair manner. CPSC also has a federal rule making underway that puts U.S. importers on notice."
- "Another area that we at CPSC are rethinking is the singular approach used in the past to identify risks and simply recall products when necessary. This is one aspect of enforcement that will not work if pursued alone."
So Ms. Tenenbaum maintained the tough tone but gave hints of a coming thaw. We'll see in due course if I am imagining things. Needless to say, I hope not!
Remarks of Gib Mullan: Gib Mullan, the CPSC chief enforcement officer, gave a short speech summarizing the CPSIA and recent events. I must say I found some of this speech positively chilling. For one thing, Mr. Mullan noted with apparent satisfaction the first recall of a toy for violations of the phthalates ban. I believe this refers to the recall of 40 inflatable toy baseball bats previously highlighted in this space. Aside from the fact that Mr. Mullan confirmed that the enforcement focus of the agency is (supposedly) bath squeeze toys, which certainly does not include inflatable baseball bats, this micro-recall of 40 bats is highly suggestive of a strict liability enforcement policy. If that is so, then what is the purpose of pointing out this recall to the crowd at ICPHSO? I would suggest that it is intended to scare the business community. Mission accomplished?!
Further to that mission, Mr. Mullan announced that the agency is attempting to be more "consistent" and "rigorous" in assessing penalties. Okay kids, think of Target's $600,000 penalty - if the CPSC is going to be "consistent", what does that precedent mean for the rest of us? If Target gets hit with a massive penalty after it performed preshipment testing, had no actual knowledge, was increasing its safety surveillance and turned itself in voluntarily after catching its own errors, what should we expect from a "consistent" penalty practice at the agency now? Mr. Mullan continued by noting (again, with a bit too much relish) the rising tide of penalties assessed by the agency in 2009, and further noted that they haven't even cracked the 2007 lead-in-paint violations yet. He said larger penalties should be expected now, given the new powers allowed the agency under the CPSIA.
What is the purpose of this announcement? What else could it be, besides an intent to scare you and me? And, hats off to the chef, it succeeded. Among the many outrages of this new practice is the focus on retribution for old recalls with new penalties. Why is this a problem in my view? Well, for one thing, no one can do anything about the 2007 recalls at this point. Is the CPSC under the impression that the toy industry hasn't "learned its lesson" yet? If that isn't their view, then why lay on mega-penalties for matters that were apparently closed with significant expense now almost three years ago?
At what point is our penance complete? I can only supply a couple suggestions to explain this new penalty practice - (a) vindictiveness (as in CPSC meting out "justice", rather than simply ensuring a safe marketplace), and (b) terrorizing the corporate community into "compliance". Both rationales are wrongheaded and destructive. I continue to return to my original comment (December 17) on the penalty factors - CPSC penalties can only be consistent, rigorous, purposeful and (importantly) predictable if they are restricted to egregious conduct. Until the CPSC disciplines itself to a fairer penalty system, ALL OF US will assume we are next in line to get whacked like Target. After all, the CPSC has said publicly that they intend to be consistent and rigorous on penalties - in other words, they are telling us that we can and should learn from Target's experience. That message unleashes a parade of horribles. The CPSC needs to take this on board.
One last observation about Mr. Mullan's speech - he noted that recalls from China fell by 40% in 2009, the first fall in years. This is of course good news for everyone, most of all the children's product industry. As we know, success has many fathers but failure is an orphan. Many pundits point to the CPSIA as the reason that recalls have fallen. Mr. Mullan added another factor, the deep recession of 2009. Both of these factors contributed, but I think the real "father" of this success is that the notorious publicity of the new law and the new strict enforcement of the lead-in-paint rules (under the old law) led various companies and industry organizations to get mobilized to address safety practices. Who among us wasn't shocked and horrified by the suicide of the owner of a Chinese factory that supplied Mattel with lead-in-paint toys? The horrors of the recall frenzy and everything it entailed led to changes in practice. The remaining hubbub of the new law is just a hang-over IMHO, and does not explain the good recent reduction in recalls. For this reason, I believe the focus of the CPSC and its enforcement activities can and should SHIFT toward maintaining these gains through industry outreach, education, targeted and focused enforcement, and development of new and modern systems appropriate to the changing marketplace. It even calls into question the value of the law's kneejerk requirement of prophylactic testing, something I am on record opposing.
Health Canada and Bill C-6: Frankly, I have not had time to dig into the Bill C-6 yet but it got a lot of air-play at ICPHSO. Much of the brass at Health Canada was there, and I attended several talks by these professionals. I must say I left impressed with the Health Canada leadership. They were incredibly approachable and engaged. I was not made to feel like the "enemy". Especially notable was their TONE. They don't even imply that businesses are populated with bad or untrustworthy people. They repeatedly pledged to work cooperatively with businesses and noted that they have done well for 40 years with voluntary recalls and non-confrontational relationships. Hmmm, could it really be true that you catch more flies with honey than with vinegar?
