I have heard the comment that I am too harsh on the Democrats and risk marginalizing myself as some sort of Right Wing Nutjob, a Tea Party extremist.
Is this a fair criticism?
My POV is that this criticism fails to take into account my experiences in this business tragedy and does not consider that my views and my anger did not come from the sky - they were built, block by block, by Congressional Democrats and by the leadership at the CPSC.
I won't defend my being perpetually angry at the agency or Congress for their defiant stance of indifference. [Some Dems cloak their indifference in words of sympathy, never matched by actions consistent with their purported tears. I follow actions, not words, and prefer to ignore insincere blubberings unless something concrete is offered. It never is.] I have been working on this project for three years now, and actively working to get the CPSIA fixed for almost two years. That's a punishing death march, guys, particularly since almost everything I have written or pushed for has been disregarded or completely ignored. It seems improbable that I have been wrong about everything without exception for two long years - even a blind squirrel finds the occasional acorn. Hence the anger and the mounting frustration.
Of course, there are other sources of anger and frustration. The process of implementing this flawed law by the CPSC has destroyed so much good in the process. What we have left is much less protective of public health or well-being. The constant media pandering and the relentless positioning of businesses and business people as evil societal elements that must be controlled is, frankly, embittering. Under the pressure of this relentless drumbeat, it is hard to not feel unprotected and in great danger. We have no defenders and are on notice that we are prime suspects.
No defense, but please someone, tell me, what am I supposed to do now? Grin and bear it? Give in and pretend everything's okay? If you think either option is realistic, you really don't understand my situation or my motivation. These aren't realistic options. I am fighting off doomsday - grin-and-bear-it doesn't work when the Grim Reaper is coming your way. And there are no days off.
So if I can't go along to get along and if the CPSC and Congress have proven beyond a shadow of a doubt that they have made up their mind and have no interest in me or my problems, what options are left to me? The process of advocacy that I have been practicing and that I have been financing hasn't produced enough results - we are still in the soup. If I can't give up and if what I am doing just doesn't work - logic suggests I need to do something else.
So what I have been doing is telling the truth - it's the Dems who have done all this and it's the Dems who refuse to fix it. It's the Dems who won't listen and it's the Dems that refuse to acknowledge their errors. If everyone in Congress voted to save their job by supporting passage of the CPSIA in August 2008 rather than face reelection attack ads, that was then and this is now. The Dem leadership has chosen to ignore the OBVIOUS and continue to deny that anything can or should be done in this matter. There's nothing wrong or politically-incorrect about speaking the truth - and that's the truth. We are where we are because of the Dems. They own it.
If the politicians who are busily engaged in snuffing out our business enterprises won't listen and cannot be influenced, then what's left to me? I must enter the political arena to specifically target them for removal. And that's what I am doing. It's only fair - they act like they want my business dead. So we need to put different people in their place. And we need to do it right away.
If this makes me a Tea Partier or a Right Wing nutjob, so be it. My head is not bowed. My customers, my suppliers and my working associates and partners know where I stand. I am fighting for our business life and will not rest until the people responsible for this mess are brought to justice.
Showing posts with label February 10. Show all posts
Showing posts with label February 10. Show all posts
Tuesday, August 10, 2010
Wednesday, September 30, 2009
CPSIA - Businesses Plan for the Final Days
With the February 10th stay on testing expiration rapidly approaching, the 15-month rules due on November 14 (expected to set deadly testing frequency requirements) and absolutely no relief on the horizon from a unfeeling, uncomprehending, resolutely unyielding Democratic Congress, businesses are left to fend for themselves. Consider the calendar: February 10th is only four months and ten days away. From that day forward, every item imported must be accompanied by a super-expensive CPSIA test report. Time is running out. This is a problem.
For many products, the cost of testing ALONE renders them unprofitable. And this is on top of the high cost of tracking labels and other costs associated with the CPSIA. These new costs make obsolete many business models serving specialty markets like schools. [Btw I was told yesterday to be prepared to pay $35,000 to modify our warehouse management software system to fix ONE hole in our tracking labels accountability effort. ONE hole, not ALL the holes. Ah, it's just money, and money grows on trees, right?!] If you are a maker of products rendered unprofitable by CPSIA testing, you face ugly choices. Because many businesses run on a calendar marketing cycle, you may have to drop items mid-year after testing requirements kick in. Most dealers won't forgive you for this. What to do?
At this point, with so much uncertainty, businesses are struggling to answer this question. Planning is literally impossible. How can you address this major business planning issue set to mature in only 133 days if, for instance (as is true), no phthalates testing labs have been accredited yet and no final phthalate testing standard has been announced? Good question, darned good question.
A common strategy to prepare for the Final Days is to top off inventory ahead of the testing requirement. Businesses are now scouring inventory records and ordering stock ahead of time to ride out 2010. This will be a mini-stimulus bill for China factories, giving them a boost in production if the American importers can find inventory financing from tired and scared banks. The upside to all this is that businesses planning ahead in this way will not have to torch dealer relations during 2010. This buys time as Congress continues to sit on its hands after gutting the business futures of countless small businesses.
The next phase will be recovering from the shock of the Section 102(d)(2)(B) 15-month rule which is expected to require at least annual testing (or, as rumored, even more frequent testing, such as once per production run). After finalization of this rule, the jig will be up, and businesses will have to finally reconcile themselves to being put out of their markets once and for all. [Notice that this has nothing to do with safety, just gratuitous, thoughtless destruction of economic value and markets.] Specialty companies will face the prospect of either abandoning their specialty markets for mass markets (with smaller, less-specialized product lines), abandonment of children's products altogether (this has happened widely in the Donated Goods industry and in apparel already) or sale/closure. The inventory top-offs going on now will allow businesses to wind up their current business plans in an orderly fashion.
At demoralizing times like this, I like to think of the comforting words of a staffer of Illinois' own Senator Dick Durbin (whataguy!): "I think you are right that the CPSIA imposes costs on businesses, and because of economies of scale it’s the smaller businesses that will feel these costs more acutely. This is part of a larger calculation that it’s worth the costs to shift from the old system of post-market correction (once a dangerous product is out in the market and leads to sick kids, recalls, lawsuits, etc.) to a new system of pre-market testing and certification (instead of just assuming products are safe and paying the price for false assumptions)." [Correspondence dated April 16, 2009] At least we know they meant for us to die. Comforting . . . unless you thought those guys worked for you, too.
It's nice to know we are living a purpose-driven life. We get to be sacrificial lambs to Senator Durbin's master plan to keep everyone safe. Everyone, from the Senate to Henry Waxman's House to the caring CPSC, should be SO proud!
For many products, the cost of testing ALONE renders them unprofitable. And this is on top of the high cost of tracking labels and other costs associated with the CPSIA. These new costs make obsolete many business models serving specialty markets like schools. [Btw I was told yesterday to be prepared to pay $35,000 to modify our warehouse management software system to fix ONE hole in our tracking labels accountability effort. ONE hole, not ALL the holes. Ah, it's just money, and money grows on trees, right?!] If you are a maker of products rendered unprofitable by CPSIA testing, you face ugly choices. Because many businesses run on a calendar marketing cycle, you may have to drop items mid-year after testing requirements kick in. Most dealers won't forgive you for this. What to do?
At this point, with so much uncertainty, businesses are struggling to answer this question. Planning is literally impossible. How can you address this major business planning issue set to mature in only 133 days if, for instance (as is true), no phthalates testing labs have been accredited yet and no final phthalate testing standard has been announced? Good question, darned good question.
A common strategy to prepare for the Final Days is to top off inventory ahead of the testing requirement. Businesses are now scouring inventory records and ordering stock ahead of time to ride out 2010. This will be a mini-stimulus bill for China factories, giving them a boost in production if the American importers can find inventory financing from tired and scared banks. The upside to all this is that businesses planning ahead in this way will not have to torch dealer relations during 2010. This buys time as Congress continues to sit on its hands after gutting the business futures of countless small businesses.
The next phase will be recovering from the shock of the Section 102(d)(2)(B) 15-month rule which is expected to require at least annual testing (or, as rumored, even more frequent testing, such as once per production run). After finalization of this rule, the jig will be up, and businesses will have to finally reconcile themselves to being put out of their markets once and for all. [Notice that this has nothing to do with safety, just gratuitous, thoughtless destruction of economic value and markets.] Specialty companies will face the prospect of either abandoning their specialty markets for mass markets (with smaller, less-specialized product lines), abandonment of children's products altogether (this has happened widely in the Donated Goods industry and in apparel already) or sale/closure. The inventory top-offs going on now will allow businesses to wind up their current business plans in an orderly fashion.
At demoralizing times like this, I like to think of the comforting words of a staffer of Illinois' own Senator Dick Durbin (whataguy!): "I think you are right that the CPSIA imposes costs on businesses, and because of economies of scale it’s the smaller businesses that will feel these costs more acutely. This is part of a larger calculation that it’s worth the costs to shift from the old system of post-market correction (once a dangerous product is out in the market and leads to sick kids, recalls, lawsuits, etc.) to a new system of pre-market testing and certification (instead of just assuming products are safe and paying the price for false assumptions)." [Correspondence dated April 16, 2009] At least we know they meant for us to die. Comforting . . . unless you thought those guys worked for you, too.
It's nice to know we are living a purpose-driven life. We get to be sacrificial lambs to Senator Durbin's master plan to keep everyone safe. Everyone, from the Senate to Henry Waxman's House to the caring CPSC, should be SO proud!
Monday, July 6, 2009
CPSIA - How to Solve Your Problems!
The CPSIA Answer Man gets questions, we get questions! The CPSIA is much simpler than most people believe. Congress, having wisely given so much discretion to the CPSC and to you, left many options open for virtually any situation. Here's a few common "dilemmas" and their simple solutions:
Q: "My Company is straining to survive in tough times, and someone told me that because our products are modified by downstream dealers, I might be liable to comply with this law. I have never tested my items, which are known to be safe, but now I understand I will have to test and even label each item by lot. I don't want to do that, and can't figure out how I would afford it. Mr. CPSIA Answer Man, what should I do?"
A: This could be a major bummer for you, my sad friend. Under Section 3(a)(2) of the CPSA, your products would be subject to the new strictures on lead and tracking labels if they are "children's products", that is "a consumer product designed or intended primarily for children 12 years of age or younger". Hmmm, that could be just about anything. The CPSC has clarified this to the opacity of mud. Consider the many unanswered questions of the Promotional Products industry on this very topic, where companies sell "blanks" that are later modified and resold, possibly as items suitable for children.
So let me answer your question with a question: are you one of those small-minded individuals who craves certainty and cannot abide by guessing or living in the shadows? I hope not, because if you are, you will find yourself compelled to pretend all aspects of the law apply to you. After all, having read the pen stay decision, it appears to be a judgment call whether an item is designed or intended "primarily" for children. And in the world of CPSIA judgment calls, you are encouraged to make the right decision - as determined by other people after the fact.
If you conclude that the law MIGHT apply to you, and can tolerate the risk of any of 51 organizations (the CPSC and 50 States SAGs) coming after you, you should adopt the now common approach to dealing with the CPSIA - non-compliance! Yes, it's low cost and gets the job done with very little bureaucracy. It's one of life's little ironies that this law, intended to facilitate tougher regulation of safety, actually ENCOURAGES non-compliance. Our dear friends in the Consumer Group community know it, too. I am not exactly sure what Congress thought it was accomplishing with this new scheme, other than economic devastation, but heck, I always knew I wasn't smart enough to be in government.
Q: "You have GOT to be kidding. When my dealers call up to assert that the law applies to me and to force me to absorb new costs and responsibilities, what am I supposed to tell them?"
A: Now THAT'S a good question. Mr. CPSIA Answer Man has tried several approaches, such as claiming to not speak English, wrong number, out to lunch, etc. These strategies don't seem to work very well. Unfortunately, our friends in government have not left you with much to say. You have your fig leaf, and need to bob and weave to convince your customers that your approach would stand up if tested. These debates are usually settled on the basis of economic power. Oops, you lose!
This raises one of the delicious ironies of this new law. If you are hiding behind a tiny fig leaf and are getting pressure to move into a safe harbor, what can you do? Sometimes, the law's designated safe harbors (such as lead substrate levels of 300 ppm as of August 14 or TRU's 100 ppm limit as of January 1) simply means you must exit your market, which may not be an option for any number of reasons. I am going to assume that safety is not a real concern for your products, since it has been made clear that only a tiny percentage of children's products ever get recalled. Since Congress wants the CPSC to act with "common sense", is there a way to make a case for such safe products to get into that safe harbor? The answer is NO. The law does not allow exceptions. The only exemptions possible under the law are for products that ("on the basis of the best-available, objective, peer-reviewed, scientific evidence") cannot possibly introduce so much as ONE atom of lead into the body. Thus, you get exempted if you can prove it never applied to you in the first place. SAFETY IS IRRELEVANT. Ouch!
Mr. CPSIA Answer Man wants to remind everyone that none of the foregoing has anything to do with safety. We all have a responsibility to our customers to behave honorably and with a sense of duty when it comes to safety. You should always do the safety testing necessary to satisfy yourself that it is safe and appropriate to sell your products, and need to take into account everything you know when you make that judgment. Control of your supply chain is a big part of how you will achieve this. No matter what you conclude in your administration of CPSIA survival, you can never lose sight of your safety responsibilities.
Q: "What if one of my dealers takes it upon him/her to test one of my products that I have concluded is OUTSIDE the law's confines? What am I supposed to do if they show me the report? What if they demand that I recall the product based on this unnecessary, irrelevant and possibly erroneous test report?"
A. Don't go there.
Q: "This is turning into a blood pressure incident for me. I don't believe this blather you are spouting. Where are the rules and regulations so I can read them myself?"
