CPSIA - Welcome to the Team, Gib!

In a fascinating turn of events, Gib Mullan has apparently left the employ of the CPSC and accepted the job of Chief Counsel of the House Committee on Energy and Commerce's Commerce, Manufacturing and Trade Subcommittee. This is the subcommittee which has jurisdiction over the CPSC (and NHTSA, currently being run by David Strickland, one of the drafters of the CPSIA). We live in interesting times, don't we?

Gib Mullan has had a long and illustrious career at the CPSC. Formerly a litigation partner at Kirkland & Ellis, Gib joined the CPSC as its General Counsel in 2004 and later became the Director of Compliance and Field Operations. In that latter role, Gib drew some fire in this space. Later, in something of a palace coup, he was "detailed" to the CPSC's Office of Executive Director and then "assigned" to a "special project" at Customs and Border Patrol. The Product Safety Letter questioned whether this was a legal maneuver by Chairman Tenenbaum as it was not accompanied by a Commission vote. In other words, PSL implied that Mullan was the subject of an illegal firing by Tenenbaum.

Hmmm. And now ex-Kirkland partner Mullan is Chief Counsel for the House Subcommittee responsible for the CPSC? And working for the Republicans?

Can you say "oversight"?

Sounds like fun!

CPSIA - Reasons to be Optimistic

With just a couple days left in 2010, a desolate year of long frustration, the new Congress is already stirring on the CPSIA front. On Thursday, January 6th, the Republican staff of the House Committee on Energy and Commerce is hosting a bipartisan working group session on proposed fixes to the CPSIA. I will be attending, as will representatives of many interested stakeholder groups. It is my understanding that the Democrats have been invited as have some of their consumer advocate group allies.

It is worth noting that this meeting will be held in broad daylight with both sides at the same table. It appears that the Republicans are making a statement about changes in legislative process as well as changes in law. I think it's high time that the legislative process emerge from the shadows and commend them for their approach.

It is also quite noteworthy that this meeting will take place on the FIRST day of the new Congress. The swearing-in ceremonies will take place on Jan. 5th in the afternoon. The next day the Energy and Commerce committee staff begin work on the CPSIA. You have to be impressed at the speed and seriousness that the Republicans are attempting to address this issue. Who says our government is broken?

The politics in Washington changed a lot at the midterm elections. Not only has the House changed hands, so the Waxman era ended, but elsewhere things are changing, too. In the Senate, perhaps a dozen Democratic Senators are facing reelection in this cycle and the Tea Party is still a major force. What will the likes of Mark Pryor think about their chances when their compadres (like Blanche Lincoln) have been so recently vanquished? Perhaps that will motivate a shift in approach. Will the Senate stiffen if a Republican House sends in a fair amendment of the CPSIA? The winds may finally be at our backs.

And then there's the White House. It's anybody's guess what's going on there, but there is reason to believe Mr. Obama is tacking toward the center. This is Clintonesque, a la 1994, and may be a trend that holds up. He has some tough choices to make, but the center may be a better place for him now. That suggests a greater willingness to cooperate with a bipartisan retooling of this law.

If Obama hugs the center line and if the Senate is feeling less unrelentingly liberal facing reelection in the Tea Party era, a serious amendment of this law is possible. It is even possible that these wave lengths will penetrate the CSPC Commission and all sorts of behaviors could change. O to dream . . . .

And we need the help, guys. The 15 Month Rule is a crisis waiting to happen, the testing and certification stay is due to expire on February 10 (in the middle of the Chinese New Year) and of course, there's the 100 ppm lead standard looming in August. There's a lot to address. Let's hope this can move along quickly and put an end to this sorry chapter in our regulatory history.

CPSIA - The Worm Continues To Turn

The day we all feared, the day we knew would come someday . . . well, the Federal Register says it's coming soon. According to a notice of "Final Rule Stage" published on December 20, the CPSC is moving forward on the so-called "15 Month" Rule.

You have to chuckle at the "15 Months" part. This rule was legally mandated to be enacted 15 months after the CPSIA was signed into law. The presumed date of enactment would then have been November 14, 2009, a mere 14 months ago now. They didn't even published a first draft until May 2010. If the agency can somehow finish this project by January 14, it could be called the "15 Months Times Two" Rule. Then again, it's basically inconceivable that they will make it. Eventually they'll need another name for this thing.

The urgency behind finishing up this rule is that the testing and certification stay expires on February 10, 2011. Remember that Bob Adler already said he wouldn't vote an extension of this stay because . . . he hates stays. Perhaps he prefers market chaos and economic depression instead. Anyhow, to avoid the showdown, they need to get their ducks in a row, hence the need to get this rule going.

