CPSIA - Component Testing Rule Comment Letter

August 3, 2010

Todd A. Stevenson
Director, Office of the Secretary
Room 820
U.S. Consumer Product Safety Commission
4330 East West Highway
Bethesda, Maryland 20814

Agency: Consumer Product Safety Commission (CPSC)

Re: Docket No. CPSC–2010-0037 Conditions and Requirements for Testing Component Parts of Consumer Products.

Dear Mr. Stevenson:

I am hereby submitting comments in response to the Solicitation of Comments on the Conditions and Requirements for Testing Component Parts of Consumer Products (Docket No. CPSC–2010–0037) published in the Federal Register on May 20, 2010 (the “Proposed Rule”).

This request for comments comes after, among other things, a two-day workshop held at the CPSC on December 10-11, 2009. Our company incurred the expense of sending three people (all panelists on multiple panels) to attend this “sold out” event which was purportedly to solicit stakeholder feedback on this rule and the so-called “15 Month Rule” (also up for comment today). There is little evidence from the Federal Register that any of our feedback was taken or possibly even heard. I have lost track of how many comment letters I have filed, panels or hearings I have appeared at and essays or letters I have written about the CPSIA and these issues. So far, my comments have added up to . . . nothing. Nevertheless, I am filing this letter in the vain hope that perhaps this will be my lucky day and you may listen to me, finally.

I would like to make some general comments first.

a. Some Positives in the Proposed Rule. I am in favor of the concept of component testing and applaud the Commission for taking steps to make it a reality, however flawed. In addition, I am also enthusiastic about composite testing. Regrettably, however, the devil is in the details.

b. CPSC Data Demonstrates that Risk is Low, so the Proposed Rule does not Need to be so Strict. I have analyzed the recall data published on the CPSC website and determined that from 1999 – 2010, the CPSC can account for ONE DEATH and THREE ASSERTED INJURIES from lead or lead-in-paint. If the goal of these rulemakings is to reduce deaths and injuries from lead, then these data must be borne in mind. With so few incidents involving lead injury of any kind in children’s products (less than occurs on AN AVERAGE DAY from swimming pools and spas in the U.S.), there is no justification for building such an ornate rule for something simple and logical like component testing or composite testing. Likewise, incidents of fraud in testing are equally infrequent and in any event, already addressed by other statutes. Congress did not require this complicated regulatory scheme, and the data cannot justify it.

c. The Proposed Rule Puts Compliance First, Before Safety. This rule seems to place a very high emphasis on the need to comply, as opposed to the need to make children safer. One is not necessarily the equivalent of the other. My favorite example is our company’s record of compliance. Founded in 1984, our company has recalled a grand total of 130 pieces in its history, all recovered, out of perhaps one billion pieces sold. Not bad. Were we to meet the myriad requirements of this rule, I cannot fathom that our products would be safer. Does all that extra compliance benefit anyone? It certainly will cost a lot (we pay, you don’t). As I read your rule, I wondered why you didn’t list the wire transfer instructions for the top testing companies. You might as well . . . . Still, the casual waste of our resources cannot make anyone safer – they were already completely safe.

Safety is the reason the CPSC exists. This document fails because it confuses the desire to powerfully enforce the CPSIA with actually making people safer. The only thing that may be accomplished is business death for many companies, principally small ones. Swashbuckling enforcement may make great headlines but no one will be any safer. Compliance is not safety.

d. Science Has Apparently Been Rendered Moot at the CPSC. While I accept that Congress has banned certain phthalates in toys, I do not accept that the ban is a SCIENTIFIC CONCLUSION. It is legislation, not science. Notably, the CPSC has twice investigated phthalates and held that phthalates were safe in toys. Yet, on page 28213 in the Federal Register, the Proposed Rule discusses the “risk” presented by a product that might have a violative concentration of phthalates in a component, but with an overall concentration that wouldn’t violate the ban. It goes on to assert that a component-based rule is “more protective of human health”, as though the agency had reached the scientific conclusion that phthalates were dangerous – which is not true. Re-characterizing the legislative ban as an assessment of “risk” may appear to legitimize your rule, but it is certainly not an accurate statement of the historical position of the agency. I object to the rule’s equating of a ban by politicians to a scientific judgment. Science is under enough assault without the stamp of approval of the CPSC announcing its death.