A: Mr. CPSIA Answer Man does not wish to frustrate! Here is the CPSC's highly touted CPSIA website, see if you can find the rules and regulations yourself. Of course, don't forget to look at the FAQs, which are treated with the seriousness of regulations (until they aren't). Also, you should check out the letters of the General Counsel, but they don't always hold up and aren't the equivalent of a Commission decision (in other words, the Commission can back away from the GC if it wants to). And if you are really resourceful, you might try to find an unpublished CPSC or GC letter to a company on its products that holds a clue for you, or perhaps pick up a useful voicemail from a CPSC staffer along the way that seems to shed some light. Sadly, nothing is really obvious in this arena, since there is no way for the CPSC (or anyone, frankly) to regulate such a vast array of products and have sensible rules that apply to all of them - so you will need to hire experienced counsel. Gather all the experts around a table and see what conclusions you come to. If you have more questions, Mr. CPSIA Answer Man remains at your service!
Q: "The testing costs are going to kill me. We can't afford all these tests because our items generate too little volume to bear the cost. Interestingly, we also don't see much value in purchasing test reports whose results we know before we pay the money. If I really have to bear these unnecessary costs, I will have to gut my product line - and fire some people. My customers want these products, too! What should I do? Also, I know I don't have to test (yet) but am responsible to be compliant with the lead limits. How do I make sure I comply without testing?"
A: I am so glad you asked this question, as it is on so many minds these days. We already covered the fact that an exemption for you is unlikely. Some people want to allow component testing. This sounds good, and for manufacturers of the simplest items, it may work fine. Unfortunately, no one seems to have thought through how a system based on component testing would work. A few "stumbling blocks" might include: (i) incomprehensible test reports (don't correlate or can't be correlated to the finished goods), (ii) reversion to the old "trust me" safety system but with more bureaucracy and cost, (iii) uncooperative component manufacturers who aren't legally required to provide test reports (think of the low volume fabric that is sold in your neighborhood sewing shop), and (iv) ever-finer gradations of components makes the testing scheme into a laughingstock.
As usual, all roads leading to Rome and all that, the issue of what is safe and what is not becomes relevant again. You will not be allowed to argue for an exception based on the safety of your products (socks and underwear?). The rules are blind to safety or risk assessment. Unless and until the law is trimmed back to something more reasonable and appropriate, a la Canada, you better figure out how to finance your testing burden starting with lots made on or after February 10, 2010. The banks are getting healthier - perhaps you can take down a big fat loan!
As to complying without testing, that's a rather metaphysical requirement of this law. Aren't those folks in Congress sneaky?! Wow, if I only had their cleverness . . . . This is the same thinking that underlies their choice to make 600 ppm lead-in-substrate legal from February 10 - August 14, 2009 and then instantly turn it into illegal, dangerous contraband. I wish I could fathom the "logic" of that one. After all, they specifically set the February 10th limit and authorized it for sale, which suggests that they believed it was safe enough to fob off on the American public. Well, it makes a satisfying sound bite at least. I think the requirement to comply while staying the testing requirement is just another compromise on the way to, well you know where. There is no logic to it. You can use supply chain management, selective testing, comprehensive XRF studies of your product range and business judgment. Even this won't work for all of you. Non-compliance anyone?
Q: "My greatest fear is those darned tracking labels. I can't identify my sources on my products, no matter what the Federal government wants. I might as well turn in the keys for my business. Is there ANYTHING I can do? Is there ANY guidance I can hang on to?"
A: The CPSIA Answer Man shares your concern. Today is July 7 and with the tracking labels requirement due to become active in a mere 39 days, the CPSC has yet to so much as float a single sentence of advice. Well, except for Commissioner Moore, who is looking forward to a delightful "learning process". He seems to think that if guidance is put out sometime before the August 14 deadline (August 13, perhaps?) for the crafting community, all would be well. I take it you are not a crafter. Ouch!
Many comment letters have been filed with the CPSC on tracking labels, including mine, which set out concerns like yours. The issue of confidential sources has been highlighted as a "deal killer" yet the CPSC remains silent. Notably, at the ICPHSO conference in February, the General Counsel specifically addressed this point and told the audience to "get past the mourning process" because Congress wants source information to be publicly available. So I guess you should probably begin to hang crepe, if you are to take this advice seriously.
For what it's worth, the NAM petition to stay the tracking labels provision was recently refiled. Hope springs eternal. Let's hope the Commission acts with "common sense" and pushes the day of reckoning on tracking labels far off into the horizon.
Q: "My Company is straining to survive in tough times, and someone told me that because our products are modified by downstream dealers, I might be liable to comply with this law. I have never tested my items, which are known to be safe, but now I understand I will have to test and even label each item by lot. I don't want to do that, and can't figure out how I would afford it. Mr. CPSIA Answer Man, what should I do?"
A: This could be a major bummer for you, my sad friend. Under Section 3(a)(2) of the CPSA, your products would be subject to the new strictures on lead and tracking labels if they are "children's products", that is "a consumer product designed or intended primarily for children 12 years of age or younger". Hmmm, that could be just about anything. The CPSC has clarified this to the opacity of mud. Consider the many unanswered questions of the Promotional Products industry on this very topic, where companies sell "blanks" that are later modified and resold, possibly as items suitable for children.
So let me answer your question with a question: are you one of those small-minded individuals who craves certainty and cannot abide by guessing or living in the shadows? I hope not, because if you are, you will find yourself compelled to pretend all aspects of the law apply to you. After all, having read the pen stay decision, it appears to be a judgment call whether an item is designed or intended "primarily" for children. And in the world of CPSIA judgment calls, you are encouraged to make the right decision - as determined by other people after the fact.
If you conclude that the law MIGHT apply to you, and can tolerate the risk of any of 51 organizations (the CPSC and 50 States SAGs) coming after you, you should adopt the now common approach to dealing with the CPSIA - non-compliance! Yes, it's low cost and gets the job done with very little bureaucracy. It's one of life's little ironies that this law, intended to facilitate tougher regulation of safety, actually ENCOURAGES non-compliance. Our dear friends in the Consumer Group community know it, too. I am not exactly sure what Congress thought it was accomplishing with this new scheme, other than economic devastation, but heck, I always knew I wasn't smart enough to be in government.
Q: "You have GOT to be kidding. When my dealers call up to assert that the law applies to me and to force me to absorb new costs and responsibilities, what am I supposed to tell them?"
A: Now THAT'S a good question. Mr. CPSIA Answer Man has tried several approaches, such as claiming to not speak English, wrong number, out to lunch, etc. These strategies don't seem to work very well. Unfortunately, our friends in government have not left you with much to say. You have your fig leaf, and need to bob and weave to convince your customers that your approach would stand up if tested. These debates are usually settled on the basis of economic power. Oops, you lose!
This raises one of the delicious ironies of this new law. If you are hiding behind a tiny fig leaf and are getting pressure to move into a safe harbor, what can you do? Sometimes, the law's designated safe harbors (such as lead substrate levels of 300 ppm as of August 14 or TRU's 100 ppm limit as of January 1) simply means you must exit your market, which may not be an option for any number of reasons. I am going to assume that safety is not a real concern for your products, since it has been made clear that only a tiny percentage of children's products ever get recalled. Since Congress wants the CPSC to act with "common sense", is there a way to make a case for such safe products to get into that safe harbor? The answer is NO. The law does not allow exceptions. The only exemptions possible under the law are for products that ("on the basis of the best-available, objective, peer-reviewed, scientific evidence") cannot possibly introduce so much as ONE atom of lead into the body. Thus, you get exempted if you can prove it never applied to you in the first place. SAFETY IS IRRELEVANT. Ouch!
Mr. CPSIA Answer Man wants to remind everyone that none of the foregoing has anything to do with safety. We all have a responsibility to our customers to behave honorably and with a sense of duty when it comes to safety. You should always do the safety testing necessary to satisfy yourself that it is safe and appropriate to sell your products, and need to take into account everything you know when you make that judgment. Control of your supply chain is a big part of how you will achieve this. No matter what you conclude in your administration of CPSIA survival, you can never lose sight of your safety responsibilities.
Q: "What if one of my dealers takes it upon him/her to test one of my products that I have concluded is OUTSIDE the law's confines? What am I supposed to do if they show me the report? What if they demand that I recall the product based on this unnecessary, irrelevant and possibly erroneous test report?"
A. Don't go there.
Q: "This is turning into a blood pressure incident for me. I don't believe this blather you are spouting. Where are the rules and regulations so I can read them myself?"
A: Mr. CPSIA Answer Man does not wish to frustrate! Here is the CPSC's highly touted CPSIA website, see if you can find the rules and regulations yourself. Of course, don't forget to look at the FAQs, which are treated with the seriousness of regulations (until they aren't). Also, you should check out the letters of the General Counsel, but they don't always hold up and aren't the equivalent of a Commission decision (in other words, the Commission can back away from the GC if it wants to). And if you are really resourceful, you might try to find an unpublished CPSC or GC letter to a company on its products that holds a clue for you, or perhaps pick up a useful voicemail from a CPSC staffer along the way that seems to shed some light. Sadly, nothing is really obvious in this arena, since there is no way for the CPSC (or anyone, frankly) to regulate such a vast array of products and have sensible rules that apply to all of them - so you will need to hire experienced counsel. Gather all the experts around a table and see what conclusions you come to. If you have more questions, Mr. CPSIA Answer Man remains at your service!
Q: "The testing costs are going to kill me. We can't afford all these tests because our items generate too little volume to bear the cost. Interestingly, we also don't see much value in purchasing test reports whose results we know before we pay the money. If I really have to bear these unnecessary costs, I will have to gut my product line - and fire some people. My customers want these products, too! What should I do? Also, I know I don't have to test (yet) but am responsible to be compliant with the lead limits. How do I make sure I comply without testing?"
A: I am so glad you asked this question, as it is on so many minds these days. We already covered the fact that an exemption for you is unlikely. Some people want to allow component testing. This sounds good, and for manufacturers of the simplest items, it may work fine. Unfortunately, no one seems to have thought through how a system based on component testing would work. A few "stumbling blocks" might include: (i) incomprehensible test reports (don't correlate or can't be correlated to the finished goods), (ii) reversion to the old "trust me" safety system but with more bureaucracy and cost, (iii) uncooperative component manufacturers who aren't legally required to provide test reports (think of the low volume fabric that is sold in your neighborhood sewing shop), and (iv) ever-finer gradations of components makes the testing scheme into a laughingstock.
As usual, all roads leading to Rome and all that, the issue of what is safe and what is not becomes relevant again. You will not be allowed to argue for an exception based on the safety of your products (socks and underwear?). The rules are blind to safety or risk assessment. Unless and until the law is trimmed back to something more reasonable and appropriate, a la Canada, you better figure out how to finance your testing burden starting with lots made on or after February 10, 2010. The banks are getting healthier - perhaps you can take down a big fat loan!
As to complying without testing, that's a rather metaphysical requirement of this law. Aren't those folks in Congress sneaky?! Wow, if I only had their cleverness . . . . This is the same thinking that underlies their choice to make 600 ppm lead-in-substrate legal from February 10 - August 14, 2009 and then instantly turn it into illegal, dangerous contraband. I wish I could fathom the "logic" of that one. After all, they specifically set the February 10th limit and authorized it for sale, which suggests that they believed it was safe enough to fob off on the American public. Well, it makes a satisfying sound bite at least. I think the requirement to comply while staying the testing requirement is just another compromise on the way to, well you know where. There is no logic to it. You can use supply chain management, selective testing, comprehensive XRF studies of your product range and business judgment. Even this won't work for all of you. Non-compliance anyone?
Q: "My greatest fear is those darned tracking labels. I can't identify my sources on my products, no matter what the Federal government wants. I might as well turn in the keys for my business. Is there ANYTHING I can do? Is there ANY guidance I can hang on to?"
A: The CPSIA Answer Man shares your concern. Today is July 7 and with the tracking labels requirement due to become active in a mere 39 days, the CPSC has yet to so much as float a single sentence of advice. Well, except for Commissioner Moore, who is looking forward to a delightful "learning process". He seems to think that if guidance is put out sometime before the August 14 deadline (August 13, perhaps?) for the crafting community, all would be well. I take it you are not a crafter. Ouch!
Many comment letters have been filed with the CPSC on tracking labels, including mine, which set out concerns like yours. The issue of confidential sources has been highlighted as a "deal killer" yet the CPSC remains silent. Notably, at the ICPHSO conference in February, the General Counsel specifically addressed this point and told the audience to "get past the mourning process" because Congress wants source information to be publicly available. So I guess you should probably begin to hang crepe, if you are to take this advice seriously.
For what it's worth, the NAM petition to stay the tracking labels provision was recently refiled. Hope springs eternal. Let's hope the Commission acts with "common sense" and pushes the day of reckoning on tracking labels far off into the horizon.
Monday, February 9, 2009
CPSIA - A More Serious Message
Tomorrow is February 10, effectiveness day for the new lead and phthalates standards and obligations under the dreaded CPSIA. Yes, the boom is lowered on Tuesday, and many of you are already taking dramatic steps to stay ahead of this law. With two days warning, the pain will be especially harsh on everyone with ANY phthalates exposure. Any inventory with phthalates that falls within the incredibly broad definition of a children's product becomes worthless at midnight (less than two hours from now, in Chicago), which will lead to huge business losses and possible loan defaults. Intentional or "knowing" violations of any of the many provisions of the new law exposes you to possible criminal liability, not to mention penalties and the pain and humiliation of recalls. Are we having fun yet???