I sent in comments on the first draft of this rule on August 3. I wasn't a big fan . . . and I guess other people had reservations, too. According to www.regulations.gov, the CPSC received 112 comments letters (that may overstate the number, because regulations.gov seems to have some duplicates). I haven't read them myself, but I assume I am the only one who saw any flaws in this rule. The rest of the letters are probably just "thank you" notes.

Anyhow, it's worth noting that the Chinese New Year occurs on February 3, 2011 so take my word for it, all the Chinese factories will be closed on Feb. 3rd and probably won't reopen until Feb. 10 at the earliest after a two-week holiday. Some workers are gone three or even four weeks for this holiday. In a "best case" scenario, the CPSC can't take action on this rule until they officially acknowledge the public comment "thank you" notes and hold a public Commission meeting. Do the math - if they choose to take action on this rule now, we will get about ten minutes notice to begin conforming. I can't see any risk of market chaos again . . . can you?

Here's a fairly obvious fact for you - we have not incorporated any of the pending rules into our supply chain or manufacturing processes. Why? You tell me what I'm supposed to do. The rule that has been published is deeply flawed and, basically, stupid. It is not a final rule. 112 comment letters were filed on it. It could change . . . it BETTER change. How am I supposed to implement rules that haven't been published or possibly even written? Telepathy? I don't read minds and I haven't implemented the unknowable, either.

If this does not make your blood boil enough, consider these excerpts from the notice of Final Rule Stage:

• "The U.S. Consumer Product Safety Commission is charged with protecting the public from unreasonable risks of death and injury associated with consumer products." [Emphasis added] The CPSIA makes consideration of RISK by the CPSC illegal. Bummer, huh? Someone should have told the CPSC because they still claim to be concerned with "risk" of injury.
• "When deciding which of these approaches to take in any specific case, the Commission gathers and analyzes the best available data about the nature and extent of the risk presented by the product." And then ignores it??? See also the final bullet below.
• "As for exemptions [from the "15 Month Rule"], the statute does not appear to give the Commission the authority to exempt firms from the testing or certification requirements, so it may not be possible to exempt firms within section 14 of the CPSA." In other words, HTA, you can lump it. And the CPSC is telling you who to blame - Congress.
• "The congressional mandate to issue this regulation does not require the Consumer Product Safety Commission to do a cost/benefit analysis for this regulation. Therefore, a cost/benefit analysis is not available for this regulatory action." Head-in-sand syndrome. I bet you'll be able to do a cost/benefit analysis pretty quickly when your costs go up again by 20x.
• "[It] is not possible to provide an analysis of the magnitude of the risk this regulatory action addresses." Ahem. And it's okay to put forward a rule of this complexity and far-reaching impact while flying entirely blind because . . . why???

Let's not forget that there's a new Congress being sworn in January 5th. The incoming Republican House majority has pledged to shrink the federal government and to closely examine how regulatory agencies are governing. Hmmm. Help may be on the way . . . soon.

CPSIA - Why Does The Press Push Bad Ideas?

Last week, Justin Pritchard of the Associated Press again pressed the point that glassware with lead in the enamel should be recalled. He expressed shock at the "stunning" news that the CPSC reconsidered its view that the glasses are subject to the noxious lead regulations of the CPSIA.

Why did Mr. Pritchard find this outcome "stunning"? After all, in response to a question about the risks involved in the glasses, Pritchard had this to say in a TV interview: "The [lead and cadmium] levels are low in the sense of . . . no one is going to touch this glass, put their hand to their mouth and fall ill. This is a low level over time concern." If the glasses are a low risk, why would he expect a federal regulator to waste time or resources on them?

Even more remarkably, Pritchard knows that the McDonalds Shrek glasses were found to be non-toxic by the CPSC. He broke the McDonalds story. The Shrek glasses present precisely the same "issue". He also knows lead is only restricted in children's products and that enamel coatings containing lead are permitted explicitly in the law (16 CFR 1303.2(b)(1)). There is no evidence that the presence of lead in the enamel has ever injured anyone. Ever.

So why is Pritchard continuing to push a story that he knows is defective? This puts it kindly. Let's rule out that he is seeking a Pulitzer or has an ill-motive. Why would he do this?

Of course, we know there is a bias in reporting and in investigating that favors reporting "bad news". Good news is not really considered news at all (except on the sports page). The media's incentive is to publish terrifying stories - it sells papers and banner ads, and it's natural for Congress to push legislation to save us from poorly understood threats as an extension of this trend. But something else is at play, it turns out.

