CPSIA - New Waxman Amendment Draft Issued Tonight, Mark-up Set for Wednesday Morning

The third draft of the Waxman Amendment 2.0 was released this evening. I have attached a clean copy of the legislation, as well as a redline for your convenience. The powers-that-be also released a draft of their "report language". The report language is interpretative language and is not included in the law mainly to keep future law clerks busy doing research. It should also give us something new to argue about.

This is the Committee Briefing Memo accompanying the draft legislation.

Consistent with past practice, this draft was issued with the usual coercion. A mark-up has been scheduled for Wednesday AM 10:00 a.m. in Room 2123 Rayburn House Office Building BUT the Dems will decide tomorrow if they will proceed with that process. All talk of a hearing to vet this legislation has been quashed by the Dems who are scrupulous in managing the record. [I will never get to testify, that's for sure.] There will be a meeting on Tuesday at 4 PM to discuss this draft, at which point the Dems will either pull the plug or move forward. Presumably, this depends on the enthusiastic response to this draft. The Dems say they want a bipartisan bill and further want to send it to the Senate with the news that the bill is "supported by industry". In other words, Mr. Waxman is not interested in negotiating with the Senate, just wants their rubber stamp. He's not big on "jawboning" if that means he has to listen to others and make concessions . . . .

You are right to consider this another patented Waxman "take it or leave it" offer.

In response to complaints that this bill ignores the many legitimate concerns of the small business community, Waxman staff has advised that they "can't help everyone". That means you, guys.

Changes in this Draft:

a. Functional Purpose "Exception" - Minimal changes, mainly reverting back to the "public health or safety" test formulation. References to "all foreseeable users" is gone now. The "town hall" provision allowing "interested parties" to intervene in every proceeding has been eliminated. The "Previously Denied Petitions" provision is unchanged and still makes no sense.

The report language clarifies the meaning of "practicable", noting that excessive or unreasonable costs should be considered not "practicable". Specifically, they note: "The Committee does not consider a mere increase in the cost of manufacture or production, in itself, to be excessive. The Committee does expect that the Commission will consider compliance to be impracticable where compliance would place the viability and continuation of a class of products or materials in jeopardy, such as youth All Terrain Vehicles or youth bicycles made with recycled steel." [Emphasis added]

In case you were wondering about the purpose of the functional purpose exception, it is a gift to the noted industries. It's not for you. Remember, this relief is only available to those who are capable of mounting an exception application. Not a small undertaking.

Remember that the applicant for a functional purpose exception must apply for relief for a "specific product or material". You must also PROVE that your costs are not "practicable". Can you see some wiggle room there? A true believer Commission might have very little incentive to interpret these terms permissively. [You can count on that one with the Dems in charge.] This will be a costly and technical process. Think of this in the context of your business - is this realistic? With our 1500 products, it's just inconceivable. Too bad for us. Let's also not forget the stringency of the three-prong test.

The report language specifies that a "measurable adverse effect" on public health or safety refers to changes in blood lead levels. The language is pretty specific and will require a toxicologist's report to justify any exemption. Here are the magic words: "Given that there is no current blood level at which the scientific community considers lead exposure to be 'safe,' the Committee understands that a very small adverse effect may theoretically occur at any level of exposure. The Committee intends, however, for the Commission to deny requests for exception under this section as having a 'measurable adverse effect' on health or safety only in the case of those adverse effects that the Commission determines to be empirically, as opposed to theoretically, measurable. At present, the Committee understands that there is scientific consensus to interpret the phrase 'measurable adverse effect' from lead exposure to mean a measurable increase in blood lead levels."

This is a form of legislative filter to make sure that the exception is only for the chosen industries or companies. Again, this isn't meant for small fry, just big business. That's equity these days, I guess.

Anyone remember how hotly the Dems defended the inclusion of ATVs and bikes in this law back in '08 and '09? It was intentional, they insisted, necessary to protect the public against deadly lead. There's no safe level of lead, blah blah blah. Guess they got over that one . . . after they received 170,000 emails from ATV'rs.

b. Thrift Store Relief: Virtually no change, other than minor clarifications.