We need to know what you are doing, how your business is being affected, how much money is being wasted, jobs being terminated, customer relationships ending and so on. We need to draw attention to these real situations and use the media to help explain the real world impact of this law. Congress wants to say that the disaster we were all predicting was just a figment of our imagination. Right now, they are sweating this one out. Let's bring reality to their doorstep.
Please post your story as a comment on this post. Alternatively, or in addition, please email me at rwoldenberg@learningresources.com. Thanks.
Rick
We need to know what you are doing, how your business is being affected, how much money is being wasted, jobs being terminated, customer relationships ending and so on. We need to draw attention to these real situations and use the media to help explain the real world impact of this law. Congress wants to say that the disaster we were all predicting was just a figment of our imagination. Right now, they are sweating this one out. Let's bring reality to their doorstep.
Please post your story as a comment on this post. Alternatively, or in addition, please email me at rwoldenberg@learningresources.com. Thanks.
Rick
Friday, February 6, 2009
CPSIA - National Bankruptcy Day Redux
From: Rick Woldenberg
Sent: Fri 2/6/2009 3:14 AM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'; andrew_grobmyer@pryor.senate.gov; james_reid@rockefeller.senate.gov
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; 'cfalvey@cpsc.gov'; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org; richard.goldberg@mail.house.gov; matthew.abbott@mail.house.gov; 'Brian_hendricks@hutchison.senate.gov'; 'david@commerce.senate.gov'; 'Cathy.hurwit@mail.house.gov'; pweller@cpsc.gov; mgougisha@cpsc.gov; bridget_petruczok@boxer.senate.gov; michael_daum@cantwell.senate.gov; bill_ghent@carper.senate.gov; hap_rigby@demint.senate.gov; frannie_wellings@dorgan.senate.gov; david_quinalty@ensign.senate.gov; james_chang@inouye.senate.gov; jonathan_becker@klobuchar.senate.gov; michelle_schwartz@lautenberg.senate.gov; lee_dunn@mccain.senate.gov; sonya_wendell@mccaskill.senate.gov; matthew_hussey@snowe.senate.gov; brendan_plack@thune.senate.gov; hugh_carroll@wicker.senate.gov; elissa.levin@mail.house.gov; christopher.schepis@mail.house.gov; theresa.lavery@mail.house.gov; greg.louer@mail.house.gov; brian.diffell@mail.house.gov; amy.ingham@mail.house.gov; laura.vaught@mail.house.gov; matt.johnson@mail.house.gov; saul.hernandez@mail.house.gov; aaron.shapiro@mail.house.gov; rick.axthelm@mail.house.gov; steve.plevniak@mail.house.gov; scott.cleveland@mail.house.gov; jonathan.smith@mail.house.gov; pat.cavanagh@mail.house.gov; rachelle.wood@mail.house.gov; michael.gaffin@mail.house.gov; angela.manso@mail.house.gov; dana.lichtenberg@mail.house.gov; derrick.ramos@mail.house.gov; elizabeth.stack@mail.house.gov; lori.pepper@mail.house.gov; david.bahar@mail.house.gov; mark.bayer@mail.house.gov; Neeta.Bidwai@mail.house.gov; kyle.victor@mail.house.gov; chris.debosier@mail.house.gov; morgan.jones@mail.house.gov; matthew.dockham@mail.house.gov; tuley.wright@mail.house.gov; cade.king@mail.house.gov; betsy.christian@mail.house.gov; chris.herndon@mail.house.gov; Mike.Ward@mail.house.gov; laura.abshire@mail.house.gov; randi.meyers@mail.house.gov; Greta.Hanson@mail.house.gov; liz.muro@mail.house.gov; jamie.euken@mail.house.gov; jon.oehmen@mail.house.gov; brad.schweer@mail.house.gov; michael.beckerman@mail.house.gov; valerie.henry@mail.house.gov; Becky.Claster@mail.house.gov; tiffany.guarascio@mail.house.gov; jeff.mortier@mail.house.gov; Christopher_day@billnelson.senate.gov; john_phillips@kerry.senate.gov; Kerrie Campbell (kcampbell@manatt.com); bryan_hickman@hatch.senate.gov; Ben.Kershaw@mail.house.gov; tom_jones@commerce.senate.gov; Lisa Brown (lbrown@who.eop.gov); Jamie Dimon (jamie.dimon@chase.com); csunstein@who.eop.gov; Cass Sunstein (csunstein@uchicago.edu); Amy R. Fahey (amy.r.fahey@chase.com); laura.m.burkhead@chase.com; Michael J. Gawne (michael.j.gawne@chase.com); Marilou Menezes (marilou.menezes@chase.com); Stacy.ettinger@jec.senate.gov
Subject: CPSIA - National Bankruptcy Day Redux
Yesterday, two events took place that ensure the devastation of many American businesses, namely the decision by Judge Paul Gardephe of the U.S. District Court for the Southern District of New York (08 Civ. 10507 PGG) to overturn the legal opinion of Cheryl Falvey and establish a virtually immediate retroactive nationwide ban on phthalates on February 10 (the NRDC Case), and the rejection of the National Association of Manufacturers’ petition to stay the new lead standards by a vote of the CPSC Commissioners 2-0. While the latter outcome was expected (see the legal analysis in my email dated February 4 entitled “CPSIA – The Blame Game”), the NRDC Case decision was unexpected and is a huge setback to any rational implementation of this law. The decision raises anew the prospect of a National Bankruptcy Day on February 10.
On November 7, I wrote an email to Cheryl Falvey, General Counsel of the CPSC, documenting the potential of her retroactivity opinion (on lead) to cause widespread loan defaults among American businesses. I have reproduced the November 7 email below and in an attachment. My warnings of dire consequences from the lead ban have been ignored, but courtesy of the NRDC Case, we will soon find out if I was right. With two business days to go, and no advance warning, American retailers and manufacturers will be caught with massive inventories of product which they had been assured was legal to sell (opinion of Cheryl Falvey dated November 17, 2008) but which will now become contraband on February 10. The ability of such companies to comply with their asset-based loan agreements is now in question. Likewise, the decision in the NRDC case creates an overnight Sarbanes-Oxley disaster for the SEC as countless public financial statements instantaneously become materially misstated. It will be most interesting to see how the banks respond to this Congressionally-induced crisis. I am cc’g this email to Jamie Dimon, the CEO of JPMorgan Chase, whose loan documents are abstracted in the attachment, so the bank can begin to review its options. Another financial crisis for American banks, how exciting for the American public!
You have demonstrated that you are not interested in contrary opinions of your law. In my February 4 email, I explained how the mechanics in your law, the CPSIA, prevents the CPSC from using its judgment and discretion to implement the new law. Interestingly, the letter of Acting Chairman Nancy Nord to Representative Henry Waxman et. al. dated January 30 (see attached) echoes my analysis of the law. As she notes:
“[We] are struggling, and impacted industries are struggling, with the requirements of the CPSIA as they relate to various products, such as bicycles, car seats, shoes and books, that may or may not have been intended to be so broadly impacted by the legislation. We are also working hard to find common sense solutions to some of the scenarios that have been raised in cases where public health is not endangered. As we work through these many issues, the staff has found that the requirements of the new law are inflexible, are not sequenced to maximize effectiveness and generally limit our options. Action by BOTH the Commission and the Congress is needed to address these issues. . . . It especially should be emphasized that because we cannot change the retroactive effect of the lead ban to existing inventory, [the stay on testing and certification] will not provide relief to the charities, thrift stores and other small retailers who must still meet the standards enacted by Congress. [Ed. Note: With the decision in the NRDC Case yesterday, this warning now applies to phthalates, as well.] To effect this change, Congress will need to amend the statute.” [Emphasis added]
The response to this letter was swift – by letter dated February 3, Representative Waxman et. al. requested that President Obama urgently replace Ms. Nord. Thus it appears that silencing Commissioner Nord is the preferred response to her comments on the inner workings of the CPSIA. The Congressional leadership’s intolerance of dissent is outrageous. As stated in Representative Waxman et. al. state in their February 4 letter (see attached), “everyone agrees” that the new standards are “critical” to protect children. See no evil, hear no evil . . . . The substance of Commissioner Nord’s arguments, and my arguments, remain entirely unanswered.
The business losses from the implementation of the CPSIA will make February 10 a dark day in American economic history. I have no idea how many business closings will result or when they will happen, and have no interest in promoting that sort of speculation. It is, however, NO speculation that business losses will be severe and entirely the responsibility of Congress during a time of severe financial and economic crisis. House and Senate leadership made certain that businesses will be hobbled, crushing the employees, customers and communities of the affected companies. The gloating self-satisfaction of supporters of this bill (see, e.g., http://www.nrdc.org/media/2009/090205a.asp) will soon backfire as the American public comes to recognize the carnage done by “do-gooders”. As before, I assert that this law will touch an estimated 60% of the U.S. economy in one way or another.
The economic impact of the CPSIA making will become manifest over time, not with a Big Bang on February 10 but slowly building and revealing itself long after the damage is irreversible. Those who arrogantly dismissed the protests of the MANY responsible and law-abiding people subject to this unfair law as “misguided” or “misinformed” will be held to account when the wreckage becomes clear. As you vote this week to print up a quick $800 billion to resurrect the economy, please remember to take ownership of your simultaneous action to destroy an important part of it.
You have brought this disaster on your voters, and we will remember how you responded to our pleas. I hope you will finally listen to the substantive and legitimate criticism of this disastrous law and use this last opportunity to stay the effectiveness of the CPSIA, thus allowing more time for hearings, further debate and rulemaking, and a rational, fair and orderly implementation of your groundbreaking safety program. There are two business days to go – the time to act is NOW.
Download legal analysis from 2/4/09: CPSIA - The Blame Game >>>
Download 1/20/09 letter from Chairman Nancy Nord to Representative Henry Waxman >>>
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
Rwoldenberg@learningresources.com
See my blog at http://learningresourcesinc.blogspot.com/ or at www.twitter.com/rwoldenberg
*****************************************************************************
From: Rick Woldenberg
Sent: Fri 11/7/2008 1:16 AM
To: cfalvey@cpsc.gov
Cc: Michael Gidding (mjg@brown-gidding.com); nnord@cpsc.gov; jmartyak@cpsc.gov; judith.bailey@mail.house.gov
Subject: The Financial Consequences of Retroactive Application of the CPSIA
Dear Ms. Falvey,
Per our conversation today, I am writing you to express my deep concern over the dire financial consequences of your office's September 12th legal opinion ("September 12th Opinion") that the new safety standards of the CPSIA apply retroactively to existing inventory.
It is unfortunate that so many people misread the issue of "financial consequences" to refer simply to the cost of the inventory. Yes, as covered in detail in today's panel discussion, companies in the chain of commerce (manufacturers, distributors and retailers) have little practical ability to make existing inventory "go away". In that sense, the retroactive application of the CPSIA is in fact disastrous. Yet, the implications of the September 12th Opinion are far deeper and more threatening. A necessary result of the purported retroactive effect of the CPSIA on existing inventory will be (a) widespread defaults under loan agreements as of February 10, 2009, (b) widespread failures to obtain audited financial statements for 2008 (another loan default issue), and (c) for public companies, an immediate Sarbanes-Oxley disclosure issue stemming from these problems. Defaults under loan agreements may result in the reduction or termination of available credit to operating companies. It can also trigger cross-defaults among related entities or related agreements, causing even more far-flung financial destruction. For many family businesses, this could result in a total wipeout of all family wealth in one fell swoop.
While these financial consequences have received little attention to date, their potentially highly toxic effect should not be ignored.
Loan Defaults: The typical American company finances its operations with asset-based loans. In this kind of loan, lenders agree to advance a percentage of "Eligible Inventory" as a revolving loan. In other words, the loan floats up and down over its term as the borrower meets its daily cash needs, but overall availability is limited by the value of inventory. The size of borrowing availability is determined each month based on representations called "Borrowing Base Certificates" in which the borrower attests to the value of its inventory, and then makes various representations relating to the definition of "Eligible Inventory". I have attached a typical definition of "Eligible Inventory" for your review. Please note subparts (b) and (e), as well as the final paragraph. Subparts (b) and (e) cannot be attested to after February 9, and under the terms of the last paragraph of the definition of "Eligible Inventory", an undetermined amount of inventory would no longer be "eligible". In addition, the ongoing representation of the typical borrower that they are operating in compliance with law can no longer be made. This has implications for the Borrowing Base Certificate, see below.
In a typical Borrowing Base Certificate, the following language typically appears:
"Pursuant to the terms of that certain [Loan Agreement], we submit this Borrowing Base Certificate to you and certify that the information set forth below and on any attachments to this Certificate is true, correct and complete as of the date of this Certificate. . . . The undersigned hereby certifies that the above information and computations are true and accurate and hereby represents and warrants that as of the date hereof, (i) no Event of Default or Unmatured Event of Default under the Credit Agreement has occurred or is continuing, (ii) the representations and warranties of the Borrower set forth in the Credit Agreement are true and correct in all material respects as of the date hereof, and (iii) the Borrower is in compliance with the covenants set forth in the Loan Agreement."
Any Borrowing Base Certificate with such language after February 9 may not be executed by anyone intent on selling or placing a positive value on inventory existing on February 9. An inability to sign a Borrowing Base Certificate or signing a Borrowing Base Certificate with fraudulent intent is clearly a serious default under any loan agreement.
Consequences of Loan Defaults: Even a technical default must be resolved between borrower and lender. In this case, lenders will have three basic options for action: (a) levy fees to cure or waive the default (this is a typical provision in many loan agreements), (b) insist that the loan agreement be renegotiated, likely to reduce borrowing availablility based on a new, lower advance rate on Eligible Inventory, and/or (c) an outright and possibly immediate refusal to lend. Notably, if existing inventory continually becomes contraband under the September 12th Opinion as lead and lead-in-paint standards ratchet down over time, this cascade of defaults will repeat again and again.