This subject is analyzed in an interesting article by Jonah Lehrer in this week's New Yorker magazine entitled "The Truth Wears Off". Lehrer tries to explain why replication of scientific studies tends to show declining results over time. This is quite unexpected given that scientific studies are subject to peer reviews and are often published by periodicals with their own high standards of review. Lehrer notes that in small studies, weird results can show up (such as a 1930's study which claimed that one Duke University student had ESP but later retesting revealed the student's rapidly diminishing extrasensory powers . . .). In larger pools of data, results revert to a mean (this is called "funneling"). However even statistical significance doesn't explain the phenomenon. Lehrer shows that we only get to see certain slices of data. Most data won't be published because it's not interesting or doesn't confirm prejudices.

Put into a CPSIA context, Lehrer implicitly argues that media won't write a story announcing that lead-in-enamel on your glassware is safe. Nor that you were always fine and your children weren't in danger. Nor that there have been few injuries from lead in any children's products. Nor that the few known injuries in the context of the large volume of products in use is actually a GOOD result. Nor that there are no identified victims of "phthalate poisoning" or that incidents of cadmium poisoning in American children are virtually unknown. The excuse - it's not "newsworthy". What's the reality?

The reality is that we are exposed to a very imbalanced set of data. Quoting Michael Jennions, a biologist at the Australian National University, Lehrer argues that "the tendency of scientists and scientific journals [is] to prefer positive data over null results, which is what happens when no effect is found." If the null set (the "everything's fine" news) doesn't get reported, what does? Says Richard Palmer, a biologist at the University of Alberta, "We cannot escape the troubling conclusion that some - perhaps many - cherished generalities are at best exaggerated in their biological significance and at worst a collective illusion nurtured by strong a-priori beliefs often repeated."

The same mantra over and over? The words "Rachel Weintraub" suddenly pop into my mind.

Lehrer continues: "[T]he problem seems to be one of subtle omissions and unconscious misperceptions, as researchers struggle to make sense of their results. Stephen Jay Gould referred to this as the 'shoehorning' process." Referring to studies in Asia that consistently confirm that acupuncture is effective, and studies in the West that show much poorer results, "Palmer notes, this wide discrepancy suggests that scientists find ways to confirm their preferred hypothesis, disregarding what they don't want to see. Our beliefs are a form of blindness."

Or to quote Robert Adler, anecdotes aren't evidence.

John Ioannidis, an epidemiologist at Stanford University who once published a study entitled "Why Most Published Research Findings are False", calls the phenomenon "significance chasing" where scientists play with numbers trying to find "anything that seems worthy". In a news context, this is the same as Pritchard fingering the Super Hero glasses on the grounds that there is lead in the enamel even though he knows the Shrek glasses were safe. Maybe these other glasses are a problem?! Jeff Plungis of Bloomberg published an article on lead in Christmas light wires on December 8th because he apparently thought it was "interesting" and not well-known. Same thing.

Ioannidis says "It feels good to validate a hypothesis. It feels even better when you've got a financial interest in the idea or your career depends on it. And that's why even after a claim has been systematically disproved . . .you still see some stubborn researchers citing the first few studies that show a strong effect. They really want to believe that it's true." [Emphasis added]

Lehrer's article is a great read, I recommend it to you.

So you can stop scratching your head. Pritchard and Plungis, Adler and Tenenbaum, Waxman and Schakowsky, Weintraub and Green, will all continue to beat the same drum. They know they're right . . . they just can't prove it. And they will continue to repeat themselves in spite of the facts of this case:

• There are (virtually) no known victims.
• The impact of the law cannot be measured.
• The nexus between lead in children's products and purported injury to children is not proven. This means that the inclusion in the law of so many formerly unregulated categories of goods is absolutely unjustified.
• The benefits of prophylactic testing has been disproved by the passage of time - the last 29 months.
• The law targets small business and lets big business off the hook. Even since passage of the CPSIA, it is clear from data that big business are responsible for headline recalls.

I guess the media keeps on publishing these stories because it's human nature. Unfortunately, many jobs and many futures have been damaged in the service of a human weakness. I like to think we can rise about such limitations. It is in the hands of the CPSC and Congress to solve this problem.

Let's hope they do their job . . . sometime really soon.