They also stressed their interest in hearing about "lessons learned" and engaging in real dialogue as the new bill is crafted and refined. They noted some real gaps in their enforcement empowerment under the existing law, which they characterize as outmoded, but then again, they also stressed that these powers are intended to be used only if necessary. What a different tone they struck. They convinced me that they are nice people who mean to be partners in safety with industry. A refreshing change.
The contrast with the last year of CPSC hostility was palpable. It gave me reason to reflect on the course of my own relationship with the CPSC. Interestingly, I was a big fan of the agency until about two years ago. For 17 years I trusted them, I consulted with them, I had no reluctance to work with them and thought of them as partners, I advised friends to trust them, I did not see them as the 'enemy". The CPSIA and the feeding frenzy of the last two years sadly eroded that trust. Trust has to be earned, of course. I believe trust in the CPSC can be restored but not without real effort and real action. The Health Canada folks struck the right tone, and we can only hope that the CPSC was listening. Industry and the CPSC do not have to be at loggerheads, and there can be trust (there MUST BE trust). To get there, the "new" CPSC may need to make some concessions, but a path to this worthy karma level does exist. This detente does not need to involve endangering children, either. Health Canada implicitly recognizes that industry has no interest in harming children. Considerable efforts by industry are expended to avoid this terrible outcome. The presence of a few bad or incompetent actors in a massive marketplace of many thousands of companies and millions of different products does not make the rest of the market participants into bad guys, too. This is the notion that must be abandoned.
Final Thoughts: ICPHSO was a great event for networking, off-line conversations and sharing of perspectives. I feel that there is room for more dialogue. We can only hope that some barriers are being broken down, and that we may see some positive surprises (for a change). It is also clear, as Health Canada demonstrated, that a regulator can be effective and non-confrontational at the same time. We know the CPSC has a big stick, perhaps they can stop reminding us with harsh rhetoric and harsh actions (we won't forget about the stick, trust me). Next on the agenda is a rationalizing of the rules to allow businesses to function economically. Unfortunately, I cannot conceive of this development without a change in the law. To do this, the CPSC must summon up its resolve and TELL Congress that changes are needed. I do not see any way to avoid this. Time has a value, too, so the CPSC leadership must weigh the consequences of waiting - costs are mounting rapidly as time goes by.
I hope I'm not dreaming. This can be done. The coming weeks will reveal a lot about the direction and resolution of the pending issues confronting the business community.
Friday, October 23, 2009
For this reason, a ballpoint pen (a "pen") is okay, unregulated and untested as to lead if it is not "primarily" intended for children. If a pen is "primarily" intended for children, it needs to be proven lead-free (within the new standards, okay). Notably, all children use pens. Thus, we can safely assume there are two kinds of pens used by children: (a) those primarily intended for children (the smaller set of pens) and (b) those NOT primarily intended for children (the larger set of pens). The CPSC is only interested in testing and regulating the smaller set, the ones primarily intended for children - this in spite of the fact that the agency knows that the unregulated larger set is used universally and in high numbers by children. In theory, the pens in both sets could be identical - and it wouldn't matter. Conclusion: the "new" CPSC is all about enforcement (which pens are regulated and which are not?) and NOT about safety (which pens are actually safe and which are not?). This is truly sad - for American consumers (including me and my family).
How did this happen?
The law pushed us here, and the new leadership at the CPSC, led by Inez Tenenbaum, was only too enthusiastic to take us along for the ride. The new CPSC outlook appears to be that the CPSIA defines safety and ergo, vigorous enforcement of the law makes everyone "safer". If the law proscribes a product, a feature or a use, it is unsafe, and barring compelling evidence to the contrary, if the law doesn't proscribe the product, feature or use, it's safe. That's it. Turning back to the astounding pen decision, the rationality of the CPSC's position is therefore dependent on the CPSC having NO information suggesting that pens present a danger to children from lead. This makes it possible for them to say that it's fine to sell unregulated pens to kids. Of course, it also means that they are knowingly outlawing something that they KNOW is safe (pens primarily intended for children). They just don't want to admit it.
Ah, that's the rub, isn't it? They won't admit that their mission has been terribly distorted by this law. They want to pretend that, in fact, they are still the champions of safety. [Ed. Note: In many ways, the CPSC remains a great champion of safety. The implementation of the CPSIA is NOT one of those ways.] How far will they go to assert moral high ground as the CPSIA police rather than as an agency with a safety mission first and foremost?
Earlier today, the Grand Haven Tribune posted (yet another) article about the ill-effects of the CPSIA. This time the article focused on the dilemma faced by small cottage industries and handcrafters under the new safety law. Consider the quotes from the CPSC spokesperson in light of our discussion:
"'This law is intended to make products safer for children because there are too many incidents where children have ingested too much lead,' said Kathleen Reilly, public affairs specialist for the U.S. Consumer Product Safety Commission. 'There are many, many products that contain lead. So this takes a look at preventing that.' With the product safety act, the commission plans to significantly reduce the total lead content in products from 600 parts per million to 100 ppm by August 2011. Products now must not contain more than 300 ppm, according to the act. 'We're not trying to put people out of business,' Reilly said. 'But there has to be safer standards for children's products. . . . We're not out to get anyone. . . . We're just following the law to make sure people at home who make children's products make safe products. How do you know whether or not it's safe if it's never been tested?'"