It can be anticipated that many companies will find credit declining or terminated as a result of these defaults. This will have a dramatic effect on these companies' investable capital and their ability to maintain a stable workforce.
Audited Statements: Many loan agreements require audited financial statements at the end of every year. All public companies provide audited statements. In preparing audited statements, independent accountants will insist on "testing" inventory valuations. Furthermore, they will take into account events occurring after the close of the period, as such events could expose misleading information in the financial statements for the current period. In the case of retroactive effect on existing inventory, the pending change in valuation of inventory as of February 10, 2009 will make it impossible to certify 2008 financials without serious and negative qualifications (if at all). This failure would have an immediate effect on any company under its loan agreement (and in the public markets, if applicable), resulting in reduction or termination of available credit. Recent events on Wall Street demonstrate the serious threat posed by sudden losses of available credit, and the consequential financial destruction and loss of jobs.
Sarbanes-Oxley: The financial implications above clearly constitute a material financial event and create immediate issues under Sarbanes-Oxley for any public company. The fact that this issue has not yet been disclosed by any public company is troubling and potentially creates personal liability for many public company officers, including possible criminal liability.
The conclusion that the CPSIA applies retroactively to inventory is an inherently technical legal matter, involving detailed analysis of unbending rules of law. It should be no surprise then that equally technical financial issues emerge in its wake based on precise readings of unbending contracts and GAAP rules. In this case, the above financial/contractual issues are real and will get the attention of the financial community. Lenders have no incentive to be "understanding" in their appreciation of the CPSIA or its good intentions. Good intentions don't repay loans, and contraband inventory makes for poor collateral. And once lenders are provided with an incentive to act (to preserve their own capital), the dominoes will start to topple - ending where? ending how?
The CPSC needs to reconsider its opinion urgently and to render a clean, clear and well-publicized opinion that the CPSIA does NOT apply retroactively to existing inventory. Time is of the essence.
Thank you for considering my view on this important topic.
Download Eligible Inventory Definition >>>
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
380 North Fairway Drive
Vernon Hills, IL 60061
Sent: Fri 2/6/2009 3:14 AM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'; andrew_grobmyer@pryor.senate.gov; james_reid@rockefeller.senate.gov
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; 'cfalvey@cpsc.gov'; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org; richard.goldberg@mail.house.gov; matthew.abbott@mail.house.gov; 'Brian_hendricks@hutchison.senate.gov'; 'david@commerce.senate.gov'; 'Cathy.hurwit@mail.house.gov'; pweller@cpsc.gov; mgougisha@cpsc.gov; bridget_petruczok@boxer.senate.gov; michael_daum@cantwell.senate.gov; bill_ghent@carper.senate.gov; hap_rigby@demint.senate.gov; frannie_wellings@dorgan.senate.gov; david_quinalty@ensign.senate.gov; james_chang@inouye.senate.gov; jonathan_becker@klobuchar.senate.gov; michelle_schwartz@lautenberg.senate.gov; lee_dunn@mccain.senate.gov; sonya_wendell@mccaskill.senate.gov; matthew_hussey@snowe.senate.gov; brendan_plack@thune.senate.gov; hugh_carroll@wicker.senate.gov; elissa.levin@mail.house.gov; christopher.schepis@mail.house.gov; theresa.lavery@mail.house.gov; greg.louer@mail.house.gov; brian.diffell@mail.house.gov; amy.ingham@mail.house.gov; laura.vaught@mail.house.gov; matt.johnson@mail.house.gov; saul.hernandez@mail.house.gov; aaron.shapiro@mail.house.gov; rick.axthelm@mail.house.gov; steve.plevniak@mail.house.gov; scott.cleveland@mail.house.gov; jonathan.smith@mail.house.gov; pat.cavanagh@mail.house.gov; rachelle.wood@mail.house.gov; michael.gaffin@mail.house.gov; angela.manso@mail.house.gov; dana.lichtenberg@mail.house.gov; derrick.ramos@mail.house.gov; elizabeth.stack@mail.house.gov; lori.pepper@mail.house.gov; david.bahar@mail.house.gov; mark.bayer@mail.house.gov; Neeta.Bidwai@mail.house.gov; kyle.victor@mail.house.gov; chris.debosier@mail.house.gov; morgan.jones@mail.house.gov; matthew.dockham@mail.house.gov; tuley.wright@mail.house.gov; cade.king@mail.house.gov; betsy.christian@mail.house.gov; chris.herndon@mail.house.gov; Mike.Ward@mail.house.gov; laura.abshire@mail.house.gov; randi.meyers@mail.house.gov; Greta.Hanson@mail.house.gov; liz.muro@mail.house.gov; jamie.euken@mail.house.gov; jon.oehmen@mail.house.gov; brad.schweer@mail.house.gov; michael.beckerman@mail.house.gov; valerie.henry@mail.house.gov; Becky.Claster@mail.house.gov; tiffany.guarascio@mail.house.gov; jeff.mortier@mail.house.gov; Christopher_day@billnelson.senate.gov; john_phillips@kerry.senate.gov; Kerrie Campbell (kcampbell@manatt.com); bryan_hickman@hatch.senate.gov; Ben.Kershaw@mail.house.gov; tom_jones@commerce.senate.gov; Lisa Brown (lbrown@who.eop.gov); Jamie Dimon (jamie.dimon@chase.com); csunstein@who.eop.gov; Cass Sunstein (csunstein@uchicago.edu); Amy R. Fahey (amy.r.fahey@chase.com); laura.m.burkhead@chase.com; Michael J. Gawne (michael.j.gawne@chase.com); Marilou Menezes (marilou.menezes@chase.com); Stacy.ettinger@jec.senate.gov
Subject: CPSIA - National Bankruptcy Day Redux
Yesterday, two events took place that ensure the devastation of many American businesses, namely the decision by Judge Paul Gardephe of the U.S. District Court for the Southern District of New York (08 Civ. 10507 PGG) to overturn the legal opinion of Cheryl Falvey and establish a virtually immediate retroactive nationwide ban on phthalates on February 10 (the NRDC Case), and the rejection of the National Association of Manufacturers’ petition to stay the new lead standards by a vote of the CPSC Commissioners 2-0. While the latter outcome was expected (see the legal analysis in my email dated February 4 entitled “CPSIA – The Blame Game”), the NRDC Case decision was unexpected and is a huge setback to any rational implementation of this law. The decision raises anew the prospect of a National Bankruptcy Day on February 10.
On November 7, I wrote an email to Cheryl Falvey, General Counsel of the CPSC, documenting the potential of her retroactivity opinion (on lead) to cause widespread loan defaults among American businesses. I have reproduced the November 7 email below and in an attachment. My warnings of dire consequences from the lead ban have been ignored, but courtesy of the NRDC Case, we will soon find out if I was right. With two business days to go, and no advance warning, American retailers and manufacturers will be caught with massive inventories of product which they had been assured was legal to sell (opinion of Cheryl Falvey dated November 17, 2008) but which will now become contraband on February 10. The ability of such companies to comply with their asset-based loan agreements is now in question. Likewise, the decision in the NRDC case creates an overnight Sarbanes-Oxley disaster for the SEC as countless public financial statements instantaneously become materially misstated. It will be most interesting to see how the banks respond to this Congressionally-induced crisis. I am cc’g this email to Jamie Dimon, the CEO of JPMorgan Chase, whose loan documents are abstracted in the attachment, so the bank can begin to review its options. Another financial crisis for American banks, how exciting for the American public!
You have demonstrated that you are not interested in contrary opinions of your law. In my February 4 email, I explained how the mechanics in your law, the CPSIA, prevents the CPSC from using its judgment and discretion to implement the new law. Interestingly, the letter of Acting Chairman Nancy Nord to Representative Henry Waxman et. al. dated January 30 (see attached) echoes my analysis of the law. As she notes:
“[We] are struggling, and impacted industries are struggling, with the requirements of the CPSIA as they relate to various products, such as bicycles, car seats, shoes and books, that may or may not have been intended to be so broadly impacted by the legislation. We are also working hard to find common sense solutions to some of the scenarios that have been raised in cases where public health is not endangered. As we work through these many issues, the staff has found that the requirements of the new law are inflexible, are not sequenced to maximize effectiveness and generally limit our options. Action by BOTH the Commission and the Congress is needed to address these issues. . . . It especially should be emphasized that because we cannot change the retroactive effect of the lead ban to existing inventory, [the stay on testing and certification] will not provide relief to the charities, thrift stores and other small retailers who must still meet the standards enacted by Congress. [Ed. Note: With the decision in the NRDC Case yesterday, this warning now applies to phthalates, as well.] To effect this change, Congress will need to amend the statute.” [Emphasis added]
The response to this letter was swift – by letter dated February 3, Representative Waxman et. al. requested that President Obama urgently replace Ms. Nord. Thus it appears that silencing Commissioner Nord is the preferred response to her comments on the inner workings of the CPSIA. The Congressional leadership’s intolerance of dissent is outrageous. As stated in Representative Waxman et. al. state in their February 4 letter (see attached), “everyone agrees” that the new standards are “critical” to protect children. See no evil, hear no evil . . . . The substance of Commissioner Nord’s arguments, and my arguments, remain entirely unanswered.
The business losses from the implementation of the CPSIA will make February 10 a dark day in American economic history. I have no idea how many business closings will result or when they will happen, and have no interest in promoting that sort of speculation. It is, however, NO speculation that business losses will be severe and entirely the responsibility of Congress during a time of severe financial and economic crisis. House and Senate leadership made certain that businesses will be hobbled, crushing the employees, customers and communities of the affected companies. The gloating self-satisfaction of supporters of this bill (see, e.g., http://www.nrdc.org/media/2009/090205a.asp) will soon backfire as the American public comes to recognize the carnage done by “do-gooders”. As before, I assert that this law will touch an estimated 60% of the U.S. economy in one way or another.
The economic impact of the CPSIA making will become manifest over time, not with a Big Bang on February 10 but slowly building and revealing itself long after the damage is irreversible. Those who arrogantly dismissed the protests of the MANY responsible and law-abiding people subject to this unfair law as “misguided” or “misinformed” will be held to account when the wreckage becomes clear. As you vote this week to print up a quick $800 billion to resurrect the economy, please remember to take ownership of your simultaneous action to destroy an important part of it.
You have brought this disaster on your voters, and we will remember how you responded to our pleas. I hope you will finally listen to the substantive and legitimate criticism of this disastrous law and use this last opportunity to stay the effectiveness of the CPSIA, thus allowing more time for hearings, further debate and rulemaking, and a rational, fair and orderly implementation of your groundbreaking safety program. There are two business days to go – the time to act is NOW.
Download legal analysis from 2/4/09: CPSIA - The Blame Game >>>
Download 1/20/09 letter from Chairman Nancy Nord to Representative Henry Waxman >>>
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
Rwoldenberg@learningresources.com
See my blog at http://learningresourcesinc.blogspot.com/ or at www.twitter.com/rwoldenberg
*****************************************************************************
From: Rick Woldenberg
Sent: Fri 11/7/2008 1:16 AM
To: cfalvey@cpsc.gov
Cc: Michael Gidding (mjg@brown-gidding.com); nnord@cpsc.gov; jmartyak@cpsc.gov; judith.bailey@mail.house.gov
Subject: The Financial Consequences of Retroactive Application of the CPSIA
Dear Ms. Falvey,
Per our conversation today, I am writing you to express my deep concern over the dire financial consequences of your office's September 12th legal opinion ("September 12th Opinion") that the new safety standards of the CPSIA apply retroactively to existing inventory.
It is unfortunate that so many people misread the issue of "financial consequences" to refer simply to the cost of the inventory. Yes, as covered in detail in today's panel discussion, companies in the chain of commerce (manufacturers, distributors and retailers) have little practical ability to make existing inventory "go away". In that sense, the retroactive application of the CPSIA is in fact disastrous. Yet, the implications of the September 12th Opinion are far deeper and more threatening. A necessary result of the purported retroactive effect of the CPSIA on existing inventory will be (a) widespread defaults under loan agreements as of February 10, 2009, (b) widespread failures to obtain audited financial statements for 2008 (another loan default issue), and (c) for public companies, an immediate Sarbanes-Oxley disclosure issue stemming from these problems. Defaults under loan agreements may result in the reduction or termination of available credit to operating companies. It can also trigger cross-defaults among related entities or related agreements, causing even more far-flung financial destruction. For many family businesses, this could result in a total wipeout of all family wealth in one fell swoop.
While these financial consequences have received little attention to date, their potentially highly toxic effect should not be ignored.
Loan Defaults: The typical American company finances its operations with asset-based loans. In this kind of loan, lenders agree to advance a percentage of "Eligible Inventory" as a revolving loan. In other words, the loan floats up and down over its term as the borrower meets its daily cash needs, but overall availability is limited by the value of inventory. The size of borrowing availability is determined each month based on representations called "Borrowing Base Certificates" in which the borrower attests to the value of its inventory, and then makes various representations relating to the definition of "Eligible Inventory". I have attached a typical definition of "Eligible Inventory" for your review. Please note subparts (b) and (e), as well as the final paragraph. Subparts (b) and (e) cannot be attested to after February 9, and under the terms of the last paragraph of the definition of "Eligible Inventory", an undetermined amount of inventory would no longer be "eligible". In addition, the ongoing representation of the typical borrower that they are operating in compliance with law can no longer be made. This has implications for the Borrowing Base Certificate, see below.