My specific comments on this proposal:

1. Component Testing Looks Better Than It Is. I wish I felt we (or anyone else) would use component testing extensively in the future. There are several reasons why this option will be of little use to anyone, particularly the small companies that it was intended to benefit. [Companies with enough scale may find the Proposed Rule useful – one of the many ironies of the CPSIA is that its principal beneficiaries may be the companies that prompted its passage.]

a. Limited Market Availability for Component Certificates. While some high volume components of children’s products may quickly be tested to meet these requirements, many other kinds of components are not likely to be tested:

i. Low volume components
ii. Components made in small lots
iii. Components made by small suppliers (many fabrics)
iv. Components which derive only a tiny percentage of revenues from regulated products or which principally cater to other industries (e.g., paper clips or aluminum foil in a science kit)

Unfortunately, it appears to me that the logic of this rule is that if we can be certain that some certificates will be widely available (e.g., paint, plastic pellets), therefore all other certificates will be available. That’s plainly ridiculous.

b. Complexity. The subdividing of compliance testing into component parts and the whole, some tests done on parts and some on the whole, with tests of varying dates substituting from time to time, is simply a mindboggling mess. I cannot imagine that this can be successfully managed on any scale (how many products need to take advantage of this rule before test reports develop big and inconsistent holes?). And how will retailers be able to interpret this patchwork quilt of tests? This scheme will be self-defeating on all levels.

Add to this the requirement that components need to be traceable, and you basically rendered the component testing opportunity moot. Of course, I am presuming that industry will take your rules seriously. To me, it’s completely inconceivable that anyone will build your traceability system. [Traceability will not raise revenues, only mindless complexity, and as noted above, cannot conceivably improve safety.] If you take these rules seriously, you will cry, laugh/scream – or walk away. The paperwork required for this exercise is well beyond almost all companies’ capabilities. [Does the CPSC have ANY tangible evidence that its requirements can be met by anyone . . . other than Mattel and Wal-Mart? Presumably, no one at the agency living in the real world thinks that traceability rules can be met by the typical Handmade Toy Alliance member, or other small businesses like ours.]

c. Unrealistic Expectations on Manufacturing Control and Traceability. To take advantage of this rule, a manufacturer must take responsibility at the sub-micro-level for manufacturing quality. Let’s recall for a moment that we are not making drug treatments here, nor are we building the Space Shuttle. We are making simple plastic toys and games, children’s shoes, pens, shirts, books, educational materials and so on. Consider this instruction from your new rule: “The manufacturer must exercise due care that the manufacturing process does not add a prohibited chemical from an untested source, such as the material hopper, regrind equipment, or other equipment used in the assembly of the finished product.” Our company has several hundred vendors producing thousands of SKUs – do you honestly believe we could possibly manage how all these independent companies wash out their molding machines or manage their regrinding operations? Is this some kind of sick joke?

By the way, this verbiage will end the use of recycled materials in children’s products. This is completely unjustified for safety reasons and is certainly very unfriendly to the environment. As noted above, your agency’s responsibility is to manage safety. You have no basis in fact for asserting that these theoretical sources of lead are or could constitute a public safety risk.

d. Liability Risk. The Proposed Rule goes to great length to ram home the message that all the risk is on our shoulders. The monotonously repetitive use of the term “due care” throughout this document makes abundantly clear that the CPSC is perfecting a myriad of claims to be made against any and all manufacturers of children’s products when it suits the purpose of the agency. Many of the claims may be perfected with the agency’s 20-20 hindsight. The Proposed Rule minces few words on this preservation of rights: “The above information is needed so that, if noncomplying products are found, the Commission can use this information to determine whether a finished product certifier, component part certifier, or third party conformity assessment body is not complying with the appropriate requirements.” Under the Proposed Rule, even a missing piece of paper can be the basis of charge of failed due care. A fear of criminal charges seems realistic.

Will aggravating letter writers be the first to suffer under this hammer? The answer is – it’s entirely up to YOU under your rule. Small companies will see how the deck is stacked against them and steer far from the component testing option (if they understand the obtuse wording of the rule).

2. If Few Companies Can or Will Use Component Testing, Has the Agency Provided “Relief”? Of course, the answer is NO. The Proposed Rule may look like good policy, but if the practical impact of the rule is that few people can or will take advantage of it, it is simple window-dressing. The impact on small businesses, exemplified by the well-known and sympathetic Handmade Toy Alliance, will be severe. They are not the only ones in need of help, either. If small companies like HTA members cannot take advantage of these rules in large part or would be too scared to take a chance in the face of the awesome display of governmental power in the rule’s terms, then they will suffer and shrink. I would note that the Notice on the “15 Month Rule” explains how a failure to protect small companies could play out badly (see “Caveats and Possible Market Reactions to Third Party Testing Requirements” on page 28358). Those negative impacts could result from a failure of policy here, too.

3. Maintenance of Records for the Life of a Product Plus Five Years Is Unduly Burdensome (Not to Mention Pointless). Please consider our case: We still produce certain items from our original product line in 1984. Clocks don’t go out of style in education, even if Tickle Me Elmo and Furby last only one year. The requirement that we must retain records for the life of the product plus five years could theoretically be forever in our case. Perhaps the CPSC can provide us free unlimited warehouse space for all these records. In any event, our case also makes clear how pointless this requirement is. We have only had one recall in 26 years, which we successfully administered without the assistance or guidance of the thousands of pages of rules and legislations that befell us under the CPSIA. How, precisely, will decades of records improve the public weal in OUR case? Your rule is very good at spending our money, our resources and our time, but doesn’t make a reasoned connection to safety in any way. We are not Mattel and in any event, they don’t define the market. Had you listened to us in December 2009 at your workshop, you would know this already.