So, the CPSC says that the standards are needed to stop "too many incidents" where children have ingested "too much lead". From toys, hairbows and clothing - or from lead paint on the walls of their homes or by ingesting lead in dirt? The new CPSC shockingly does not distinguish among these sources of lead - it just reads the law, enforces it . . . AND then justifies it. The assertion that we have a widespread lead poisoning problem from children's products is the justification, however fantastic and faulty. I would like to point out that the notorious lead-in-paint recalls of 2007/8 resulted in ONE reported injury and ZERO deaths over 25 months. Hmmm.
The agency continues its justifications with the implication the agency believes and believed that "safer standards" were necessary. Is it true that the CPSC went to Congress to ASK for these new standards? Did they testify in favor of the tighter standards, saying that they were necessary to stop a public health crisis? Did the CPSC Staff rise up and demand that standards be tightened? The answers are no, no and no. However, Ms. Reilly's remark makes a good sound bite and it makes the agency's enforcement policy sound appropriate and necessary.
The worst of this string of justifications is her assertion "How do you know whether or not [a toy is] safe if it's never been tested?" Where did Ms. Reilly come up with this one? I was not aware that the CPSC actually believed the old chestnut that it is appropriate to assume the worst about products unless manufacturers preemptively test. Say, this sounds faintly familiar . . . yes, it's coming back to me . . . . Anyone remember this quote: "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] The author: Rachel Weintraub, director of product safety for the Consumers Federation of America in the Wall Street Journal on September 10. In other words, the CPSC has adopted the consumer groups' rationalization for the CPSIA to justify their emphasis of enforcement over safety.
Ironically, the coherence of the CPSC's new message is destroyed by the fact that items outside the regulation (such as pens not intended for children) won't be tested but may be used widely by children. Are they still "safe"? Go on, CPSC, chase your tail!
The mission at the CPSC used to be safety. A product, component, material or use was evaluated for risk, and it was regulated only if it presented a harm. Now Congress has fobbed off a dangerous defective law on the CPSC, installed an enforcement-first Chairman, who in turn ramped up the agency's PR machine to make the new police force look like a safety patrol. In fact, the new leadership seems obsessed with enforcement and rarely asks about actual safety when discussing products affected by the CPSIA. When thinking about brass or about pens, does the subject even come up? Do I need to remind you of the rhinestones fiasco? The agency solves this problem with its "public affairs specialists", employed to lull the public into submission with the tranquilizer that we always needed this excessive regulation. . . . That makes it all okay!
I am disappointed in myself that I am even somewhat surprised by all this. After all, history is written by the victors and in this case, the Democrats put their people in charge and told them what to do. The retelling of the safety story has begun, and in the process the 37-year mission of the agency is being obliterated before our very eyes. Ironically, I feel strongly that this will end in Americans being less safe, not more.
Thursday, October 22, 2009
Here's a few quotes to chew on:
"Dr Mandy Drake, from Edinburgh University's centre for cardiovascular science, said: "What the study shows is that it is not simply a case of one factor in isolation contributing to abnormalities in male development but a combination of both lifestyle and environmental factors, which together have a greater impact." [Come on, guys, you don't expect us to believe that, do you?!]
"'In most studies reproductive disorders are only seen after abnormally high levels of exposure to chemicals, which most humans are not exposed to. Our study suggests that additional exposure to stress, which is a part of everyday life, may increase the risk of these disorders and could mean that lower levels of chemicals are required to cause adverse affects.' The study looked at male fetal development in rats. It found that while exposure to the chemical compound dibutyl phthalate, found in products including glues, paints and plastics, had some effects on reproductive development, this was significantly increased with simultaneous exposure to stress hormones."
In other words, phthalates may be much less of factor than stress in causing birth defects. What might induce stress while in utero? Well, how about scare tactics by politicians, media and consumer groups? How about their never-ending daily assault on the dangers of modern life? The regular appearance of articles questioning all the basics in our life, the accusations of hidden dangers lurking everywhere. In particular, for a pregnant woman (emitting the stress hormones to the in utero baby), the worrisome impression that the trusted baby products she bought from the trusted ocmpanies she has known for so long . . . can't be trusted. That's some serious stress.
And a likely source of such stress hormones today is the CPSIA. This study then lends credence to the proposition that the greatest threat to the health of our nation is Congress! The stress induced by the confidence-sapping CPSIA is apparently causing birth defects, and now we have a study to prove it.
It's time to sue Congress for this tort, and to pass legislation outlawing these stress hormone-inducing scare tactics. While we're at it, we might as well change the CPSIA, too. For good for future babies, we have to finish the job once and for all!
