Sunday, April 18, 2010

CPSIA - Why the Waxman Amendment MUST BE REJECTED

As we face the dilemma of what to do about the Waxman Amendment 2.0, I want to point out recent quotes by Sam Zell, a Chicago-based real estate entrepreneur. At a recent panel discussion of the Urban Land Institute, Mr. Zell bemoaned how our federal government governs these days: "[What's] going on now is frightening . . . Up until this administration, you knew the rules and had a very stable environment . . . If the current situation is indicative of the next half century, I think we're screwed."

Screwed. Mr. Zell's words ring in my ears.

In the wake of Friday's contentious meeting with the Waxmanis on Capitol Hill, the Dems announced that a new draft of the Waxman Amendment 2.0 would be released on Monday. In their usual bullying style, Waxman staff issued yet another ultimatum, advising this time that after release of that next draft, we all must "decide" whether or not to support the amendment. If we won't support it, they say they have better things to do.

The meeting produced no breakthroughs. The fundamental flaws in the law remain unaddressed, and meager goodies meant to partially salve the wounds of a limited number of companies remain the focus of the legislation. The goal of this legislation is to split the group protesting this law, peeling off the ATV'rs, the book industry, the crafters and mass market retailers. None of these groups is a clear winner, either. The rest of us, namely the Small Business community, will be left as roadkill.

A request by the ranking Republican for hearings was rejected on the grounds that there has been too much "jawboning" already. We are apparently all Chatty Cathies. Shame on us.

This reasoning behind the limited intent of the legislation was on display at this week's Senate Appropriations Committee hearing attended by Illinois' own Senator Dick Durbin and Maine's Senator Susan Collins with only one witness, CPSC Chairman Inez Tenenbaum. Don't watch the hearing on a full stomach . . . . Among other things confirmed by this hearing was that the functional purpose exemption embedded in Waxman Amendment is supposed to benefit a "narrow class" of products (in the words of Ms. Tenenbaum), namely bikes, ATVs and books. Lucky them.

Sadly, the hearing also confirmed the bizarre impression held by members of Congress that the small business issues are limited to crafters, for some reason a particular source of angst. Our company happens to also be a small business, although we no longer operate out of a bedroom or a garage - and we face major issues caused by this law. While I share concern for the tiniest of enterprises, the economic problems don't end there. In the words of the Chicago City Treasurer Stephanie Neely: "We are truly an economy of small businesses. And it's important that they thrive. They do a lot of employing. . . on a day-to-day basis, these are people who are employing one, ten, thirty people, and and it's important that we help them." Oh yeah, jobs.

The Waxman Amendment should be REJECTED until comprehensive legislation to fix the law is brought to the floor. If we let them pass this law, organized resistance to this law will be greatly diminished, and any opportunity to restore a sensible rule of law may be lost . . . permanently.

Consider the consequences if this amendment is passed:

- Our national safety law has changed from risk-based to standards-based. Mindlessly focused on lines in the sand, the new law's definition of safety has been completely rubbed out. Without this compass, the world of safety has become an unpredictable, unstable random walk. The Senate hearing included (incredibly) a rehashing of the "dangers" posed by Zhu Zhu Pets, the need for BPA recalls, the potential risk posed by triclosan and the CPSC's ability and interest in initiating recalls for these "dangers". Given that we no longer can figure out what's safe and what's not, every possible threat brings up discussion of recalls.

Try to run a business under conditions like that.

The risk of this reactive form of government CANNOT BE OVERSTATED. On April 13, Representative Edward Markey proudly sent out letters to 13 companies demanding that they stop using the antibacterial compound triclosan. The list of targets was almost certainly supplied to him by consumer groups. Mr. Markey, for all his power, is not a regulatory agency and does not have authority, resources or expertise to act as a regulator and his consumer group buddies are also not empowered to regulate our markets (thankfully). He is only a Congressman (up for reelection in November, btw). However, nowadays, that's apparently enough to regulate. I would not want to receive such a letter. I also do not cotton to this style of government.

- The complexity and volume of safety law being spewed out is truly breathtaking and overwhelming. I literally cannot keep up anymore. i can't read it all, watch it all, digest it all or even write comment letters. [Unfortunately, I still have job responsibilities, too.] On a recent Friday, the CPSC expelled almost 600 pages of new rules - and they were IMPORTANT. They included the new so-called 15 Month Rule - have you read it yet? This 100+ page rule has been written to control children's products as though we were merchants of death. We are not. The April 15 hearing to review this regulatory morsel was a mere five hours long, so lengthy that the CPSC has only posted one hour of the fun so far. Ironically, this hearing wasn't broadcast live, as it conflicted with broadcast of the first meeting of phthalates CHAP. Can't broadcast two mega-hearings at once.

Do you get it yet?

By my reckoning, the rules applicable to generic children's products is now nearing 2500 pages. If you take into account childcare items and other ancillary matters, the number of pages is probably well in excess of 3000 pages. We are clearly heading to a place where the rules total many thousands of pages. And WHY are there so many rules? It has nothing to do with actual safety. The injuries (one) and deaths (one) from lead in 2007/8, the highest outbreak of recalls in our history, were simply nominal for a country 300 million people.

In any event, you are going to have to know and bear the risk of ALL of those rules. And the new rules keep coming, very often overruling the rules you already mastered. For those you who are tempted to support Mr. Waxman's Amendment, please THINK about this.

- When the CPSC is done with its rulemaking, it is going into enforcement mode. That was a clear message of Ms. Tenenbaum's testimony in front of the Senate Appropriations Committee.
Her Compliance initiative will feature another 41 employees at a cost of $4,7 million to catch you violating rules. In addition, the resources of the existing agency will also shift to catching you. If you have read any of my writings about penalties, perhaps you can figure out what that means.

Bottom line, having divorced their mission from common sense or any notion of risk, the CPSC built an ornate and truly incomprehensible set of safety rules that even mega-corporations have admitted exceeds their capacity to manage. For small businesses, not merely the home crafters, compliance will be simply impossible. If those businesses are unable to understand the rules or afford to comply (while staying in business), they won't be able to follow them, and if the agency is bent on catching them, well, the results will be grim.

If you can't see this coming - my friend, you are blind.

The Testing and Certification stay ends on February 10, 2010. Don't expect this Commission to extend it again. The meter is running.

IF you support the Waxman Amendment because you really want the meager relief they are dangling, you will be conceding that you are prepared to endure what I have described. You are not ready for that, and you know it. Support for revising the bill comprehensibly will be greatly diminished at the same time, and even our most steadfast supporters in Congress will give up on us.

As painful as it may seem, you MUST decline to support this legislation. We must, as a community, insist on a true fix, one that addresses the real problems caused by the CPSIA. Nothing short of a total fix will suffice. The ornate rules needs to be simplified and refocused on real issues. The needless self-destructive imposition of blinding costs needs to be reversed. Excessive bureaucratic processes and exemptions only for big industries and big companies must end.

NOTHING that I am suggesting will or should amount to a retrenchment in safety for children or anyone else. It is no "free pass" for industry, whatever that might mean. It is simply means a return to sanity.

That may be too much to ask for this Congress or this Commission. I am not optimistic. Make me a believer this week - REJECT THE WAXMAN AMENDMENT.

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