CPSIA - Taking Advice from Idiots

In a recent article entitled "Advice on avoiding a toxic Christmas", USA Today attempted to take Christmas paranoia to new heights. Naturally, the premise of the article is that companies are criminally irresponsible or venal and certainly can't be trusted, and consumer advocates and any pediatrician that will talk to a reporter are better people, better informed and by definition trustworthy. In this article, USA Today's Liz Szabo consults "experts" to reach the following conclusions:

a. "No one knows how much lead people absorb from holiday decorations, says pediatrician Bruce Lanphear, of Canada's Simon Fraser University." And if he said it, it must be true. [Of course, pediatrician Philip Landrigan, of Mount Sinai School of Medicine in New York, notes "In the whole scheme of things, is it a huge risk? No."]

What's the problem with Xmas lights, you say? Lead in the PVC. According to Alicia Voorhiess, a mom with a blog, manufacturers "use it" in the PVC. Right - you got us! Don't worry, though, after much digging, she found two companies that offer Xmas lights which comply with Restriction of Hazardous Substances (RoHS), a European standard which limits the presence of lead in lights.

Ummm, Alicia, RoHS is a standard to designed to prevent leaching of heavy metals to protect the environment and only applies to electronics. This MEANS that the lead is restricted in the bulbs and fittings, not the PVC. Whatever, it sounds safer, doesn't it?

The author of the article quotes Dr. Alan Greene (my college classmate) saying that you should handle your Xmas lights with gloves. Why stop there? Moon suits, anyone?

b. Artificial Christmas trees are made of PVC, too, and we know what manufacturers are wont to do with PVC. The solution - use a real tree grown without pesticides.

I find this a most uncreative solution, myself. Here's a few more:

• Post a picture of a beautiful tree near the spot you might have placed your tree. Keep it away from the fire, however.
• Consider just displaying your Xmas lights in their packaging. No touching!
• Use an artificial tree, but place under a glass enclosure or something air tight like Saran Wrap. Stand at least five feet away at all times.

All of these remedies will protect you from lead. That said, please remember there is NO safe level for lead. And a holy, jolly Christmas to you, too!

Shame that USA Today didn't focus in on the fact that there is lead in the air, in our water and in our food. OOPSIE! In fact, lead in water is conveniently piped into Washington, D.C. homes for kids to drink in their own bathrooms and kitchens. Nice! Somehow USA Today missed this. Shocking . . . .

c. Candles with metal wicks might also have lead in them, or then again, maybe they won't. In a blow to poorly-researched newspaper articles, the CPSC apparently banned these wicks in 2003. Who knew the CPSC actually tried to its job before the CPSIA? Somebody should have told Congress.

According to this all-knowing newspaper, candles also contain paraffin, a wax made from petroleum. Not sure why I should care about that, but it sounds ominous. And some fragrances in candles have phthalates in them "which can affect the hormonal system". Isn't knowing nothing about science FUN???

The solution - The author of this article actually recommends that you use pure beeswax candles. Happy hunting! They also suggest you "poke cloves into oranges". Ah, the old clove poking trick! That sounds like fun but IS IT SAFE? This article says oranges have lead in them. NO! And, for an extra kicker, it also says they have cadmium, too: "If the soils contain toxic metals like lead, mercury and cadmium then the consumers may be poisoned as happened in the "Ouchi-ouchi" disease in Japan . . . and similar episodes." Wow, Ouchi-Ouchi! Scott Wolfson, do you hear a bell ringing? [Eating oranges didn't cause "Ouchi-Ouchi" but then again, researching these things is sooooo time-consuming.]

So there you go. Skip Christmas this year, too dangerous. I wonder if a Festivus pole is lead-free . . . .

CPSIA - Fred Upton Wins Republican Nod on Energy and Commerce Committee

Rep. Fred Upton has apparently won steering committee endorsement as Chairman of the House Committee on Energy and Commerce. This means he will in all likelihood be appointed as Chairman tomorrow, succeeding Henry Waxman in the next Congress. While Upton's ascendancy comes in a victory over Rep. Joe Barton, a longtime and ardent critic of the CPSIA, it is not thought to reflect any reduction of support among Republicans for a significant CPSIA amendment.

Hope springs eternal. Help may finally be on the way!

CPSIA - Canada Tries to "Out-Stupid" Us - Is that EVEN Possible?

When I went to Toronto one year ago to attend the international ICPHSO conference, I came away impressed with the sensibility of the Health Canada folks. They were grounded, they were calm and reflective, they seemed to understand that the CPSIA went too far and was not needed as the basis for Canadian law. I left with a sense of admiration and confidence in them.