Wednesday, October 21, 2009
First, it is okay to incorporate as much lead as you want in your product, provided that it is not "intended primarily" for children: "The Commission is often asked what products must comply with the lead content limit, i.e., what is a 'children’s product' under the law. The answer is anything that is designed or intended primarily for a child 12 years of age or younger. 'Primarily' is the key word used in the law. Not everything a child uses or touches must meet the lead content limit, only those things designed or intended primarily for a child 12 years old or younger." So, this means that the lead limits only apply to products intended "primarily" for children, and does NOT apply to products that children might use but aren't aimed at the children's market. [This is the dilemma in the brass bushings case.] Regulation of children's products exists in its own little world, and hazards that exist within that market don't exist outside it - is that it?
The CPSC will make a determination about this intent based on what you say or what you and others think about your product: "We consider how the product is marketed as well as what the manufacturer has said about the product (if reasonable) and whether consumers commonly recognize the product is being intended for a child 12 or younger." Given that the CPSC is supposed to protect consumers from untoward product hazards (hence the agency's name), I think it is fair to conclude that the CPSC has decided use of lead is only dangerous if the leaded product is intended for children. Intent apparently affects the physiological impact of lead. Interestingly, this is also the case with phthalates. Perhaps these materials were banned from children's products because they can be activated by mind control, which is clearly dangerous.
I find the CPSC's position compelling, as it suggests that perhaps the rules for small business under the CPSIA should be different. Many people have suggested to me that we should demand different rules for small business. After all, small businesses are severely and unfairly penalized under the new law - perhaps small business should get a pass? I have always said "no" on the grounds that parents are unlikely to forgive injury based on who caused it. Injuries are bad, whether caused by a big business product or a small business product. Therefore, it seems imperative to me that one (rational) set of rules needs to apply to everyone.
If, however, lead is okay if delivered by pen (". . . most consumers would not consider an ordinary ball point pen as being intended primarily for use by a child 12 years of age or younger") but not by way of an electrical cable in a potato clock, then perhaps we can rethink the other rules by analogy. Thus, this new CPSC position paper suggests that it might also be okay for certain kinds of businesses to poison kids. Pen companies, for instance, are apparently unrestricted - your Bic can be made of pure lead, that's fine with the CPSC. By this same pretzel logic, I think it is reasonable to hold that small businesses are exempt from the law. Why not?!
In the same document, the CPSC also reiterated their excellent advice on materials that can be included in children's products without testing for lead. They chose to remind us that our old friends palladium, rhodium, osmium, iridium and ruthenium are okey-dokey in children's products. The fact that these materials are well-known to be poisonous, explosive and made from spent nuclear fuel rods did not apparently deter the CPSC. I know I am not a "safety professional" but I would think that at least some of these materials are hazardous substances under the FHSA, presumably making them poor candidates for exemption from the CPSIA. Given that these materials continue to appear on the CPSC's exempt list suggests that I must not fully appreciate their safety benefits . . . .
Of course, the CPSC's permission to use these materials on the grounds that they are lead-free seems remarkably out of touch with reality. Each of these materials, like other permitted materials like surgical steel, certain stainless steels, gold, silver, platinum and titanium, as well as diamonds, rubies, sapphires, emeralds and natural or cultured pearls, is absurdly expensive and in many cases, quite rare. It may sound good to say that the market is full of available alternatives, but if they are ridiculously expensive or hard to obtain, how is that any different than giving us permission to use pixie dust or krytonite? As a practical matter, not at all.
Someday, I wish the CPSC would issue practical advice that made sense to me. Once upon a time, I actually thought our nation's safety laws were rational, understandable and predictable. Nowadays, they are riddled with traps for the unwary and require teams of people to interpret and administer them. The implementing rules are detached from any semblance of the reality of the marketplace: "The products on this list are all things the Commission has determined do not contain lead over 100 ppm, which is within the allowable 300 ppm limit. Thus, they will comply with the law (and must always comply) and, therefore, do not need testing and certification. They do not need to be tested by a third party laboratory to prove they are, in fact, made of something on the list, and they do not need to be tested to prove that they meet the lead content limits . . . . Some retailers may want manufacturers and importers to test and certify their products, but those tests and certificates are not required by the Commission for the materials or products on the list." That makes it fine, I guess - the CPSC has had nothing to do with this "mysterious" phenomena.
As long as the CPSC thinks it is okay to wear blinders while doing its job, we will continue to get rules describing the legal and illegal ways to poison children and other safety conundrums. I am tired of it, what about you?
Tuesday, October 20, 2009
Monday, October 19, 2009
Sunday, October 18, 2009
- Our companies are members of the Toy Industry Association (TIA).
- We are on the record as opposing the Toy Safety Certification Program (TSCP).
- The dues of TIA members paid (and continue to pay) for the development of the TSCP, as well as the salaries and bonuses of the representatives mentioned below.
- The "15 month rule" will soon be released by the CPSC (on or before November 14). It will address, among other things, testing frequency and sample sizes for testing, and is expected to include the so-called component testing rule.
Did any of you watch the lengthy TSCP hearing (video link and text link) at the CPSC on October 14? This hearing was apparently jointly requested by the TIA, Consumers Union (CU) and Consumer Federation of America (CFA). Interesting bedfellows, huh? This hearing provided much to reflect upon. In this post, I will address the issues presented by the TIA's program and the TIA's authorship from a small business perspective. I will return to the consumer groups later.