4. Composite Testing Rule for Paint LOWERS the Lead Standard to Sub-trace Levels. In yet another example of overly risk-averse rulemaking, the agency’s new composite testing rule for paints requires that lead content must never exceed that for any individual component paint in the composite. This slices the 90 ppm limit by two-thirds for a three-paint sample and by 75% for a four-paint sample. This super-stringent rule ensures that it is literally a gamble to use composite testing – so why would anyone bother? Even more bothersome, since the new policy of the agency is to impose strict liability for lead-in-paint violations, this new rule demonstrates the ascendency of the debunked notion that there is “no safe level for lead”. If the agency really wants to take this position, it should not permit composite testing for paints. Too risky . . . .

5. The Regulatory Flexibility Analysis is Flawed and Self-Justifying. The analysis justifying this Proposed Rule is a “best case” scenario, and takes none of the foregoing into account. If in fact the rule will hard or impossible to use, or will create too many legal risks or recordkeeping burdens and thus go largely unused, the reasoning in this section will be completely inapplicable.

6. The Burden of Recordkeeping is FAR GREATER than Asserted in the Proposed Rule. At our company, we produce about 1500 “catalog” items and several thousand other SKUs and custom products through a network of hundreds of factories in various countries. We do not control these factories – they are generally family businesses like our company, and are independent of us. Typically, we provide only a small share of annual revenue of any of our factories and thus have limited leverage over their business practices. Like many small businesses, we have a very limited infrastructure in place to supervise factories “on the ground”, although it is worth noting that our safety record indicates that our business methods have worked well for more than two decades.

To implement the recordkeeping set forth in this rule, I estimate that we would have to spend $50,000 - $100,000 in software development expenses to store and manage the desired records. In addition, we would need to expand our staff significantly. To reach out to all of our factories, negotiate and monitor many new business practices, will take a significant increase in staff. I posit that we would need to open an Asian office with as many as 5-10 local employees. A Chinese office would cost us at least $500,000 per annum. In addition, we would have to increase our clerical and management staff in the U.S. to help with data input, software management, project management, audits, vendor relations and general management. This would cost us at least $250,000 per annum. We anticipate that this intrusion on the business practices of our vendors would cost us business relationships and would lead to significant cost increases. The total cost of these disruptions would add another $500,000 or more per annum. It is not inconceivable that we ALONE could incur annual expenses of $1.5 million and certainly at least 10 man-years of labor (more than 20,000 hours) to comply with these rules. There are THOUSANDS of companies affected by this rule. We estimate that the assessment of cost and man-hours in the Paperwork Reduction Act section of the Proposed Rule is LOW by a factor of 100x-5,000x.

I would suggest that this rule be greatly simplified by making the following changes:

a. Eliminating the Requirement for Traceability Recordkeeping. As noted above, this ornate rule architecture is completely inappropriate for the minimal, almost non-existent threat, demonstrated by the CPSC’s own injury data. Recordkeeping requirements should minimized or dropped altogether.

b. Encourage the Exercise of Business Judgment. The presumption that only the CPSC (or Congress) can make sound judgments when considering safety issues is simply not supported by the data. Again, our company is a good example of that – we scrupulously maintained our safety record without the CPSC’s oversight, coercion or even encouragement since 1984. The concept of “business judgment” is well-defined in U.S. common law and has real meaning under the law. I think the concept of using components supported by GCCs is simple enough. Given that the restrictions on lead are clear under the CPSIA, why not let businesses exercise their judgment on how to meet those requirements and then measure them on their success in doing so? What is to be gained by inserting the CPSC into all aspects of how we conduct business? We were doing just fine before you arrived on the scene.

Given the few lead injuries noted in the CPSC’s historical data, the agency could save its scarce resources and remain effective as a safety administrator by focusing on known safety issues and incidents and leave the vast majority of law-abiding and safety-conscious companies ALONE. The data suggests that higher and higher mountains of regulations will never reduce injuries from the historically miniscule levels documented on the CPSC website.

c. Allow Composite Testing Using the Overall Concentration as the Pass/Fail Measure. Again, this is justifiable based on the historically minimal risk posed by the regulated substances. The already low lead levels specified in the CPSIA have not reduced injuries or deaths from the negligible levels that predated it. Since the number of recalls is so dramatically affected by agency policy (e.g., strict liability or not, how recalls are accounted for, etc.), the only reliable measure of the effectiveness of policy is injuries. Composite testing holds the promise of real savings to the many law-abiding companies affected by the CPSIA. Loosen the noose and they may actually save some money.

Component testing can be a simple and effective way to lower costs, but a different approach is necessary to get to that result. A sharp reconsideration of the Proposed Rule will be required to achieve this goal.

Thank you for considering my views on this important subject.

Sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.
380 North Fairway Drive
Vernon Hills, IL 60061