And one year later - they are showing troubling signs of declining IQ points, a possible sign of lead poisoning! In a stunning turn of events, Canada apparently has decided to play one-upsmanship with the United States. Not satisfied at losing in the international arena of regulatory lunacy, Canada proceeded to tighten up our oh-so-loose CPSIA lead standards.

Editorial Pause Here - Someday I want to see governments everywhere refer to INJURY STATISTICS when they call for new laws to make people safer. To figure out if people are "unsafe", one must certainly know if they are being injured . . . right? You'd really want to be able to measure that, wouldn't you? Please tell me you understand this point . . . . Soooo, if one chooses to argue that we are harming children with "too much" lead in children's products, isn't incumbent on the accuser to demonstrate in some meaningful way that the harm we will spend zillions to "eliminate" actually exists, you know, at a bare minimum? Shouldn't we demand a higher standard of justification than "it stands to reason"?

Back to Canada - Canada announced on November 29th "the most stringent rules in the world" on lead. The Canadians have decided that lead limits should be 90 ppm for toys and any product other than a kitchen utensil intended to come in contact with the mouth for children three years old and under. They will also join us at 90 ppm for lead-in-paint.

Please recall that the dirt in Mr. Obama's backyard tested for lead at higher levels than 90 ppm. His DIRT. So now we know he won't be able make toys or teething rings out of his dirt and sell those products in Canada. Finally, the menace is contained!

So why did they do this? "Health Canada says the new limits are needed because while reputable companies do their best to ensure lead has not been added intentionally to their products, companies can still run into trouble with quality control when importing huge volumes of goods in complex supply chains."

Oh, I see - it's the fault of darkest China! Good Canadians wouldn't do this but those evil people in their complex supply chains - they can't be trusted.

I would toss this off as some kind of joke other than the fact that this creates a massive business problem for us. And, of course, after the cynical and ignorant politicians get past congratulating themselves on saving the populace (from what?), there will be great mystery about what happened to variety of playthings in Canada or why educational products are much harder to find. What a mystery that will be!

As an American supplier of many Canadian school supply dealers and Canadian schools (we make Canada-specific educational products), I want to note that we have never had a single accusation of injury in Canada from any of our products since we were founded in 1984. I do not relish attempting to meet this asinine standard, lower than the loathsome U.S. standard of 100 ppm due to come into being in August for no particular reason other than to kill jobs. Will anyone feel sorry for me when we get our first test report showing lead levels of 93 ppm on a single part in an assembled toy? In other words, compliant with the U.S., but 3 parts-per-million above the arbitrary trace standards of Canada? Nah, it will be ours to savor - no one will care. We have to make children safe, safe, safe and who could put a price of the safety of our children?!

I don't know how long we will sell products for kids under three in Canada if this law goes forward. Perhaps the Canadians figure the kids can start to be educated after three.

Maybe Canada really has a chance to out-stupid us if they keep this up. Bully for you, Canada! And I thought it couldn't be done . . . .

CPSIA - My Written Testimony at Senate Hearing 12-2-10

As you may know, there will be a Senate CPSC oversight hearing tomorrow. The hearing will be held by the Subcommittee on Consumer Protection, Product Safety and Insurance of the Senate Committee on Commerce, Science and Transportation. You can see the witness list here. The subject of the hearing is "Oversight of the Consumer Product Safety Commission: Product Safety in the Holiday Season"

I have submitted the following written testimony. I will not be testifying at this hearing.

STATEMENT OF RICHARD M. WOLDENBERG
Chairman, Learning Resources, Inc.
Vernon Hills, Illinois

December 2, 2010


As an operator of a small business making educational products and educational toys, I have had a front row seat for the implementation of the Consumer Product Safety Improvement Act of 2008 (CPSIA) by the Consumer Product Safety Commission (CPSC). On the occasion of your CPSC oversight hearing, I want to highlight the economic damage wrought by the CPSIA without achieving any material improvement in safety statistics. I also want to bring to your attention the open hostility of the CPSC toward the corporate community in the implementation and enforcement of the CPSIA, and conclude with my recommendations for legal reforms to restore common sense to safety administration without reducing children’s safety.

Children are our business. As educators, as parents and as members of our community, we have always placed the highest priority on safety. We would not be in the business of helping children learn if we didn’t care deeply about children and their safety. The CPSIA has dramatically impacted our business model, reduced our ability to make a profit and create jobs, pared our incentive to invest in new products and new markets, and generally made it difficult to grow our business. We would gladly accept these burdens if the law made our products safer, but the fact is that it hasn't. Our company, Learning Resources, Inc., has recalled a grand total of 130 pieces since our founding in June 1984 (all recovered from the market). Our management of safety risks was highly effective long before the government intervened in our safety processes in 2008.