[Some of my readers may be from outside the toy industry and may think "This does not apply to me!" Please bear with me and read on. This may not be your problem TODAY, but it is a sign of things to come.]
The TSCP is a complicated initiative that is difficult to explain succinctly. Here is the document defining the TSCP. You can access the TSCP website here. While I will attempt to summarize it here, you should rely instead on the definitive documents published by the TIA.
The TSCP is a program designed by the TIA to ensure that toy companies comply with law. As Elizabeth Borrelli (Executive Director, TSCP) puts it: "TSCP is a conformity assessment system. It is not a testing program but a comprehensive, effective and efficient system to verify that toy manufacturers have satisfied requirements of the CPSIA (and retailers) and that their toys confirm to applicable safety standards." The TIA says that the TSCP is a "work in progress".
The TSCP goes far beyond the requirements of the CPSIA. [The TIA acknowledged this repeatedly at the hearing. For instance, see the video at 134:30 and 149:30.] It is also a "voluntary" program, not a requirement of law. The TIA wants to foster broad acceptance of its initiative. They presented it to the CPSC for the agency's endorsement. Carter Keithley, President of the TIA, called the need for CPSC support "absolutely crucial". [Also, see the video at 135:15.] According to the TSCP specifications, the program includes: "1) hazard analysis and\or risk assessment for toy product design, 2) factory process control audits and 3) production sample testing to validate that the factory is producing, at the time of sampling, toys that meet U.S. safety standards. These three elements will be verified or audited by accredited certification bodies."
A few details about the TSCP:
- Factory Ratings - There are three levels of factory compliance under the TSCP: Tier 3 (non-ISO 9001 factories), Tier 2 (ISO 9001 factories) and Tier 1 (ISO-9001 factories that have met unspecified additional criteria to be established by the TSCP). Mass market factories are highly likely to be Tier 1, and small fry factories are likely to be Tier 3 or Tier 2. The terms below, according to the TIA, are designed to provide an "incentive" for non-Tier 1 factories to raise their compliance to Tier 1 standards. [Too bad for you if you and your factory don't want to incur this expense.]
- Hazard assessment - This pre-production analysis must prepared by or under the supervision of a responsible officer of the company on a product-by-product basis and must be attested to in writing. [Remember this.]
- Testing Sample Sizes - Under 3's: not less than 18 pieces; over 3's: not less than 12 pieces; big or expensive items: not less than 3 pieces; under 1000 pieces sold per year: sample size TBD; minimum production run: 500-1000 pcs (whatever this means).
- Sampling procedure - Tier 3 - need outsider to select all samples; Tier 2 - outsider picks samples randomly 4-6 times per year; Tier 1 - The factories select samples themselves.
- Testing frequency - Tier 1: greater of once a year or every million pieces, plus one extra heavy metals test annually (Max - never more than four times a year); Tier 2: greater of twice-a-year or every 500,000 pcs. (Max - monthly); Tier 3: greater of quarterly or every 150,000 pcs. (Max - every other week). [You read that right.]
- Security - Samples must have special seals to avoid "adulteration"
The TIA insists that the TSCP was designed with small business in mind, has been vetted by small business interests and has been applauded by small businesses.
What Happened at the Hearing:
The TIA spent a great deal of time explaining the terms of the TSCP. The consumer groups spent their time explaining why this program that goes far beyond the law ISN'T ENOUGH. The CPSC Commission asked a lot of questions and spent a bit too much energy (in my view) complimenting the TIA on their work. One Commissioner (Anne Northrup) pushed back with probing questions about TSCP economics and the intiative's impact on small business (see the video at 78:49 for about 15 minutes and later at 146:35).
What Does the TSCP Mean for Small Business?
The TSCP, if adopted, would be catastrophic for small toy companies or companies making toys with factories catering to the specialty market (rather than the mass market). Although the TIA denies this point (explicitly), the TSCP significantly favors mass market companies in an almost shameless way. Consider, for instance, the cost of participation in the TSCP. Rick Locker, outside counsel to the TIA, talked about a cost of $65 per item to enter the program. [He noted that for this $65, toy companies "now have $2 million of technology available to them" (123:48). Hey, TIA Members, do you realize what Mr. Locker means? The website they created cost $2 million. That's some fancy website they built with your money.] Upon questioning by Ms. Northrup, none of the TIA spokespeople would admit or guess at the overall cost to participate in the program (84:00 - and check out Northrup's reaction at 85:15).
What might those costs be? Well, we know it costs $65 per item simply to key the product into the website. Then there's the cost of the rating of the factory. [The TIA insists that this cost will not be borne by importers but instead by the factory. See video at 150:50. Apparently, this overhead is not passed along to the factory's customers, unlike all other factory overhead.] What might this cost? The TIA provided no estimates. I believe the one-time cost of becoming ISO 9001 is estimated at tens of thousands of dollars from a "standing start". Likewise, the comparable compliance process with ICTI-CARE (Toy industry Code of Conduct) ain't cheap. Figure TSCP ratings to cost thousands, and possibly much more, depending on the actions required to make the transition to the new TSCP standards. Then there's the cost of regular audits and re-certifications. Many of the new requirements will likely lead to on-going, incremental administrative expenses at the factories, suggesting that product costs will float upward on a go-forward basis under the TSCP.