In a typical Borrowing Base Certificate, the following language typically appears:
"Pursuant to the terms of that certain [Loan Agreement], we submit this Borrowing Base Certificate to you and certify that the information set forth below and on any attachments to this Certificate is true, correct and complete as of the date of this Certificate. . . . The undersigned hereby certifies that the above information and computations are true and accurate and hereby represents and warrants that as of the date hereof, (i) no Event of Default or Unmatured Event of Default under the Credit Agreement has occurred or is continuing, (ii) the representations and warranties of the Borrower set forth in the Credit Agreement are true and correct in all material respects as of the date hereof, and (iii) the Borrower is in compliance with the covenants set forth in the Loan Agreement."
Any Borrowing Base Certificate with such language after February 9 may not be executed by anyone intent on selling or placing a positive value on inventory existing on February 9. An inability to sign a Borrowing Base Certificate or signing a Borrowing Base Certificate with fraudulent intent is clearly a serious default under any loan agreement.
Consequences of Loan Defaults: Even a technical default must be resolved between borrower and lender. In this case, lenders will have three basic options for action: (a) levy fees to cure or waive the default (this is a typical provision in many loan agreements), (b) insist that the loan agreement be renegotiated, likely to reduce borrowing availablility based on a new, lower advance rate on Eligible Inventory, and/or (c) an outright and possibly immediate refusal to lend. Notably, if existing inventory continually becomes contraband under the September 12th Opinion as lead and lead-in-paint standards ratchet down over time, this cascade of defaults will repeat again and again.
It can be anticipated that many companies will find credit declining or terminated as a result of these defaults. This will have a dramatic effect on these companies' investable capital and their ability to maintain a stable workforce.
Audited Statements: Many loan agreements require audited financial statements at the end of every year. All public companies provide audited statements. In preparing audited statements, independent accountants will insist on "testing" inventory valuations. Furthermore, they will take into account events occurring after the close of the period, as such events could expose misleading information in the financial statements for the current period. In the case of retroactive effect on existing inventory, the pending change in valuation of inventory as of February 10, 2009 will make it impossible to certify 2008 financials without serious and negative qualifications (if at all). This failure would have an immediate effect on any company under its loan agreement (and in the public markets, if applicable), resulting in reduction or termination of available credit. Recent events on Wall Street demonstrate the serious threat posed by sudden losses of available credit, and the consequential financial destruction and loss of jobs.
Sarbanes-Oxley: The financial implications above clearly constitute a material financial event and create immediate issues under Sarbanes-Oxley for any public company. The fact that this issue has not yet been disclosed by any public company is troubling and potentially creates personal liability for many public company officers, including possible criminal liability.
The conclusion that the CPSIA applies retroactively to inventory is an inherently technical legal matter, involving detailed analysis of unbending rules of law. It should be no surprise then that equally technical financial issues emerge in its wake based on precise readings of unbending contracts and GAAP rules. In this case, the above financial/contractual issues are real and will get the attention of the financial community. Lenders have no incentive to be "understanding" in their appreciation of the CPSIA or its good intentions. Good intentions don't repay loans, and contraband inventory makes for poor collateral. And once lenders are provided with an incentive to act (to preserve their own capital), the dominoes will start to topple - ending where? ending how?
The CPSC needs to reconsider its opinion urgently and to render a clean, clear and well-publicized opinion that the CPSIA does NOT apply retroactively to existing inventory. Time is of the essence.
Thank you for considering my view on this important topic.
Download Eligible Inventory Definition >>>
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
380 North Fairway Drive
Vernon Hills, IL 60061
Friday, January 30, 2009
CPSIA - Some Random Thoughts
There are many developments brewing as we approach the dreaded "National Bankruptcy Day". I hear that large inventory write-offs are about to be announced by certain public companies under pressure to remove product from store shelves by their mass market retailer customers. This "war" between suppliers and retailers has long been predicted in my letters and in this space. As enormous piles of money gets shamefully shredded, presumably leading to significant job losses at manufacturers, their factories and their downstream retailer-customers, we can only hope Reps. Waxman and Rush are satisfied with their handiwork, making America "safer". It's all worth it, right?
In the dreaded news category, we are also hearing about increasing informal recalls of product ahead of implementation of the new standards. "Recall" may be too harsh a word for it, but by hook or by crook, companies are retrieving product from the marketplace, and then either reworking it or trashing it. The author remains confident that these actions are entirely motivated by legalities, not by any social conscience or any shred of evidence that the products in question are dangerous. Having been raised to treat money with respect and because these days it's clear that money is a limited resource, I regret such waste, but even more, I regret the implication of such informal recalls. I feel that these recalls will be taken by the marketplace (dealers and consumers) as some form of implicit acknowledgement that there was a serious safety problem in the first place. It is natural that anyone seeing sophisticated companies acting in such a broad and panicky fashion would draw this sad conclusion. This will make our opposition more difficult as it will feed the resolve of supporters of the CPSIA to hold their ground, and will likewise whip up fear among the most skittish consumers. Sadly, there is nothing we can do but watch helplessly - every such recall will hurt, both financially and dynamically, making us all look bad for no good reason.
The pendency of the new standards makes me think about how much safer we will be in a few short days. Obviously, the new standards are in our best interests, otherwise why would wise Congress take these draconian steps if not to protect us! So, if these standards are needed to protect us, I wonder how it is that we have survived this long without such necessary protection. It's certainly true that children have been checking books out of libraries for many, many years with only paper cuts to show for their reckless behavior. And thrift stores have sold children's clothing and strollers for years without incident, but apparently no one knew the "dangers" that lurked within. Indeed, all of these items have been considered safe until February 10, when magically they will become unsafe unless proven otherwise.
Let's focus on the last six months, when we all began to adjust to the new standards. If there was such a raging safety problem, why did recalls abate in 2008 (versus 2007)? The new standards were not in place in 2008 . . . . Why aren't we seeing many claims of injury from all the dangerous children's products still legally available in the market? Even more to the point, what about the ten zillion products already sold and in use in the United States? Surely the population of existing product already sold is enormous, dwarfing the inventory in the supply chain at any given time. Shouldn't we be seeing outrageous injury statistics right now, currently, that would only abate over time as the population of "safer" products slowly overtakes the quantity of older product in use by children everywhere? Hmmm. I don't recall seeing any such statistics or notice of such injuries anywhere. Any idea why that might be?
Here's a theory: There never was a problem with children's product safety. While I, and everyone else, regrets the death of one child from a lead jewelry bangle, that one tort does not mean that everything made for children was defective or that each American business catering to children needs Big Brother watching over its shoulder to ensure "safety". If safety really was a problem, there would be a problem TODAY, right now, and NOTHING in the CPSIA could change that fact for years - unless the law made the product already sold illegal and required its immediate disposal (which it does not). In other words, plainly, the "dangers" that the CPSIA intends to "cure" once and for all, never existed and don't exist.
Imaginary problems are best solved with imaginary cures. Unfortunately, the CPSIA is real.
Rick
In the dreaded news category, we are also hearing about increasing informal recalls of product ahead of implementation of the new standards. "Recall" may be too harsh a word for it, but by hook or by crook, companies are retrieving product from the marketplace, and then either reworking it or trashing it. The author remains confident that these actions are entirely motivated by legalities, not by any social conscience or any shred of evidence that the products in question are dangerous. Having been raised to treat money with respect and because these days it's clear that money is a limited resource, I regret such waste, but even more, I regret the implication of such informal recalls. I feel that these recalls will be taken by the marketplace (dealers and consumers) as some form of implicit acknowledgement that there was a serious safety problem in the first place. It is natural that anyone seeing sophisticated companies acting in such a broad and panicky fashion would draw this sad conclusion. This will make our opposition more difficult as it will feed the resolve of supporters of the CPSIA to hold their ground, and will likewise whip up fear among the most skittish consumers. Sadly, there is nothing we can do but watch helplessly - every such recall will hurt, both financially and dynamically, making us all look bad for no good reason.
The pendency of the new standards makes me think about how much safer we will be in a few short days. Obviously, the new standards are in our best interests, otherwise why would wise Congress take these draconian steps if not to protect us! So, if these standards are needed to protect us, I wonder how it is that we have survived this long without such necessary protection. It's certainly true that children have been checking books out of libraries for many, many years with only paper cuts to show for their reckless behavior. And thrift stores have sold children's clothing and strollers for years without incident, but apparently no one knew the "dangers" that lurked within. Indeed, all of these items have been considered safe until February 10, when magically they will become unsafe unless proven otherwise.
Let's focus on the last six months, when we all began to adjust to the new standards. If there was such a raging safety problem, why did recalls abate in 2008 (versus 2007)? The new standards were not in place in 2008 . . . . Why aren't we seeing many claims of injury from all the dangerous children's products still legally available in the market? Even more to the point, what about the ten zillion products already sold and in use in the United States? Surely the population of existing product already sold is enormous, dwarfing the inventory in the supply chain at any given time. Shouldn't we be seeing outrageous injury statistics right now, currently, that would only abate over time as the population of "safer" products slowly overtakes the quantity of older product in use by children everywhere? Hmmm. I don't recall seeing any such statistics or notice of such injuries anywhere. Any idea why that might be?
Here's a theory: There never was a problem with children's product safety. While I, and everyone else, regrets the death of one child from a lead jewelry bangle, that one tort does not mean that everything made for children was defective or that each American business catering to children needs Big Brother watching over its shoulder to ensure "safety". If safety really was a problem, there would be a problem TODAY, right now, and NOTHING in the CPSIA could change that fact for years - unless the law made the product already sold illegal and required its immediate disposal (which it does not). In other words, plainly, the "dangers" that the CPSIA intends to "cure" once and for all, never existed and don't exist.
Imaginary problems are best solved with imaginary cures. Unfortunately, the CPSIA is real.
Rick
Wednesday, January 21, 2009
It's a New Era
With Mr. Obama now in office, having instructed us with his "Let's Change America" slogan, I am energized all over again to attack the vindictive and misguided CPSIA before it's too late. February 10 is a mere 21 days away. The government has only three weeks to come to its senses. Do you realize that the CPSC has received literally thousands of requests for advice, rulings and clarifications and answered only a tiny portion? Implementing this law with so many points unresolved (and unresolvable) should be considered a crime. Today, the Obama administration ordered a halt in all rulemaking, echoing a move by the Bush administration in January 2001. It would be foolish to believe this was intended to help us, but it may in fact have that effect. If this Executive Order clogs up the CPSIA pipeline, then there may be no choice but to hit the "pause" button.
In the meantime, as this gets more urgent by the second, please write Congress and call your representatives every day to tell them what you think. This matters needs urgent intervention.
Rick
In the meantime, as this gets more urgent by the second, please write Congress and call your representatives every day to tell them what you think. This matters needs urgent intervention.
Rick
Monday, January 19, 2009
See No Evil, Hear No Evil . . . Speak No Evil?
We scream and we scream, and still find ourselves with few satisfying answers to a simple question: Are they listening? The "they" is Congress, specifically the House and Senate Committees responsible for the CPSIA and potentially for its remedy. We know others are listening, like the numerous Congressmen (Barrett, Bilirakis, Carney, Dent, Gerlach, Holden, Pitts, Platts, Ryan, Tiahrt, Weiner) and Senators (Brownback, Levin, Leahy, Mikulksi, Sarbanes, Snowe) who have expressed their concerns over this law, and the more that will soon follow. I think the CPSC hears us, too. Does Congress? If not, what's the problem?
It's a real puzzle - or is it? My sources tell me that at the Congressional staff meeting on Friday Jan. 16 held to clear up "misunderstandings" and "confusion" under the CPSIA, staffers apparently stated that no changes would be forthcoming in the law (aha, that clears everything up quite nicely), and that somehow this law is just a "safety net" for products. [That last remark is fascinating - I don't recall them characterizing the CPSIA as toothless in public. Are they saying different things to different people, depending on the audience? Now I AM getting confused.]
Even more outrageous, unnamed staffers are reported to have stated that no hearing would occur until an additional CPSC Commissioner was appointed, and that CPSC would be "unable" to appear at any earlier hearing. In other words, they have no intention of holding hearings in advance of the February 10 implementation date, despite the reams of data they possess on the many serious problems their law is causing. Actually, it is my understanding that the CPSC has requested such a hearing, but that request apparently fell on deaf ears. Spin, spin, spin - and then tell everyone that all discordant views are misinformation or the confusion of [fill-in-the-blank] people. Finally, to cap it off, we understand that House staffers are simply "too busy" to attend meetings with industry and the CPSC to discuss the details of the real life impact of the law.
Is there a pattern developing here? Does Congress believe it can just bury this problem and no one will notice? Put your hands over your ears and your eyes, and the problem's not there, right? Why won't Congress hold hearings and let the People speak out on the record? When it comes time to have such a debate, they seem to be too busy or have other excuses to keep inconvenient opinions out of the public eye. After all, if they can keep the protests to a few frothy blogs, this will all blow over . . . right? It is ironic that the people who patted themselves on the back for defending safety, Mom and Apple Pie, are now resorting to legislative trickery to silence you, their opponents, for the crime of disagreeing.
Just a quick reminder: February 10, is 23 days away. Let's not let it become National Bankruptcy Day - please keep screaming at your representatives in Congress. It's not too late - but we're getting there . . . .
Rick
It's a real puzzle - or is it? My sources tell me that at the Congressional staff meeting on Friday Jan. 16 held to clear up "misunderstandings" and "confusion" under the CPSIA, staffers apparently stated that no changes would be forthcoming in the law (aha, that clears everything up quite nicely), and that somehow this law is just a "safety net" for products. [That last remark is fascinating - I don't recall them characterizing the CPSIA as toothless in public. Are they saying different things to different people, depending on the audience? Now I AM getting confused.]
