Monday, August 9, 2010

CPSIA - The Great Set-Up

For those who had better things to do than wade through my comment letters last week, I want to highlight a few points.

The two CPSC rulemakings up for comment on August 3rd were on component testing and on the so-called "15 Month Rule". Both are very important rules and both have been long discussed. The "15 Month Rule" relates to testing frequency and defines a "reasonable testing program". The long controversy over these rules relates to their acknowledged potential to be TERMINAL to small businesses. This was the principal reason that Inez Tenenbaum delayed issuing these rules on time in November 2009 as required by law (they can vary from law when it suits their purposes, please note). She called a two-day workshop for December 2009 for the purpose of gathering the feedback of stakeholders. I was asked to appear as a panelist, as were two of my colleagues. These sessions were taped (they were able to hear all the feedback and digest it).

So here's a few things you should know:

a. Component testing will not be useful except for the largest companies and for those rare situations when everything falls neatly into place. The rules as written are too complex, too demanding (full traceability of all components is REQUIRED, which is delusional and completely unnecessary for such simple, innocuous products) and far too risky. The liability risk associated with these very challenging rules will scare off all but the most foolhardy or ignorant companies.

b. Component testing relies on a fantastic assumption, namely that component tests (if desired) will even be available. Why don't we assume they will be available for every paint and for every plastic pellet on the planet? Does that solve the problem? I dare say not. There are many convenient examples of likely missing test reports - think of aluminum foil in a science kit, for instance. If you are missing only a few component certificates, any benefit from the rule is lost.

c. The "15 Month Rule" was apparently NOT CHANGED from the draft discussed in December 2009. In other words, despite the agency's "misgivings" about the rule way back then, and even after two days of comments by more than 200 stakeholders, the agency ended up in the same problematic place - and put the rule out for comment now. Of course, they filled in some holes (see below). In my opinion, this means either that the "feedback" process was a complete sham (the agency gave the appearance of "listening" but did as it pleased anyhow) or else that the agency lacks the temerity to tell Congress that the CPSIA is simply screwed up. Having ducked that punch, the CPSC instead opted to put you and me out of business.

If they were unable or unwilling to listen in the last nine months, I have absolutely no confidence they will listen this time. That bodes badly for me and for you. Consider the following . . . .

d. Using the numbers from the CPSC's rulemaking, I derived that the agency wants me to spend $10,000 per item per year in testing costs (all-in). We have 1,500 items. Do the math - that's $15 million per year in testing. This is for a company with ONE RECALL OF 130 PIECES TO ITS NAME IN 26 YEARS. This is also the rule regulating a "risk" that killed ONE CHILD and MAY HAVE INJURED THREE CHILDREN . . . in 11 years. [You can review the math in my comment letter. It's their numbers, not mine.] Do you think this might be a touch excessive? No matter, that's our problem to resolve.

I can't get this $15 million number out of my head. Do you realize that this rule could become the law shortly? Hey, HTA members, do you get it yet? All that nuzzling up to the CPSC, all their tears over your plight - this rule shuts your doors. If they push forward on this rule (as I anticipate), we will all face a very daunting choice - do we close our doors, sell our companies, go into another business or, breath deep, knowingly break the law by ignoring this rule? Is this a surprise to anyone? This has to be the world's stupidest rule - and we are left with the ultimate Hobson's Choice. Thanks CPSC.

Let's not forget that Bob Adler spoke in stern tones last February when he said he would not vote to extend the stay on the testing and certification rules again. In the absence of further Commission action, the testing stay lapses on February 11, 2011. This rulemaking is intended to put the agency in position to let the stay expire. The next step would be enforcement of this new rule. Ms. Tenenbaum has publicly announced that 2011 will be all about enforcement - you have been warned, the pogroms are coming.

Do you get it . . . yet? IF the agency cannot wrap up this rulemaking in time, it will need to extend the stay. Arguably, that problem is on its doorstep right now. Even they understand that businesses need time to plan, and without final rules, no planning or preparation can take place. IF they cannot get this done in time (soon), they will have to extend the stay AGAIN. This would be incredibly damning of the agency, as it would be an apparent concession that the awful CPSIA cannot be implemented, perhaps ever. Of course, that only confirms what you and I have known for a long time - the law can't be fixed by this agency and is fatally flawed. In the absence of dynamic Congressional action, we're all toast (this is old news).

I urge you to take this battle to the political arena. The CPSC and the Dem-controlled Congress have shown that they just won't listen. They don't care about our problems. I say that if they are intent in putting us out of business, all of our productive businesses making contributions to our community and our markets every day, then it's time to return the favor. We need to put THEM out of business first.

Time's a-wastin'.


Wacky Hermit said...

Sorry to mix historical metaphors like this, but if the pogrom is coming, then shouldn't we be building an underground railroad?

I know it'd be impossible for you to take something as big as Learning Resources underground, but when the government makes it impossible to do business legally, people don't throw up their hands in the face of their natural "propensity to truck, barter, and exchange." (Adam Smith) They keep doing it, only on the down-low.

Anybody want some black-market baby booties?

Rick Woldenberg, Chairman - Learning Resources Inc. said...

I have previously predicted that this law will create a black market in children's goods. I have further observed that we should all be ashamed that the U.S. would create laws to incentivize black markets in a free market jurisdictions.

Black markets are not going to fix all problems. They are, by definition, illegal markets and as a result, they won't replace legitimate businesses on a certain scale. It's no way to run the biggest economy in the world.

Esther said...

I'm already being asked by moms to make their girls cloths because they aren't finding the products they need. It's not black market yet, but I suppose it could be.

Unfortunately, the Democrats will cause Black Markets in other areas besides children's products. Think health care, loans, home improvement. The people will survive one way or another because that is what people do. The Declaration of Independence gives us permission to rise up and resist when tyranny reigns and it may very well come to that.

halojones-fan said...

I don't think there'll be a "black market" as such. What's going to happen is that a lot of people will no longer manufacture children's products; they will instead manufacture "pet products", or "novelty miniatures", or "products for overseas markets, or simply put a big "not for use by children under 14" sticker on everything.

I mean, you can't control consumer behavior post-purchase, right?