Finally, the TSCP costs will include all the usual safety tests required for each participating item, plus additional testing and processes. I have previously posted typical safety test costs in this space. [Rick Locker cited a cost of $300 per phthalate test in his testimony, as a point of reference.] INCREDIBLY, by publishing the TSCP terms, the TIA has apparently conceded that safety testing might be necessary or desirable multiple times per year. Testing frequency has NEVER been regulated by the U.S. government previously but will be addressed by the "15 month rule" shortly. I believe the TIA's actions here will provide cover for the CPSC to impose similar testing requirements, despite the obvious market interference. How easy will it be for me, as an industry participant, to argue against testing frequencies put forth by my own trade association? Surely they are looking out for my best interests and would only suggest what's reasonable and necessary - RIGHT?! Ummm, let me get back to you on that . . . .
Taking all of the above into account, I personally think the per-item cost to "pass" TSCP will be in the many thousands of dollars per item per year. For illustration purposes, however, I think we can confidently use a cost of $5,000 per item (all-in, blended). [Yes, I am predicting a blended cost of $5,000 per item to get this coveted certificate. Quite affordable . . . .]
How would a $5,000 TSCP cost affect you versus Big Toy? To answer this question, we must make some reasonable assumptions. For Big Toy, I am going to assume annual production of 1 million units of a hypothetical toy at a Tier 1 factory. For you, I am going to assume production runs of various sizes, all at a Tier 3 factory (which means you must test each time you produce, since you are unlikely to produce more often than twice-a-month!). For both you and Big Toy, I am going to assume a FOB factory cost of $5.00 per unit.
Here are the numbers:
- COGS: $5.00
- TSCP: $5,000
- Production Size: 1,000,000 per run (or per year, doesn't matter under Tier 1 rules)
- Cost per unit for testing: $5,000 divided by 1,000,000 ($.005, rounded to one penny)
- New blended cost, including testing: $5.01, or a cost increase of 0.1% - NOT BAD FOR BIG TOY!
- COGS: $5.00
- TSCP: $5,000
- Production Size: Various run sizes illustrated below (as a Tier 3 factory, you will test each lot)
- Cost per unit for testing: 1,000 pcs - $5.00 per unit; 2500 pcs - $2.00 per unit; 5,000 pcs - $1.00 per unit; 25,000 pcs - $.20 per unit
- New blended cost, including testing: 1,000 pcs - $10.00 (a cost increase of 100%); 2,500 pcs - $7.00 per unit (40% increase), 5,000 pcs - $6.00 (20% increase); 25,000 pcs - $5.20 per unit (4% increase).
Call me crazy, but I think this is rather favorable to Big Toy. Let's see, a cost increase of 0.1% versus a cost increase of 4-100%, which is better? Notably, for importers that sell to dealers, these cost increases are MULTIPLIED at retail, only compounding the competitive problem. The TSCP-induced gulf between specialty and mass markets costs will massacre specialty market toys. MASSACRE.
There is simply NO WAY that this program was vetted in any meaningful way by small business. If you were one of the small business reviewers, please announce yourself to my readers by commenting on this post (with name, email and phone number). Let's have a debate!
There are other factors here that favor Big Toy, such as TSCP sampling methods and sample sizes which will punish small toy companies in more than one way, and TSCP's required full traceability of components (also found in the RILA-BRC standards).
Even the liability risks under the TSCP favor Big Toy which can afford to provide expensive lawyers to back-up company officers. Notably, the TSCP requires a written personal attestation by a senior company officer of the TSCP product hazard assessment. Do you want to sign this little piece of paper and take on some serious personal liability? If that sounds really good to you, please consider the remarks of Chuck Rogers, Senior Technical Director for the TSCP, at the hearing (139:28): ". . . under CPSIA, when that company official signs that attestation, and it becomes part of what is required to get a safety mark [under the TSCP], I can tell you company officials I have talked to take that very, very seriously and they're going to be extremely cautious and prudent before they sign that. AND IF SOMEONE DOES SIGN AN IMPROPER ATTESTATION, AND THAT PRODUCT IS LATER FOUND TO HAVE A SIGNIFICANT DEFECT, YOU KNOW, IT WOULD BE WITHIN THE COMMISSION'S PURVIEW, I SUSPECT, TO ASK FOR THAT ATTESTATION." [Emphasis added.] So, in other words, the TIA is trying to sell this program to the CPSC as a source of evidence to be used against its members and its industry. Love it! Where do I sign up?