Even more outrageous, unnamed staffers are reported to have stated that no hearing would occur until an additional CPSC Commissioner was appointed, and that CPSC would be "unable" to appear at any earlier hearing. In other words, they have no intention of holding hearings in advance of the February 10 implementation date, despite the reams of data they possess on the many serious problems their law is causing. Actually, it is my understanding that the CPSC has requested such a hearing, but that request apparently fell on deaf ears. Spin, spin, spin - and then tell everyone that all discordant views are misinformation or the confusion of [fill-in-the-blank] people. Finally, to cap it off, we understand that House staffers are simply "too busy" to attend meetings with industry and the CPSC to discuss the details of the real life impact of the law.
Is there a pattern developing here? Does Congress believe it can just bury this problem and no one will notice? Put your hands over your ears and your eyes, and the problem's not there, right? Why won't Congress hold hearings and let the People speak out on the record? When it comes time to have such a debate, they seem to be too busy or have other excuses to keep inconvenient opinions out of the public eye. After all, if they can keep the protests to a few frothy blogs, this will all blow over . . . right? It is ironic that the people who patted themselves on the back for defending safety, Mom and Apple Pie, are now resorting to legislative trickery to silence you, their opponents, for the crime of disagreeing.
Just a quick reminder: February 10, is 23 days away. Let's not let it become National Bankruptcy Day - please keep screaming at your representatives in Congress. It's not too late - but we're getting there . . . .
Rick
Saturday, January 17, 2009
CPSIA - The Lessons of Nero
From: Rick Woldenberg
Sent: Sat 1/17/2009 10:43 AM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'; andrew_grobmyer@pryor.senate.gov; james_reid@rockefeller.senate.gov
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; 'cfalvey@cpsc.gov'; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org; richard.goldberg@mail.house.gov; matthew.abbott@mail.house.gov; 'Brian_hendricks@hutchison.senate.gov'; 'david@commerce.senate.gov'; 'Cathy.hurwit@mail.house.gov'; pweller@cpsc.gov; mgougisha@cpsc.gov; bridget_petruczok@boxer.senate.gov; michael_daum@cantwell.senate.gov; bill_ghent@carper.senate.gov; hap_rigby@demint.senate.gov; frannie_wellings@dorgan.senate.gov; david_quinalty@ensign.senate.gov; james_chang@inouye.senate.gov; jonathan_becker@klobuchar.senate.gov; michelle_schwartz@lautenberg.senate.gov; lee_dunn@mccain.senate.gov; sonya_wendell@mccaskill.senate.gov; matthew_hussey@snowe.senate.gov; brendan_plack@thune.senate.gov; hugh_carroll@wicker.senate.gov; elissa.levin@mail.house.gov; christopher.schepis@mail.house.gov; theresa.lavery@mail.house.gov; greg.louer@mail.house.gov; brian.diffell@mail.house.gov; amy.ingham@mail.house.gov; laura.vaught@mail.house.gov; matt.johnson@mail.house.gov; saul.hernandez@mail.house.gov; aaron.shapiro@mail.house.gov; rick.axthelm@mail.house.gov; steve.plevniak@mail.house.gov; scott.cleveland@mail.house.gov; jonathan.smith@mail.house.gov; pat.cavanagh@mail.house.gov; rachelle.wood@mail.house.gov; michael.gaffin@mail.house.gov; angela.manso@mail.house.gov; dana.lichtenberg@mail.house.gov; derrick.ramos@mail.house.gov; elizabeth.stack@mail.house.gov; lori.pepper@mail.house.gov; josh.connolly@mail.house.gov; david.bahar@mail.house.gov; mark.bayer@mail.house.gov; Neeta.Bidwai@mail.house.gov; kyle.victor@mail.house.gov; chris.debosier@mail.house.gov; morgan.jones@mail.house.gov; matthew.dockham@mail.house.gov; tuley.wright@mail.house.gov; cade.king@mail.house.gov; betsy.christian@mail.house.gov; chris.herndon@mail.house.gov; Mike.Ward@mail.house.gov; laura.abshire@mail.house.gov; randi.meyers@mail.house.gov; Greta.Hanson@mail.house.gov; liz.muro@mail.house.gov; jamie.euken@mail.house.gov; jon.oehmen@mail.house.gov; brad.schweer@mail.house.gov; dana.grayson@mail.house.gov; michael.beckerman@mail.house.gov; valerie.henry@mail.house.gov; Becky.Claster@mail.house.gov; tiffany.guarascio@mail.house.gov; jeff.mortier@mail.house.gov; Christopher_day@billnelson.senate.gov; john_phillips@kerry.senate.gov; Kerrie Campbell (kcampbell@manatt.com)
Subject: CPSIA - The Lessons of Nero
I am writing in response to the letter dated January 16 to Commissioners Nord and Moore of the CPSC signed by Reps. Henry Waxman and Bobby Rush and Senators Rockefeller and Pryor (January 16 Letter). See http://energycommerce.house.gov/images/stories/Documents/PDF/Newsroom/nord%20moore%202009%201%2016.pdf. In this letter, Congressional leaders urge the CPSC to clarify "confusion and misinformation" under the CPSIA in a "clear and understandable manner" and specifically, to address the application of the new law to certain books and clothing items, resellers like thrift and consignment stores and component testing and to provide guidance to small businesses. Notably, the letter counsels that "greater communication and expedited action by the Commission will improve compliance with the law and lead to more effective and efficient achievement of the law's goals." I respectfully disagree. In large part, I believe this letter mischaracterizes the nature of the problem with the CPSIA by implying that with a few regulatory tweaks and a little more guidance, everything will be "fine". This is patently untrue and misleading in itself. Furthermore, with economic conditions as they are today (see http://video.forbes.com/fvn/business/er_retailers011409 - 200,000 stores are expected to close in 2009), the negative economic implications of this law have the potential to be catastrophic without an IMMEDIATE serious reconsideration of legislative approach. See also http://www.forbes.com/opinions/2009/01/16/cpsia-safety-toys-oped-cx_wo_0116olson.html and http://www.forbes.com/entrepreneurs/2009/01/15/toys-lead-retail-ent-law-cx_rb_0115bovarnicksafetylaw.html?partner=relatedstoriesbox . By attempting to prop up a poorly-conceived law, I believe that Congress is fiddling while Rome burns. This did not work out well for Rome or Nero, and will not work out well for the United States in this case.
Fixing the Law Exception-by-Exception Will Not Succeed. I am confounded by the notion that by drafting a list of exceptions, the CPSC will address the fundamental compliance issues under the CPSIA. As the January 16 Letter notes, the only permitted exceptions are those items which "do not contain lead or contain lead at levels that do not or would not exceed the law's limits" - in other words, the only exception criteria under this law is lead levels, NOT risk. This rule is the source of much of the problem, as it sweeps into the law many items and item categories that are well-known to be safe. No amount of rule-making will reconstruct an economy based on selling safe products that happen to have lead as a trace element. The diversity of products, markets and channels in our economy will defy every attempt to build a workable law that makes everything illegal without regard to risk except as defined. The absurdity of this effort is illustrated by the January 16 letter itself in which Congressional leaders request special rules for children's apparel consisting "entirely of dyed or undyed fabric", in other words hats, socks and underwear. Perhaps the requested rule will be known as the Hats, Socks and Underwear Exception. Frankly, this does not solve the problem for those of us living in cold Chicago. Likewise, the January 16 Letter's request to create exceptions for books is limited to "ordinary" books made entirely of paper - staples, glue, thread, laminates and other components of books (not apparently well-known to Congress) will make most books ineligible in this non-risk-based exception. However, all books comprised of loose sheets of paper should fall comfortably within the recommended exception. I am sure libraries will appreciate this helpful loophole.
A safety law that is divorced from risk assessment cannot be fixed by exceptions. Congress needs to recognize this serious flaw in the CPSIA and take immediate action to fix it.
The Proposed Actions in the January 16 Letter Will Increase Complexity. The CPSIA is already one of the most complex pieces of legislation in American history. For companies like ours which are committed to complying with law, the CPSIA presents a unique business challenge to conquer. Now Congress is suggesting that the CPSC add to the confusion by making the law even more complex with a series of detailed exceptions for various industries, channels of trade, products, features, and other unspecified circumstances. In other words, if American businesses didn't understand how the law worked before, the solution is to make it more complicated. This concept is embedded in the CPSIA, which instructs the CPSC to carve out limited exceptions for products which could not possibly violate the new standards. The legislative construct is entirely wrongheaded, as the approach to safety should be risk-based and further, is incredibly divorced from reality. For instance, the January 16 Letter does not request that resellers of used merchandise be relieved of any responsibility under the law, just that they be coached better. I suggest that Congress write a book called "How to Run A Thrift Store under the CPSIA." Perhaps then, and only then, will we understand the procedures such stores must undertake to ensure compliance when selling old merchandise.
Complexity itself is the enemy of compliance with law. Even a simple rule like the lead-in-paint ban has proven surprisingly resistant to universal compliance despite the fact that there is no economic incentive to use leaded paint in children's products. [Notably, as violations of the laws prohibiting murder illustrate, compliance problems are not unusual in American jurisprudence and are certainly not restricted to children's products companies.] Under this new legislative regime, the blazingly complex CPSIA and its attendant CPSC exceptions, rules and regulations, FAQs, opinions, interpretations, private letter advice and so on will make compliance with law a false promise to the American people, and at the same act as a high-octane stimulus package for the legal industry. Even if more $600-per-hour lawyers is a good thing for our economy, I rather doubt this will be a workable solution for any American business, including the largest, wealthiest and most sophisticated companies. For perspective, I suggest you contact the legal department of your nearest thrift store for their opinion.
The Approaching February 10 Deadline is Incredibly Unrealistic. The January 16 letter posits a fantastic resolution to the CPSIA problem, namely that the CPSC should just issue a lot of rules and regulations in the next few days to resolve the painful concerns expressed by constituents of late. Even if this were possible, the idea that it would resolve the issue is, frankly, delusional. The United States has literally hundreds of thousands of businesses affected by the CPSIA. They tend to vary in size and sophistication and many depend on a small, low-cost labor force. Despite the outpouring of concern over this law, Congress has heard from only a miniscule percentage of the affected businesses - many of the silent companies are very likely oblivious to the law and its implications. Is the concept here that when the CPSC issues a stack of rules a few days ahead of the deadline, every affected business will instantly and perfectly absorb the news, properly interpret the regulations and their application to its economic activity, rejigger processes, repair damaged relations in its supply chain overnight, and so on? I think the timeline of public reaction to the CPSIA since the law was written and signed into law informs us that this is a wholly unrealistic scenario. A series of rulings by the CPSC in the next few days will not do much to stop the economic carnage. About the only remedy that the CPSC can implement before February 10 to stop this train wreck is a broad STAY OF ENFORCEMENT. The solution of a stay ("hitting the pause button") would offer the advantage of both bringing overnight relief to the affected industries, and provide time for an open public debate over how to fix this law, whether by amendment, further regulation or some combination thereof. A stay for one year (or more) would also have the advantage of unifying the lead standards with more time to plan and sell-off inventory, thus eliminating the problem of retroactive application of the law against product with total lead levels between 300 ppm and 600 ppm which will be legal for only six months (February 10 - August 9).
Congress Seems to Want to Do the CPSC's Job. The CPSIA establishes new standards for safety in children's products in a number of now well-known ways. Prior to the CPSIA, it was the responsibility of the CPSC to make a risk-based determination for safety hazards. The January 16 letter continues the new tradition of Congress in supplanting the CPSC as the arbiter of safety risks. I do not understand what qualifies Congress to make the judgment, first that books are illegal until proven legal, and then that some kinds of books are in fact okay. Did Congress hold hearings or does it have some other way to make this assessment of risk? I believe that Congress should not be in the same business as the CPSC, and by micro-managing the activities of the Commission, it has meaningfully contributed to creating the morass that it complains about today. The CPSC is qualified to manage the process of assessing safety risk and writing sensible rules for the administration of those risks. If Congress persists in looking over the shoulder of the CPSC and critiquing its judgments down to the level of buttons, snaps and other "metal, plastic or painted components", it should not express dismay over the slow, tedious and tentative process that results. Congress is teaching the CPSC that the determination of risk is a Congressional Subcommittee responsibility now.
And What about State Attorney Generals? I want to point out that in a post-CPSIA world, having empowered the State AGs to meddle in and enforce federal safety laws; companies like ours are now faced with 51 CPSC’s (plus Congressional Subcommittees). Is this someone's idea of a more efficient way to run an economy? Has Congress thought about the practical effect of this change in our Federal system, or the risk that it imposes on businesses? The exponential expansion in regulatory bodies under the CPSIA increases the complexity of compliance to mind-boggling levels that outstrip literally everyone's ability to process - American businesses are in effect forced to ignore State laws because they can't manage compliance with them as a practical matter - and introduces significant externalities (uncontrolled risks) that cannot be managed in any way. State AGs do not answer to the CPSC and are now empowered by the CPSIA to take matters into their hands if, in their judgment, the CPSC is not enforcing the law. Great. See, e.g., http://www.azag.gov/press_releases/dec/2008/Mattel%20CJ.pdf. In Eighth Grade, I learned about the Federal system and thought this was how the Founding Fathers intended to organize our economy for maximum efficiency and equitable treatment under the law. I believe the CPSIA has rendered my Eighth Grade civics education obsolete. We are nevertheless hopeful that Congress will act before the CPSIA makes our company obsolete, too.
While I appreciate the hard work and good intentions behind the CPSIA and its passage last summer, the time has come to stop defending a defective bill and its defective process and acknowledge the reality of the law's weaknesses. I am personally convinced that there is more than one way to legislate improved safety in children's products, and that the CPSIA can be safely amended without ripping the fabric of our society. A revised bill can be built to strike the problematic overly-broad provisions that contribute nothing to the safety of children's products, and replace them with a simple, sensible, risk-based approach that will provide reasonable assurance of the safety and appropriateness of children's products in our economy.