The precautionary approach of the CPSIA attempted to fill perceived “gaps” in regulation by making it illegal to sell children’s products unless proven safe prior to sale. Yet the law has yielded few quantifiable safety benefits other than a reduction in recent recall rates for lead-in-paint (already illegal in children’s products for decades). Ironically, this progress in reducing recalls has taken place in a 27-month period in which, like the time before the CPSIA, testing of children’s products prior to sale was not mandatory. Consumer confidence wasn’t dented by the lack of mandatory testing. The justifications for the over-arching and excessively expensive CPSIA regulatory scheme just don’t hold water.

In any event, the reduction in recall rates is only a minor triumph and was not due to mandatory testing or harsh new lead standards, but most likely a (hyper) energized regulator and a great deal of publicity. Recall statistics can be highly misleading because the rate and number of recalls depend on many factors and do not generally correlate to injuries to children. In other words, product recalls are not tantamount to childhood injuries. The purpose of the CPSIA is to reduce injuries, not product recalls – yet CPSC recall statistics show that there have been almost no reported injuries from lead or phthalates in children’s products in the last decade (one death and three unverified injuries from 1999-2010, all from lead or lead-in-paint). The billions of dollars now being spent by the corporate community annually on testing and other compliance activities have not reduced injuries – there weren’t any to reduce. Whatever peace of mind has been generated by lower recall rates comes at a very high price.

The CPSIA significantly broadened the reach of federal safety regulation well beyond what was needed to deal with the lead-in-paint toy violations of 2007 and 2008. Under the CPSIA, the definition of a “Children’s Product” subject to regulation now encompasses ALL products designed or intended primarily for a child 12 years of age or younger (15 U.S.C. §2052(a)(2)). This definition ensures that virtually anything marketed to children will be subject to the restrictions of the Consumer Product Safety Act (CPSA), irrespective of known or quantifiable risk of injury. Put another way, this definition ensures that many product categories with a long tradition of safety are now subject to the withering requirements of this law for the first time simply because they fall within the overly broad definition of a Children’s Product. The affected safe products span the U.S. economy books, t-shirts and shoes, ATVs, bicycles, donated or resale goods, musical instruments, pens and educational products. The CPSC declined to use its discretion to narrow this definition in its recent “final rule” interpreting “Children’s Product”, thus ensuring continued market chaos and economic waste.

The consequences of the change in the consumer safety laws to a precautionary posture has had notable negative impacts and promises to create further problems, namely:

a. Increased Costs. The new law creates a heavy burden for testing costs. From 2006 to 2009, our company’s testing costs alone jumped more than eight-fold. We estimate that our testing costs will triple again after the CPSC (as anticipated) lifts its testing stay in 2011, and could multiply again if the CPSC enacts (as anticipated) its draft “15 Month Rule” on testing frequency and “reasonable testing programs”. Testing costs are often thousands of dollars per product. Having employed one person to manage safety testing and quality control for many years, we now have a department of five, including me, plus an outside lawyer on retainer. These jobs are funded by discontinuing sales, marketing and product development jobs – the CPSIA is NOT an ersatz stimulus program. Personnel, legal and other out-of-pocket safety expenses (besides testing) have more than quadrupled in the last three years – all without any change in our super-low recall rates or injury statistics.

b. Increased Administrative Expenses. The CPSIA requires that all products include tracking labels on both the packaging and the product itself. Rationalized as “analogous” to date labels on cartons of milk, tracking labels are in reality nothing but pure economic waste as applied to the vast array of “Children’s Products” under the CPSIA. As noted, our company has a virtually unblemished 26-year track record of safety so tracking labels promise to add little value in the event of recalls that are unlikely to occur. Ironically, with the strict new rules governing product safety, we believe the already low chance of a product recall has been reduced further. As noted above, the money to pay for all this administrative busy work comes from foregone business opportunities. We are being forced to shrink our company to apply tracking labels that no one will use.