A Few More Hearing Highlights:
- Ms. Tenenbaum asked about counterfeit certificates. The continuing interest of the CPSC in the "switcheroo" and other nefarious acts mystifies me. What is the basis for treating me and all other members of our industry as scumbag cheaters? Why is this kind of question even posed? Of course, the TIA only feeds these suspicions by specifying tamper-proof seals on samples. Why would such a thing be necessary, other than a conviction that toy companies are such creeps that consumers and the government can't only trust them? How often does this kind of fraud happen, and if the CPSC knows about it, why haven't they acted decisively against the bad guys? Your guess is as good as mine.
- The hearing featured several TIA assertions that small businesses will be so, so grateful for the TSCP. The most surreal sell job was by Chuck Rogers, who illustrated virtually every remark with anecdotes from his days at Sunbeam and Wal-Mart. Very relevant to this topic. . . . Rick Locker twice gave detailed explanations of how small businesses will save money with the TSCP (at 77:30 emphasizing reduced record keeping and at 87:50 emphasizing safety test cost savings). Mr. Locker seemed to confuse the cost of factory audits with the cost of safety tests under the CPSIA - he used an example of 20 customers requiring 20 different tests, thereby multipying testing costs 20x. This scenario makes no sense to me since only certain specific safety tests are required to comply with the CPSA, as amended. You don't need a different safety test report for each customer - but you might need a different audit report for each mass market customer. Factory audits, notably, are a mass market phenomena, and typically confront small businesses only when dealing with mass market customers.
- The TSCP is good news for you, according to Elizabeth Borrelli (90:40): "If [the TSCP] was significantly additive [to costs], then our membership and our Board wouldn't support us moving forward with it, frankly." Feel better yet?
The astounding TSCP initiative crafted by the TIA is a BUSINESS. The TIA, in proposing it, is going into business in competition with certain of its members. This move is troubling for a trade association. In addition, the TSCP adds significantly to the burden of the already excessively burdensome CPSIA. To promote this change to a regulator seemingly predisposed to treat our industry harshly is reckless and shortsighted. It is known, however, that certain toy companies are already planning to take these compliance steps and more. [In response to a question by Commissioner Adler, Hasbro's representative at the hearing confirmed that Hasbro will exceed the TSCP requirements.] Was the TIA acting with the notion that what's good for Big Toy is good for everyone else? Amazingly, this disruptive program is clearly favorable to only a small handful of TIA members and seemingly disadvantageous to a far larger number of toy companies. [I don't put much stock in the hand waving by TIA representatives at the hearing - show me the detailed analysis proving that this initiative saves money for any small business.] Given the heavy presence of mass market companies behind the development of this program, the mass market benefits and focus come as no surprise (to me).
It is worth noting one more full disclosure item: Earlier this year, I asked the TIA to help defray our advocacy expenses in opposition to the CPSIA. Despite their massive lobbying budget, they turned me down for several reasons. In a remarkable phone call, they explained to me that, among other things, (a) the TIA would not contribute to the expenses of the Alliance for Children's Product Safety unless I would allow them to exercise control over its activities, and (b) they believe the law would never be changed and preferred to channel the TIA's "limited" resources into efforts to live with the law. [There is obviously a gulf between my views and theirs.] In any event, whether it is cause or effect, the TSCP seems to have attracted a multi-million dollar investment by the TIA and essentially it appears that the TIA burned the bridges behind it - promoting the TSCP now is a primary focus of the TIA.
For those TIA members who have gotten this far in this long post, you may want to ask a few questions of TIA officers and board members.
Next, Rob Wilson of Challenge and Fun, Inc., a Massachusetts-based toy company, published an Op-Ed in PSL on October 9 entitled "Consumer Confusion Comes From CPSC Guidance, Not the Media" in which he noted that the fear Ms. Tenenbaum sought to calm came not from media reports but instead from CPSC policy. In particular, he pointed out the impractical and confusing advice given in the CPSC's own CPSC Handbook for Resale Stores and Product Resellers. Mr. Wilson closed with the following observation: "Chairman Tenenbaum vowed at her Senate confirmation hearing to bring a common sense approach to CPSIA implementation. We are still waiting for signs of common sense from the agency regarding CPSIA." Ah, that "common sense" thing again!
Sean Oberle, owner, publisher and editor of PSL, replied to Mr. Wilson in his own publication on October 13 in an editorial entitled "Clarity and Accuracy -- CPSC, the Media and Garage Sales" in which he defended Ms. Tenenbaum on the grounds that her limited statement did not constitute a comprehensive summary of her feelings or actions on the CPSIA. It's a remarkable piece, I hope you will read it. [In his editorial, Mr. Oberle makes the following observation: "a quick search of the blogosphere and other new-media sites finds more pieces running the gamut from mild warnings to doomsday predictions" - hmmm.] Interestingly, Mr. Oberle stresses his "neutrality" and "defense of accuracy and clarity" THREE TIMES. Draw your own conclusions.
Well, I sent Mr. Oberle MY Op-Ed reply to the debate he not only published but contributed to. Suffice it to say, he turned me down. I am publishing the Op-Ed here for your review and consideration. I would be interested in your thoughts.