We are facing a historic economic crisis in our country. It is time for non-partisan leadership to bring our country out of this terrible situation. The CPSIA is part of the problem and needs to be fixed. I urge Congress to face this reality, stop blaming the CPSC for a doomed attempt to make a defective law workable and get to work on amending the CPSIA for the good of our country.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
Sent: Sat 1/17/2009 10:43 AM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'; andrew_grobmyer@pryor.senate.gov; james_reid@rockefeller.senate.gov
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; 'cfalvey@cpsc.gov'; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org; richard.goldberg@mail.house.gov; matthew.abbott@mail.house.gov; 'Brian_hendricks@hutchison.senate.gov'; 'david@commerce.senate.gov'; 'Cathy.hurwit@mail.house.gov'; pweller@cpsc.gov; mgougisha@cpsc.gov; bridget_petruczok@boxer.senate.gov; michael_daum@cantwell.senate.gov; bill_ghent@carper.senate.gov; hap_rigby@demint.senate.gov; frannie_wellings@dorgan.senate.gov; david_quinalty@ensign.senate.gov; james_chang@inouye.senate.gov; jonathan_becker@klobuchar.senate.gov; michelle_schwartz@lautenberg.senate.gov; lee_dunn@mccain.senate.gov; sonya_wendell@mccaskill.senate.gov; matthew_hussey@snowe.senate.gov; brendan_plack@thune.senate.gov; hugh_carroll@wicker.senate.gov; elissa.levin@mail.house.gov; christopher.schepis@mail.house.gov; theresa.lavery@mail.house.gov; greg.louer@mail.house.gov; brian.diffell@mail.house.gov; amy.ingham@mail.house.gov; laura.vaught@mail.house.gov; matt.johnson@mail.house.gov; saul.hernandez@mail.house.gov; aaron.shapiro@mail.house.gov; rick.axthelm@mail.house.gov; steve.plevniak@mail.house.gov; scott.cleveland@mail.house.gov; jonathan.smith@mail.house.gov; pat.cavanagh@mail.house.gov; rachelle.wood@mail.house.gov; michael.gaffin@mail.house.gov; angela.manso@mail.house.gov; dana.lichtenberg@mail.house.gov; derrick.ramos@mail.house.gov; elizabeth.stack@mail.house.gov; lori.pepper@mail.house.gov; josh.connolly@mail.house.gov; david.bahar@mail.house.gov; mark.bayer@mail.house.gov; Neeta.Bidwai@mail.house.gov; kyle.victor@mail.house.gov; chris.debosier@mail.house.gov; morgan.jones@mail.house.gov; matthew.dockham@mail.house.gov; tuley.wright@mail.house.gov; cade.king@mail.house.gov; betsy.christian@mail.house.gov; chris.herndon@mail.house.gov; Mike.Ward@mail.house.gov; laura.abshire@mail.house.gov; randi.meyers@mail.house.gov; Greta.Hanson@mail.house.gov; liz.muro@mail.house.gov; jamie.euken@mail.house.gov; jon.oehmen@mail.house.gov; brad.schweer@mail.house.gov; dana.grayson@mail.house.gov; michael.beckerman@mail.house.gov; valerie.henry@mail.house.gov; Becky.Claster@mail.house.gov; tiffany.guarascio@mail.house.gov; jeff.mortier@mail.house.gov; Christopher_day@billnelson.senate.gov; john_phillips@kerry.senate.gov; Kerrie Campbell (kcampbell@manatt.com)
Subject: CPSIA - The Lessons of Nero
I am writing in response to the letter dated January 16 to Commissioners Nord and Moore of the CPSC signed by Reps. Henry Waxman and Bobby Rush and Senators Rockefeller and Pryor (January 16 Letter). See http://energycommerce.house.gov/images/stories/Documents/PDF/Newsroom/nord%20moore%202009%201%2016.pdf. In this letter, Congressional leaders urge the CPSC to clarify "confusion and misinformation" under the CPSIA in a "clear and understandable manner" and specifically, to address the application of the new law to certain books and clothing items, resellers like thrift and consignment stores and component testing and to provide guidance to small businesses. Notably, the letter counsels that "greater communication and expedited action by the Commission will improve compliance with the law and lead to more effective and efficient achievement of the law's goals." I respectfully disagree. In large part, I believe this letter mischaracterizes the nature of the problem with the CPSIA by implying that with a few regulatory tweaks and a little more guidance, everything will be "fine". This is patently untrue and misleading in itself. Furthermore, with economic conditions as they are today (see http://video.forbes.com/fvn/business/er_retailers011409 - 200,000 stores are expected to close in 2009), the negative economic implications of this law have the potential to be catastrophic without an IMMEDIATE serious reconsideration of legislative approach. See also http://www.forbes.com/opinions/2009/01/16/cpsia-safety-toys-oped-cx_wo_0116olson.html and http://www.forbes.com/entrepreneurs/2009/01/15/toys-lead-retail-ent-law-cx_rb_0115bovarnicksafetylaw.html?partner=relatedstoriesbox . By attempting to prop up a poorly-conceived law, I believe that Congress is fiddling while Rome burns. This did not work out well for Rome or Nero, and will not work out well for the United States in this case.
Fixing the Law Exception-by-Exception Will Not Succeed. I am confounded by the notion that by drafting a list of exceptions, the CPSC will address the fundamental compliance issues under the CPSIA. As the January 16 Letter notes, the only permitted exceptions are those items which "do not contain lead or contain lead at levels that do not or would not exceed the law's limits" - in other words, the only exception criteria under this law is lead levels, NOT risk. This rule is the source of much of the problem, as it sweeps into the law many items and item categories that are well-known to be safe. No amount of rule-making will reconstruct an economy based on selling safe products that happen to have lead as a trace element. The diversity of products, markets and channels in our economy will defy every attempt to build a workable law that makes everything illegal without regard to risk except as defined. The absurdity of this effort is illustrated by the January 16 letter itself in which Congressional leaders request special rules for children's apparel consisting "entirely of dyed or undyed fabric", in other words hats, socks and underwear. Perhaps the requested rule will be known as the Hats, Socks and Underwear Exception. Frankly, this does not solve the problem for those of us living in cold Chicago. Likewise, the January 16 Letter's request to create exceptions for books is limited to "ordinary" books made entirely of paper - staples, glue, thread, laminates and other components of books (not apparently well-known to Congress) will make most books ineligible in this non-risk-based exception. However, all books comprised of loose sheets of paper should fall comfortably within the recommended exception. I am sure libraries will appreciate this helpful loophole.
A safety law that is divorced from risk assessment cannot be fixed by exceptions. Congress needs to recognize this serious flaw in the CPSIA and take immediate action to fix it.
The Proposed Actions in the January 16 Letter Will Increase Complexity. The CPSIA is already one of the most complex pieces of legislation in American history. For companies like ours which are committed to complying with law, the CPSIA presents a unique business challenge to conquer. Now Congress is suggesting that the CPSC add to the confusion by making the law even more complex with a series of detailed exceptions for various industries, channels of trade, products, features, and other unspecified circumstances. In other words, if American businesses didn't understand how the law worked before, the solution is to make it more complicated. This concept is embedded in the CPSIA, which instructs the CPSC to carve out limited exceptions for products which could not possibly violate the new standards. The legislative construct is entirely wrongheaded, as the approach to safety should be risk-based and further, is incredibly divorced from reality. For instance, the January 16 Letter does not request that resellers of used merchandise be relieved of any responsibility under the law, just that they be coached better. I suggest that Congress write a book called "How to Run A Thrift Store under the CPSIA." Perhaps then, and only then, will we understand the procedures such stores must undertake to ensure compliance when selling old merchandise.
Complexity itself is the enemy of compliance with law. Even a simple rule like the lead-in-paint ban has proven surprisingly resistant to universal compliance despite the fact that there is no economic incentive to use leaded paint in children's products. [Notably, as violations of the laws prohibiting murder illustrate, compliance problems are not unusual in American jurisprudence and are certainly not restricted to children's products companies.] Under this new legislative regime, the blazingly complex CPSIA and its attendant CPSC exceptions, rules and regulations, FAQs, opinions, interpretations, private letter advice and so on will make compliance with law a false promise to the American people, and at the same act as a high-octane stimulus package for the legal industry. Even if more $600-per-hour lawyers is a good thing for our economy, I rather doubt this will be a workable solution for any American business, including the largest, wealthiest and most sophisticated companies. For perspective, I suggest you contact the legal department of your nearest thrift store for their opinion.
The Approaching February 10 Deadline is Incredibly Unrealistic. The January 16 letter posits a fantastic resolution to the CPSIA problem, namely that the CPSC should just issue a lot of rules and regulations in the next few days to resolve the painful concerns expressed by constituents of late. Even if this were possible, the idea that it would resolve the issue is, frankly, delusional. The United States has literally hundreds of thousands of businesses affected by the CPSIA. They tend to vary in size and sophistication and many depend on a small, low-cost labor force. Despite the outpouring of concern over this law, Congress has heard from only a miniscule percentage of the affected businesses - many of the silent companies are very likely oblivious to the law and its implications. Is the concept here that when the CPSC issues a stack of rules a few days ahead of the deadline, every affected business will instantly and perfectly absorb the news, properly interpret the regulations and their application to its economic activity, rejigger processes, repair damaged relations in its supply chain overnight, and so on? I think the timeline of public reaction to the CPSIA since the law was written and signed into law informs us that this is a wholly unrealistic scenario. A series of rulings by the CPSC in the next few days will not do much to stop the economic carnage. About the only remedy that the CPSC can implement before February 10 to stop this train wreck is a broad STAY OF ENFORCEMENT. The solution of a stay ("hitting the pause button") would offer the advantage of both bringing overnight relief to the affected industries, and provide time for an open public debate over how to fix this law, whether by amendment, further regulation or some combination thereof. A stay for one year (or more) would also have the advantage of unifying the lead standards with more time to plan and sell-off inventory, thus eliminating the problem of retroactive application of the law against product with total lead levels between 300 ppm and 600 ppm which will be legal for only six months (February 10 - August 9).
Congress Seems to Want to Do the CPSC's Job. The CPSIA establishes new standards for safety in children's products in a number of now well-known ways. Prior to the CPSIA, it was the responsibility of the CPSC to make a risk-based determination for safety hazards. The January 16 letter continues the new tradition of Congress in supplanting the CPSC as the arbiter of safety risks. I do not understand what qualifies Congress to make the judgment, first that books are illegal until proven legal, and then that some kinds of books are in fact okay. Did Congress hold hearings or does it have some other way to make this assessment of risk? I believe that Congress should not be in the same business as the CPSC, and by micro-managing the activities of the Commission, it has meaningfully contributed to creating the morass that it complains about today. The CPSC is qualified to manage the process of assessing safety risk and writing sensible rules for the administration of those risks. If Congress persists in looking over the shoulder of the CPSC and critiquing its judgments down to the level of buttons, snaps and other "metal, plastic or painted components", it should not express dismay over the slow, tedious and tentative process that results. Congress is teaching the CPSC that the determination of risk is a Congressional Subcommittee responsibility now.
And What about State Attorney Generals? I want to point out that in a post-CPSIA world, having empowered the State AGs to meddle in and enforce federal safety laws; companies like ours are now faced with 51 CPSC’s (plus Congressional Subcommittees). Is this someone's idea of a more efficient way to run an economy? Has Congress thought about the practical effect of this change in our Federal system, or the risk that it imposes on businesses? The exponential expansion in regulatory bodies under the CPSIA increases the complexity of compliance to mind-boggling levels that outstrip literally everyone's ability to process - American businesses are in effect forced to ignore State laws because they can't manage compliance with them as a practical matter - and introduces significant externalities (uncontrolled risks) that cannot be managed in any way. State AGs do not answer to the CPSC and are now empowered by the CPSIA to take matters into their hands if, in their judgment, the CPSC is not enforcing the law. Great. See, e.g., http://www.azag.gov/press_releases/dec/2008/Mattel%20CJ.pdf. In Eighth Grade, I learned about the Federal system and thought this was how the Founding Fathers intended to organize our economy for maximum efficiency and equitable treatment under the law. I believe the CPSIA has rendered my Eighth Grade civics education obsolete. We are nevertheless hopeful that Congress will act before the CPSIA makes our company obsolete, too.
While I appreciate the hard work and good intentions behind the CPSIA and its passage last summer, the time has come to stop defending a defective bill and its defective process and acknowledge the reality of the law's weaknesses. I am personally convinced that there is more than one way to legislate improved safety in children's products, and that the CPSIA can be safely amended without ripping the fabric of our society. A revised bill can be built to strike the problematic overly-broad provisions that contribute nothing to the safety of children's products, and replace them with a simple, sensible, risk-based approach that will provide reasonable assurance of the safety and appropriateness of children's products in our economy.
We are facing a historic economic crisis in our country. It is time for non-partisan leadership to bring our country out of this terrible situation. The CPSIA is part of the problem and needs to be fixed. I urge Congress to face this reality, stop blaming the CPSC for a doomed attempt to make a defective law workable and get to work on amending the CPSIA for the good of our country.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
Friday, January 16, 2009
Maybe I'm Just Slow But . . . I Don't Get It.
Call me cocky, but I think I understand plain English. English is my first language (my only language aside from the residue of long ago High School French) and I feel like I always have a fighting chance to understand English text, spoken or written.
