Wednesday, June 10, 2009

CPSIA - Latest Round-up (Bonds and Pens)

It has been a busy week. Let's go over the latest news:

a. GAO Pans Recall Bonds. The Product Safety Letter reported this week that the GAO had some not-so-nice things to say about CPSIA Recall bonds. The GAO's study of Escrows or Recall bonds is required by a little discussed provision in the CPSIA (Section 224). This brainwave is one of many massive overreactions in the CPSIA to a SINGLE NOTORIOUS INCIDENT, in this case the controversial failed recall of Simplicity cribs and bassinets. In that famous case, Simplicity went bust and the successor company (which bought the assets out of bankruptcy) refused to pay the liabilities associated with products sold by the predecessor bankrupt estate. [Btw, that is neither a surprise nor a scummy move - it would be the buyer's contractual right under the corporate law of all 50 States. If you always had to take liabilities with assets, many transactions would simply not happen (especially out of bankruptcy), and creditors would be much worse off - including people wanting reimbursement for defective products like the cribs and bassinets in this situation.] The new investors were not cooperative in a way pleasing to the Chicago Tribune or to various highly-strung members of Congress, and voila!, we are all now exposed to the risk of posting Escrows or Recall bonds.

How bad would this requirement be? Pretty awful. In the GAO report, several perplexing difficulties were noted:
  • Very few companies fail to complete recalls for financial reasons. The GAO notes a grand total of 15 failed recalls since 1979 (30 years) in ALL product categories (fire sprinklers, cribs, wall heaters, gas grills, thermostats, worm probes (who wants to probe a worm, anyhow) and a pull toy). The principal reason cited was bankruptcy. The agency recalls hundreds of products annually.
  • The CPSC would wilt under the burden of administering these bonds or escrows (for virtually no apparent benefit). The agency is ill-prepared for this responsibility and does not possess the skills needed for this finance-oriented function.
  • Assessing which companies or products would need to be backed by bonds would be nearly impossible.
  • There would be conflicts with other agencies with similar authority.
  • There would be serious trade barrier issues, potentially creating an international controversy. [Oh, that sounds good!]
  • And, my favorite, there are few sources for these financial instruments and they will be (and are) breathtakingly expensive. Even pricing the instruments was deemed by the GAO to be "especially daunting".

The GAO, showing more sense that some arms of the U.S. government that come to mind, said it would probably be cheaper and more efficient for the CPSC to establish a fund to help out when those few recalls fail for financial reasons or because of bankruptcy. Nahhh, that makes too much sense - next idea!

Of course, the GAO also noted that several consumer groups were passionately in favor of this provision because of various bad dreams they had recently about problems with imports. When confronted by the GAO with the various serious "unintended consequences" of this (ridiculous) proposal, the consumer groups again reiterated the urgent need for this provision to protect the public. Can you say "out of touch"?

We can only hope that the GAO Report will get a close reading by the CPSC and Congress before yet another financial catastrophe befalls respectable children's product businesses.

b. CPSC Refuses to Stay Lead Standards on Children's Pens. Earlier in the week, the General Counsel sent a letter setting out the Commission's opinion that most pens are NOT children's products. Then, in an exercise of supreme nonsense, the CPSC Commission deadlocked at 1-1 and de facto rejected a stay of enforcement on pens. The split featured Chairman Moore on the side of banning pens and against a stay, and Ms. Nord on the side of common sense. Enjoy the delicious irony, friends (especially the much maligned Ms. Nord, if you are reading this essay). The twisted logic is set forth in the advice letter of General Counsel Cheryl Falvey and the statements of the two Commissioners.

It is hard to dignify this decision by crediting it with any logic or insight. Frankly, it is inane and provides strong evidence of the lunacy foisted upon us by this awful law. I have previously noted that it will take 475+ years of writing on your hand to absorb a microgram of lead from a ball point pen, less than the lead found in two pieces of hard candy. Thus, I find the subject of the application of this law to pens to be morbidly discouraging. The very thought that a safety law could be focused on miniscule lead content in the 0.5 mm diameter brass ball in a pen tip makes me doubt the future of our civilization.

Even Chairman Moore seems to have some dim perception of this issue. He notes in his statement that children not able to use pens designed primarily for children (banned!) will just use "general purpose" pens presumably for the same purpose - writing or coloring. He notes that the same lead content is found in those pens (in all pens). He does NOT explain how to decide which pens are "in" and which are "out". [Those are the bedeviling questions that paralyze businesses under the CPSIA.] In any event, Moore focuses on pens as playthings, not as writing implements (whatever that means) and on the grounds that banning pens would not itself create a worse safety problem, states that he sees no ground to grant a stay of enforcement. Thus, he seems simultaneously aware AND oblivious to the fact that the vast majority of pens used by children will have lead OVER the limit, because the CPSC opened up a giant loophole for general purpose pens. And the purpose or benefit of regulating the remaining pens is . . . what? What relevance is his "competing safety considerations" in this situation?