An equally frustrating bureaucracy has sprung up around recordkeeping under this law. Burdensome requirements spawned by the government’s new involvement in our quality control processes forced us to make large new investments in information technology with no return on our investment. In addition, the pending CPSC draft policy on component testing promises to convert the simple task of obtaining a complete suite of safety test reports into a major recordkeeping chore. We will now be forced to manage each component separately, tracking test reports on each component one-by-one. This promises to multiply our recordkeeping responsibilities – and the related risk of liability for failing to comply – by more than an order of magnitude.

c. Reduced Incentive to Innovate. The increased cost to bring a product to market under the CPSIA will make many viable – and valuable – products uneconomic. To cover the cost of developing, testing and safety-managing new products, the prospective sales of any new item (“hurdle rate”) is now much higher than under prior law. This means that low volume “specialty market” items are less likely to come to market and many new small business entrants may find themselves priced out of the market. The CPSIA makes it much harder to start a new business serving the children’s market because the rules so heavily favor big business. Because of CPSIA transactional costs, high volume items now have a huge cost advantage over low volume items. This will hurt many small but important markets like educational products for disabled children. Our company, with its 1500 catalog items, is probably now a dinosaur under the CPSIA –the law provides a strong economic incentive to restructure our business around 50-150 items and to focus on high volume markets only. Schools would suffer from the loss of niche educational products.

d. Crippled by Regulatory Complexity. Our problems don’t end with testing costs or increased staffing. We are being crippled by regulatory complexity. Almost 28 months after passage of the CPSIA, we still don’t have a comprehensive set of regulations. Please consider how mindboggling the rules have become. There were fewer than 200 pages of safety law and CPSC rules that pertained to our business until 2008. These rules clearly defined our responsibilities and could be taught to our staff (in fact, many were rarely applicable to us). Today, the applicable laws, rules and interpretative documents exceed 3,000 pages. As a practical matter, it is simply not possible to master all of these documents – and yet it’s potentially a felony to break any of these rules. Sadly for us, the rules and CPSC staff commentary keep changing, are still being written and are rarely if ever conformed. How can we master and re-master these rules and teach them to our staff while still doing the full-time job of running our business? Ironically, the recalls of 2007 and 2008 were never a “rules” problem – those famous recalls were clearly a compliance problem. Imagine what will happen now with an unmanageable fifteen-fold increase in rules. No small business “ombudsman” can make that problem go away.

e. Small Business Will Certainly Suffer. The CPSIA was written in response to failings of big companies, but hammers small and medium-sized companies with particular vengeance. Our small business has already lost customers for our entire category on the grounds that selling toys is too confusing or too much of a “hassle”. This is our new reality. The highly-technical rules and requirements are beyond the capability of all but the most highly-trained quality managers or lawyers to comprehend. Small businesses simply don’t have the skills, resources or business scale to manage compliance with the CPSIA. For this reason, small businesses bear the greatest risk of liability under the law, despite being responsible for almost no injuries from lead in the last decade. The double whammy of massive new regulatory obligations and the prospect of devastating liability are driving small businesses out of our market.

In implementing and administering the CPSIA, the CPSC created a harsh regulatory environment for the business community over the past 28 months. Consider the following:

1. Unjustified Recalls. In June, in response to an inquiry by a Congressman and followed up by media inquiries, the CPSC pressed McDonalds to recall 12 million Shrek glasses for “high” cadmium content, despite the agency’s admission on Twitter that the glasses were not toxic. The recall effort was justified as being done “out of an abundance of caution”, a frightening regulatory standard when applied to products acknowledged to be safe by the regulator itself. McDonalds lost millions of dollars as a result, not to mention suffering from widespread and persistent bad publicity.

2. Unjustified Penalties and Coercive Tactics. The CPSC assessed a $2.05 million penalty against a hapless Japanese dollar store chain (Daiso) for five separate tiny recalls involving 698 units and 19 items. These items sold for between $1 and $4 each. There were no reported injuries from sales of the Daiso trinkets. Ms. Tenenbaum bragged about this extraordinarily excessive prosecution in a speech in March 2010 to the Consumer Federation of America: “We secured an injunction that completely stops Daiso from importing children’s products into the country. . . . Daiso has a very high hurdle to jump over to ever get back in the import business again.” Regulated companies take stunning examples like Daiso as a warning that outsized and disproportionate force may be used by this agency with little provocation.

The regulated community has also expressed alarm over the threatened use by the agency of unilateral press releases “to warn the public” about alleged dangers in specific products as a way to coerce “voluntary” recalls. Such threats have been used where facts may be in dispute to justify a recall. Under the law, the CPSC may only implement mandatory recalls subject to a court order, a slow process perhaps but also expensive and labor-intensive. “Voluntary” recalls can be much quicker and cheaper, only requiring “agreement” between the agency and the subject company. In more than one case, CPSC has threatened unilateral releases to try to "convince" a firm to undertake a "voluntary" recall but after the firm took the risk of standing up to the staff and the staff conducted further investigation, the CPSC decided that recalls were not even necessary. Not all firms can bear the expense of such a process or take the risk of calling the staff's bluff because issuance of a release would likely damage the firm and their brand, possibly irrevocably. Many supposedly "voluntary" recalls have resulted. Abusive tactics of this nature have severely damaged trust between the CPSC and the regulated community.