Not unlike the workings of other parts of the CPSIA, this new provision will be good for large scale thrift organizations like Goodwill or Salvation Army who are presumably able to centrally evaluate complex laws and implement system-wide responses to changes in law. i wonder how the smaller independent Mom-and-Pops will react to this provision. In any event, the provision tacitly bans resale of children's jewelry, painted toys and vinyl children's products. Stores will have to keep straight which items are in and which are out. With many resale stores staffed with minimum wage workers, I question how effectively most owners can prevent violations without just avoiding the category (at least in part).

Resale of childcare articles, including cribs, seems unaffected. The real gotcha is the risk the stores will bear from recalls. For that reason, I think many stores will stay away from reselling this category of goods. Clothing may make a reappearance in resale shops, finally.

It is incredible that the Democrats let this industry flap in the wind for almost two years before acting to save them from CPSIA oblivion. Think of the economic devastation these insensitive legislators wrought on small businesses all America, not to mention the patrons of this important industry - through two cold winters. This is just inexcusable, a true demonstration of stubbornness or being completely out of touch. Those who suffered at the hands of the Dem inaction have no recourse, either. Shame, shame.

c. Relief for Small Batch Manufacturers: The sham of this "relief" is perpetuated in this new draft. The definitions of "covered products" and "Small Batch Manufacturer" were left structurally intact but the thresholds were tweaked upward meaninglessly to 7500 units or $50,000 sold per item per (calendar) year, with an overall cap of company sales of $1 million. "Covered Products" oddly continues to refer only to manufactured items but Small Batch Manufacturers are defined by sales of manufactured OR imported goods. Go figure.

As I pointed out earlier today, Mattel and Hasbro have quarterly revenues of $880 million and $672 million, respectively. The so-called relief here is for companies with annual revenue of under $1 million. If these little companies pop over that revenue hurdle, they will be held to the same standard as Mattel and Hasbro. Don't worry, the CPSC plans to coach the little guys! Now if only they could provide non-recourse financing . . . .

Even if you are salivating over this pathetic crumb of "relief", I encourage you to reread what goodies Mr. Waxman is giving you. Here's the meat of it: "Any such alternative requirements shall provide for reasonable testing methods to assure compliance with the relevant consumer product safety standards." The reasonable TESTING METHODS must ASSURE COMPLIANCE. You tell me what this English sentence means. I think it means the small fry will be testing. I know the rest of us will, too. Testing and testing and testing and testing. It's time to buy stock in Intertek, I think. Later on, the bill instructs the Commission to work "cooperatively" with the little guys to "impose the least burdensome testing requirements . . . consistent with goals of statute." And those goals are, what exactly? Comprehensive, prophylactic testing.

Oh, the bounty of this relief!

d. Phthalates and Inaccessible Components: No material changes.

e. Subpoena Power: No changes whatsoever. Somebody's going to be sorry someday that this procedural speed bump was removed. Unfettered power of government was always un-American . . . until we met these Democrats.

Conclusion:

I wish I could recommend this bill. It has some good stuff in it. Unfortunately, it is utterly ineffective to arrest the damage being inflicted by the CPSIA. It is a gift to large industries but leaves the hammerlock on American small businesses catering children's markets. It sustains the fantastic notion that those of us in this business have somehow been poisoning kids for years or decades. That's a slanderous notion, something deeply offensive to me, but for the Dems to admit otherwise would mean a mea culpa. And there's no chance of that.

If the Dems manage to tempt enough corporate entities to sell out for this low price, it will be the biggest gift ever given by the corporate community to Mr. Waxman. He should host a champagne party for himself if he buys off the resistance. There will be no remaining organized opposition to the bulk of his CPSIA handiwork, and the focus will shift to surviving a manic CPSC bent on enforcing voluminous but ineffective safety rules and ladling out massive penalties for infractions without injuries. And once the action moves permanently to Bethesda, we'll see finally how much Cassandra got right.

I'm not looking forward to finding out. Vote NO on Waxman.