Chairman Moore, perhaps to give comfort to the business community, apparently decided on a Solomonic resolution with a classic mixed message - see if you can understand it. Having denied a stay of enforcement, Mr. Moore then states: "[The pen manufacturers'] other alternative is simply not to make . . . pens with excess lead that appeal primarily to children. In the meantime, while I do not expect the agency to turn into the "pen police", manufacturers, retailers and distributors should police themselves as we move toward a marketplace where lead in children's products is dramatically reduced." Get it? You have to get the lead out by not selling pens with lead over the limit; the CPSC will not stay enforcement but will not enforce the law and you manufacturers should police yourself as you move from making non-compliant products to making compliant products which you acknowledge you cannot make. Clear as mud!

I know I am just a killjoy (my wife has a saying, "Every party needs a 'pooper' which is why we invited you!") . . . but am I the only one who sees an issue with turning our safety laws into an unintelligible mish-mash jumble? Has Mr. Moore ever, for even a nanosecond, given a thought to what he would do if he had a job running a company attempting to comply with this mess of a law? Exactly HOW is a pen company supposed to interpret this law? You cannot make children's pens that violate the standard and the agency won't stay enforcement - but then again, the agency won't become the pen police and you should police yourself as you continue to make products that violate the standard. By the way, the CPSC knows you are making pens that violate the standard but don't worry about it. How do I explain this "rule" to my customers? [To anyone?] What is the answer Mr. Moore wants me to give to the eager beaver dealer who tests my children's pen and reports that it failed the standard? Am I allowed to sell it or must I turn myself in to the CPSC (the pen non-police)? I know what I think the answer is - yes, turn yourself in and expect to receive advice from the CPSC that you cannot sell the pen. See my analysis of the Potato Clock - it's exactly the same situation. Boy, am I glad I don't make this kind of pen.

I am also offended that this idiotic law has hijacked safety administration in this country. We now must put on stern faces and THINK ABOUT whether a pen tip could reduce IQ points. This is beyond stupid - but the law requires that we focus serious resources on this kind of thing. I find it embarrassing to think that such an analysis even needs to take place - the CPSIA is the ultimate anti-common sense law. As Ms. Nord states, "The Commission needs to spend its resources focusing on products that actually harm children, not chasing speculative harms that are not relevant to the real world." Hear, hear! It's a terrible shame that Ms. Nord's voice was silenced by self-serving politicos and operatives more intent on crushing Republicans than making our children safe. Perhaps by now it has become clear to all that safety was never the real goal of this law.

This is so depressing.


Anonymous said...

"This is so depressing"

It certainly is. There are true threats to our children in this country, many that go unfixed due to lack of funding. Glad my tax dollars are instead going to this nonsense.

Is there any hope? Is Waxman willing to now hold hearings with the new appointee?

Anonymous said...

yes it is depressing. it certainly doesn't inspire me to continue in the children's product industry. maybe we should all move to washington, work for the government and leave the children's product making to our foreign friends - sad thing is... even they don't want to make children's products anymore. childhood will be very boring...horrors kids may actually then have to play with sharp sticks and heavy stones.

i think maybe these politicians ate too many "toxic" pens, books, and clothing in their youth.

Unknown said...

Depressing indeed.

Geoff Jones said...

My favorite part is when I wake up an realize that I am in the USSR (not Russia, that would be non-sense!). That would make everything OK, government bureaucracy that makes no sense what-so-ever but people blindly follow it out of fear. Too bad this isn't the USSR. It makes this all the more depressing.

I liked the part in Ms Nord's statement "While the staff has stated that they are not aware of any product that could meet the definition for an exclusion from
Section 101(b) of the CPSIA, it is important that we continue to struggle to give meaning to this provision, on the
theory that Congress would not knowingly enact a meaningless provision. If there were any product that would
seem to qualify for the exclusion, it is this one." You can almost hear the glee that she is no longer the Acting Chairperson. I for one will sorely miss her perspective.

Catherine Jaime said...

No, Rick, you are not just a killjoy. You continue to show more common sense in interpreting the CPSIA mess than all of Congress put together.

It is depressing that this has continued for so long...And it makes one wonder if there is any hope for fixing this before we throw enough of these bums (Republican and Democrat!) out of office!

Please continue to hammer away at this important topic...Something has to give in D.C. sometime...

Melanie said...

Great post...keep up the pressure and keep speaking out. It is so beyond the point of being ridiculous. I have little hope that they are going to fix this least not anytime soon. Instead, I hope that enough people are growing tired of the new "change" and will instead vote a large portion of Congress out of office in 2010...then maybe we can try again to get it fixed. Until that happens, I don't think we will see a fix. I'm hoping, but very doubtful at this point.
Please keep sounding the alarm...we need you!