3. Disregard of Public Comments. The agency has garnered considerable criticism for overlooking or disregarding comments from the corporate community solicited in its public rulemaking processes. Ignoring or disregarding inconvenient public comments contrary to the agenda of the controlling party makes a mockery of the legally-mandated public comment process. Notable instances include the recent approval of interpretative rule on “Children’s Products” and the rules implementing the public database of safety incidents. The database debate was so fouled by the majority’s refusal to entertain the legitimate concerns of industry that the two minority Commissioners proposed their own draft rule – which the CPSC at first refused to post on its website.

4. Unjustified Hostile Rulemakings. The CPSC has implemented rules governing the public database that adversely affect the Constitutionally-guaranteed due process rights of our businesses. There is no adequate public policy justification for the erosion of the remarkable civil rights that distinguish the American legal system among all international legal systems – yet the Commission voted 3-2 to allow falsehoods to be posted without recourse in a database the CPSC will maintain. In other cases, the agency has published draft rules (yet to be acted on) which could force companies like ours to spend as much as $10,000 per item per year to meet ARBITRARY rules on testing frequency or “reasonable testing programs” – notwithstanding strong evidence that these rules are wasteful, unnecessary and financially irresponsible. The pendency of rules like this creates destabilizing market uncertainty and forces business decisions that have no basis other than fear of future regulation. For instance, Wal-Mart has already instituted a 100 ppm lead standard months ahead of the POSSIBLE implementation of the standard by the CPSC – simply because the CPSC has been so slow to act.

The CPSIA went off track by taking away the CPSC’s authority to assess risk. If the CPSC were again required to regulate based on risk, safety rules could focus on those few risks with the real potential to cause harm to children. All risks were not created equal.

I recommend several steps to reduce cost, liability risk and complexity all without sacrificing children’s product safety:

A. Mandate that the CPSC base its safety decisions, resource allocation and rules on risk assessment. Restore to the Commission the discretion to set age and product definition criteria for the 300 ppm lead standard and phthalate ban. Freeze the lead standard and lead-in-paint standard at their current levels unless the CPSC determines that a change is necessary to preserve public health and safety.

B. The definition of “Children’s Product” should not include anything primarily sold into or intended for use in schools or which is used primarily under the supervision of adults. Other explicit exceptions should include apparel, shoes, pens, ATVs, bicycles, rhinestones, books and other print materials, brass and connectors. Exclusions from the definition should take these products entirely outside the coverage of the CPSIA (including mandatory tracking labels).

C. Lead-in-substrate and phthalate testing should be based on a “reasonable testing program”, not mandated outside testing. The tenets of a reasonable testing program should be set by the reasonable business judgment of the manufacturer. Resellers should be entitled by rule to rely on the representations of manufacturers. Phthalate testing requirements should explicitly exempt inaccessible components, metals, minerals, hard plastics, natural fibers and wood.

D. Definition of “Children’s Product” should be limited to children six years old or younger and should eliminate the difficult-to-apply “common recognition” factor of Section 3(a)(2)(c) of the CPSA. Definition of “Toy” (for phthalates purposes) should be limited to children three years old or younger and should explicitly refer only to products in the form used in play.

E. Eliminate CPSC certification of laboratories (rely on the market to provide good resources). Fraud has only very rarely been a problem with test labs and is already illegal.

F. Impose procedural limits to insure fairness in penalty assessment by the CPSC under the CPSIA. Completely reformulate penalties to restrict them to egregious conduct (including patterns of violations), reckless endangerment or conduct resulting in serious injury.

G. Rewrite the penalty provision applicable to resale of used product so that violations are only subject to penalty if intentional (actual knowledge or reckless endangerment) and only if the violation led to an actual injury. Eliminate the “knowing” standard with its imputed knowledge of a reasonable man exercising due care.

H. Mandatory tracking labels should be explicitly limited to cribs, bassinets, play pens, all long-life “heirloom” products with a known history of injuring the most vulnerable children (babies or toddlers).

I. Public injury/incident database should be restricted to recalls or properly investigated incidents only. Manufacturers must be given full access to all posted incident data, including contact information. The “due process” civil liberty interests of the corporate community MUST BE PROTECTED.

I urge your committee to address the fundamental flaws in the CPSIA to restore order to the children’s product market and to protect small businesses from further damage. I appreciate the opportunity to share my views on this important topic.