I think it is critical to reflect on this rebuff and to delve into its deeper meaning. [My ego can take it, btw.] The Product Safety Letter (along with BNA) was cited by John "Gib" Mullan (Assistant Executive Director, Office of Compliance and Field Operations, CPSC) as the definitive source for information on safety issues at last February's ICPHSO meeting. An august publication, apparently. Yet, what does a stilted debate in PSL's pages signify? Only Mr. Oberle can say for sure. My article asks Ms. Tenenbaum to be accountable for the actions of the CPSC in implementing the defective CPSIA. Mr. Oberle has already publicly stated his neutrality on agency issues several times. [Quoting from Hamlet, "The lady doth protest too much, methinks."] What's going on here?
The American way of life is frankly dependent on our Constitutionally-guaranteed freedom of speech. The foundation of the visionary American system of a free media is its INDEPENDENCE. What if the media organs we depend on lose their independence? What if fear of retribution or a possible chilling in access to information challenges editorial decisions? In thinking about the end of the debate about the CPSC's Resale Roundup in PSL, these questions resonate. I hope this is not the Obama Revolution we have all been hearing about.
My Op-Ed for your reading pleasure:
Rick Woldenberg is chairman of Learning Resources Inc. and the Alliance for Children’s Product Safety.
Friday, October 16, 2009
Among the anticipated victims of the LCI decision (to recap):
- Connectors of all kinds
- Brass zippers, grommets and other apparel and footwear components and accessories
- Brass instruments (rentals to schools, certainly), musical bells and certain strings used in string instruments
- Children's jewelry
It is worth noting, amateur scientists in Congress, that brass has germicidal properties which is one reason why brass is used in doorknobs (icky germs!). Might actually be useful in some children's products for this reason . . . .
The presence of brass in daily life is an immutable fact. If the CPSC bans brass in children's products because of the idiotic CPSIA, NOTHING will eliminate the following uses of brass in the daily life of children:
- House keys (good for sucking)
- Doorknobs and locks (touching and licking?)
- Plumbing fixtures and drinking fountains (touching and sucking)
- Pipes to convey potable water (assuming those pipes aren't made of pure lead)
- Components in cell phones (definitely good for licking)
- Clocks, antiques, artwork (touching)
- Railings (licking)
- Jewelry (sucking)
- Guns and ammunition (no comment)
- Tools (you can poke out an eye with a tool!)
- Etc. etc. etc.
This does not even address the widespread presence of lead in, among other things, our food system, our potable water and our air. There are federal safety standards for allowable lead content in each category. Children are known to consume food, water and air throughout their daily lives without interruption. The obliviousness of the CPSIA in setting such stiff standards for bio-unavailable lead-in-substrate in children's products in the context of these other lead instances is shameful - and the source of the current issues with brass.
The CPSC Staff has determined that the CPSIA does not allow an exemption for brass bushings. In the understatement of the year, the staff concluded "that the estimated exposure to lead from children's contact with the [LCI] die-cast toys would have little impact on the blood lead level." Staff states clearly that they consider brass bushings safe and that the lead transmission from brass bushings is inconsequential and certainly not rising to the level of a hazardous substance. Unfortunately, the Commission has thus far shown no interest in taking bold stands and rejecting the legitimate legal (but nonsensical) conclusions of the CPSC Staff under the CPSIA. Common sense be damned.
In a perfect world (what a joke), the Commission's decision in this case would hold that although LCI brass bushings are caught up in the limits of the CPSIA, they present NO substantial hazard to children, and therefore using their seldom-used discretion, the Commission grants an exemption for brass bushings in children's products conditionally. The decision would explicitly state that this decision should be taken as precedent for brass in all children's products (to cut down on repetitive exemption requests). The decision would be dependent on TWO CONDITIONS, namely that: (a) the particular use of brass in children's products is not known or held by CPSC Staff to present a substantial hazard to children under the FHSA, and (b) the exemption will be lifted when Congress acts to ban brass from everyday life and takes concrete steps to retrofit America for a brass-free future, replacing all brass doorknobs, artwork, cell phones, keys and locks, plumbing fixtures and water pipes (including, what the heck, lead pipes, too) and so on. For so long as brass remains part of children's daily life in their home and school environments, the CPSC will not act to restrict brass in children's products.
The Commission, using common sense not previously known in the CPSIA era, would note that banning brass bushings would be utterly ineffective to change the net exposure of children to lead in their lives but would wreak terrible losses upon the marketplace. Senseless economic destruction is un-American and lacks a social conscience since the losses will be spread ratably throughout society among suppliers, sellers and consumers of all things brass. Finally, the Commission would note that unless and until its decisions to restrict children's products materially impact safety, the Commission will not keep safe products or components off the market for technical violations of the CPSIA. Brass bushings, in my fantasy, would be granted an exemption to the awful CPSIA.
This idle fantasy can come true if the Commission summons up the courage to act sensibly and to stop being complicit in the shoddy legislative work of Congress. As an independent agency of the U.S. government, NOT a subsidiary of the legislative branch or an organ of the House Energy and Commerce Committee, the CPSC has the authority to make up its own mind and to set rational policy. It's time that the Commission draw a line for one and all to see. Especially Mr. Waxman.