Unfortunately, I seem to be processing English rather poorly nowadays, at least to judge by my ability to get my head around the proper interpretation of the CPSIA. Congressional leaders claim in writing that there is so much "misinformation" circulating about the law, inducing panic over this wonderful, ground-breaking legislation, that must be corrected. Darn, shame on those people spreading misinformation! Presumably to assist in correcting all the misunderstandings, we are instructed by the CPSC in the following video to not to worry, all will be well. http://www.wbaltv.com/video/18479590/index.html.
In this video, Julie Vallese, spokesman for the CPSIA (soon to depart, actually), attempts to "clarify" the total lead requirements and our obligations under the law as of February 10. Given my poor grasp of English, please bear with me, but I think this is what she says:
a. As of February 10, all inventory is subject to the new 600 ppm total lead standard (including existing inventory).
b. Retailers do not have an obligation to test existing inventory for compliance.
c. As a consequence of point a., however, any sales of items violating the lead standard are subject to the full brunt of this law.
d. Retailers should simply exercise business judgment in determining what violates the law and what doesn't. She suggests calling the manufacturer (hey, thrift stores, that sounds like a great idea for you!) or just eyeballing the thing. Oh yeah, the thrift stores can also buy a XRF gun for $50,000 or rent one for $1,500 per week to check used sweaters for lead. The average selling price of a children's garment in the thrift store in the video clip below is $1.25, so a $50,000 instrument will just blend into the cost structure of an average thrift store, no prob.
Okay, I get stuck at this point. You are on the hook for selling something in violation of the CPSIA standards (it is a "knowing" violation if you did not exercise the "due care" of a "reasonable man", see 15 USC 2069(d)), but you have no obligation to test and can just "guess" whether the product is in compliance. But if you guess wrong, they reserve the right to hammer you.
Julie Vallese says this with a smile on her face like we will all understand and take comfort in these words. I don't think it's her fault that she has to defend something that just is indefensibly convoluted - the CPSC didn't write the law but is bound to enforce it regardless of whether it makes ANY sense - but I can't share her sunny confidence that everything is "fine" now. When the first store gets hammered for guessing wrong (Get ready, get set, GO Consumer Groups! Protect us, protect us!!), how useful will Julie's advice seem then? In some ways, the advice of the CPSC is practical - what choice does a thrift store or other retailer have over its existing inventory? We all have to soldier on - the advice of the CPSC seems to be just breathe deep and take a chance on violating the law. Now that's the spirit - let's stop worrying so much, complying with the law is for small-minded people anyhow.
One last thing, the video below accompanied the Julie Vallese interview on WBAL-TV. Please note at the end the reporter states that the CPSC has 100 field investigators - and they will all be out on the street on February 10 presumably looking for you! I suggest you have the milk and cookies ready to make them feel at home.
I wish I understood English better. Clearly there's something I just don't get. Isn't there?
Rick
http://www.wbaltv.com/video/18482214/index.html
Unfortunately, I seem to be processing English rather poorly nowadays, at least to judge by my ability to get my head around the proper interpretation of the CPSIA. Congressional leaders claim in writing that there is so much "misinformation" circulating about the law, inducing panic over this wonderful, ground-breaking legislation, that must be corrected. Darn, shame on those people spreading misinformation! Presumably to assist in correcting all the misunderstandings, we are instructed by the CPSC in the following video to not to worry, all will be well. http://www.wbaltv.com/video/18479590/index.html.
In this video, Julie Vallese, spokesman for the CPSIA (soon to depart, actually), attempts to "clarify" the total lead requirements and our obligations under the law as of February 10. Given my poor grasp of English, please bear with me, but I think this is what she says:
a. As of February 10, all inventory is subject to the new 600 ppm total lead standard (including existing inventory).
b. Retailers do not have an obligation to test existing inventory for compliance.
c. As a consequence of point a., however, any sales of items violating the lead standard are subject to the full brunt of this law.
d. Retailers should simply exercise business judgment in determining what violates the law and what doesn't. She suggests calling the manufacturer (hey, thrift stores, that sounds like a great idea for you!) or just eyeballing the thing. Oh yeah, the thrift stores can also buy a XRF gun for $50,000 or rent one for $1,500 per week to check used sweaters for lead. The average selling price of a children's garment in the thrift store in the video clip below is $1.25, so a $50,000 instrument will just blend into the cost structure of an average thrift store, no prob.
Okay, I get stuck at this point. You are on the hook for selling something in violation of the CPSIA standards (it is a "knowing" violation if you did not exercise the "due care" of a "reasonable man", see 15 USC 2069(d)), but you have no obligation to test and can just "guess" whether the product is in compliance. But if you guess wrong, they reserve the right to hammer you.
Julie Vallese says this with a smile on her face like we will all understand and take comfort in these words. I don't think it's her fault that she has to defend something that just is indefensibly convoluted - the CPSC didn't write the law but is bound to enforce it regardless of whether it makes ANY sense - but I can't share her sunny confidence that everything is "fine" now. When the first store gets hammered for guessing wrong (Get ready, get set, GO Consumer Groups! Protect us, protect us!!), how useful will Julie's advice seem then? In some ways, the advice of the CPSC is practical - what choice does a thrift store or other retailer have over its existing inventory? We all have to soldier on - the advice of the CPSC seems to be just breathe deep and take a chance on violating the law. Now that's the spirit - let's stop worrying so much, complying with the law is for small-minded people anyhow.
One last thing, the video below accompanied the Julie Vallese interview on WBAL-TV. Please note at the end the reporter states that the CPSC has 100 field investigators - and they will all be out on the street on February 10 presumably looking for you! I suggest you have the milk and cookies ready to make them feel at home.
I wish I understood English better. Clearly there's something I just don't get. Isn't there?
Rick
http://www.wbaltv.com/video/18482214/index.html
Wednesday, January 14, 2009
WSJ Editorial 1/14/09 Pelosi's Toy Story
We are being heard. Keep screaming!
Rick
http://online.wsj.com/article/SB123189645948879745.html
WALL STREET JOURNAL
REVIEW & OUTLOOK
JANUARY 14, 2009
Pelosi's Toy Story
In the tale of "The Velveteen Rabbit," a child's stuffed toy can only become "real" once all its fur has been loved off, and it's missing a button or two. If only. Under a new law set to go into effect February 10, unsold toys, along with bikes, books and even children's clothing are destined for the scrap heap due to an overzealous law to increase toy safety.
The damage comes from new rules governing lead in children's products. After last year's scare over contaminated toys made in China, Congress leapt in to require all products aimed at children under 12 years old to be certified as safe and virtually lead-free by independent testing. The burden may be manageable for big manufacturers and retailers that can absorb the costs of discarded inventory and afford to hire more lawyers. Less likely to survive are hundreds of small businesses and craftspeople getting hit with new costs in a down economy.
Because the new rules apply retroactively, toys and clothes already on the shelf will have to be thrown out if they aren't certified as safe. When Congress passed the legislation in August, House Speaker Nancy Pelosi boasted that "With this legislation, we will not only be recalling, we will be removing those products from the shelves." Yeehaw. While large retailers may ask manufacturers to take back uncertified products, independent stores may be stuck with inventory that is suddenly illegal to sell. One Web site, NationalBankruptcyDay.com, is cataloging the costs faced by small businesses.
Small batch toymakers, many of whom make old-fashioned wood and sustainable products, say the testing requirements -- which can cost thousands of dollars -- are unaffordable. At Etsy.com, a Web site where entrepreneurs can sell their handmade items, many expect the new law to put them out of business. Also ensnared are companies that make products like bikes or childrens books. Because they aren't toy companies, many were caught by surprise when it became clear the law would apply to them. The only lead that can be found on childrens bikes is on the tire, where it poses no risk to a child not in the daily habit of licking the wheels. And while childrens books may contain no more noxious materials than paper and ink, under the new rules they would still need a test to prove it.
Responding to the uproar, CPSC has issued a rule-making notice that would exempt natural materials from having to be certified as lead-free -- but it will need to go further to avoid an economic trainwreck in February. The real responsibility lies with Congress, which rushed through "kid-friendly" crowd-pleaser legislation without considering the consequences. Despite warnings from small businesses, Illinois Representative Bobby Rush and California's Henry Waxman pushed provisions that now require pulling products from the shelf. Mr. Waxman demanded lead standards without allowing compliance to phase in.
Now even their allies are skittering away from strict enforcement, fearing the looming fiasco could force Congress to amend the bill. Last week, consumer groups that once flogged the law, including Public Citizen, Kids in Danger, and the Naderite U.S. Public Interest Research Group, wrote a letter urging the CPSC to "take the initiative . . . by providing prompt, common-sense, and explicit interpretations regarding exemptions to CPSIA." Now they tell us.
Congress has beaten down the CPSC for allegedly not doing enough about toy safety, but last year's toy law was an election-year overreaction by Congress. The Commission needs to implement the rules without putting more companies out of business in an already tenuous economy.
Please add your comments to the Opinion Journal forum
http://forums.wsj.com/viewtopic.php?t=4978.
Rick
http://online.wsj.com/article/SB123189645948879745.html
WALL STREET JOURNAL
REVIEW & OUTLOOK
JANUARY 14, 2009
Pelosi's Toy Story
In the tale of "The Velveteen Rabbit," a child's stuffed toy can only become "real" once all its fur has been loved off, and it's missing a button or two. If only. Under a new law set to go into effect February 10, unsold toys, along with bikes, books and even children's clothing are destined for the scrap heap due to an overzealous law to increase toy safety.
The damage comes from new rules governing lead in children's products. After last year's scare over contaminated toys made in China, Congress leapt in to require all products aimed at children under 12 years old to be certified as safe and virtually lead-free by independent testing. The burden may be manageable for big manufacturers and retailers that can absorb the costs of discarded inventory and afford to hire more lawyers. Less likely to survive are hundreds of small businesses and craftspeople getting hit with new costs in a down economy.
Because the new rules apply retroactively, toys and clothes already on the shelf will have to be thrown out if they aren't certified as safe. When Congress passed the legislation in August, House Speaker Nancy Pelosi boasted that "With this legislation, we will not only be recalling, we will be removing those products from the shelves." Yeehaw. While large retailers may ask manufacturers to take back uncertified products, independent stores may be stuck with inventory that is suddenly illegal to sell. One Web site, NationalBankruptcyDay.com, is cataloging the costs faced by small businesses.
Small batch toymakers, many of whom make old-fashioned wood and sustainable products, say the testing requirements -- which can cost thousands of dollars -- are unaffordable. At Etsy.com, a Web site where entrepreneurs can sell their handmade items, many expect the new law to put them out of business. Also ensnared are companies that make products like bikes or childrens books. Because they aren't toy companies, many were caught by surprise when it became clear the law would apply to them. The only lead that can be found on childrens bikes is on the tire, where it poses no risk to a child not in the daily habit of licking the wheels. And while childrens books may contain no more noxious materials than paper and ink, under the new rules they would still need a test to prove it.
Responding to the uproar, CPSC has issued a rule-making notice that would exempt natural materials from having to be certified as lead-free -- but it will need to go further to avoid an economic trainwreck in February. The real responsibility lies with Congress, which rushed through "kid-friendly" crowd-pleaser legislation without considering the consequences. Despite warnings from small businesses, Illinois Representative Bobby Rush and California's Henry Waxman pushed provisions that now require pulling products from the shelf. Mr. Waxman demanded lead standards without allowing compliance to phase in.
Now even their allies are skittering away from strict enforcement, fearing the looming fiasco could force Congress to amend the bill. Last week, consumer groups that once flogged the law, including Public Citizen, Kids in Danger, and the Naderite U.S. Public Interest Research Group, wrote a letter urging the CPSC to "take the initiative . . . by providing prompt, common-sense, and explicit interpretations regarding exemptions to CPSIA." Now they tell us.
Congress has beaten down the CPSC for allegedly not doing enough about toy safety, but last year's toy law was an election-year overreaction by Congress. The Commission needs to implement the rules without putting more companies out of business in an already tenuous economy.
Please add your comments to the Opinion Journal forum
http://forums.wsj.com/viewtopic.php?t=4978.
Tuesday, January 13, 2009
CPSIA - The Misconception of a Marketing Intent-driven Law
From: Rick Woldenberg
Sent: Tuesday, January 13, 2009 8:48 PM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; Dennis Goldman; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; 'cfalvey@cpsc.gov'; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org
Subject: CPSIA - The Misconception of a Marketing Intent-driven Law
The CPSIA presents puzzles for those intent on complying with its terms. I mentioned one perplexing consequence of the CPSIA in my letter entitled “CPSIA Problems Seem Endless” dated January 12, namely that the rules for total lead can apply differently for a manufacturer and its dealer for the VERY SAME PRODUCT. In that letter, I noted that an industrial product would not subject the manufacturer to CPSIA lead standards for good reason, as the product is not intended for children 12 years of age or younger. However, if the manufacturer sells the product to a dealer who puts it in a catalog that he then mails to schools, the dealer becomes subject to the total lead rules. The common understanding of the CPSIA rule defining a Children’s Product depends entirely on intent, in other words, what is in your heart and in your business plan when you offer the product for sale. The nature of the product does not govern the application of the new lead standards. In this particularly case, since the manufacturer is objectively free of testing obligations and the dealer is objectively subject to the testing standards, the law creates an immediate conflict in the supply chain. Since it is likely that the dealer sells only a small volume of the distributed product (and therefore cannot afford to test the product profitably) and because the manufacturer will lose very little business by refusing to test the product, this industrial product will be dropped from the school catalog. There is no information here to suggest that the product was not safe by any definition. We’ll never know, because no one will test it, and commerce in this item will stop in the school market.
These small stories are meaningful, especially when viewed in the aggregate. These battles in the marketplace are a direct result of the disruptive effect of a poorly designed rule. The definition of Children’s Product should be objective, so that all sellers of the same product are subject to the same rule. The principal reason for this change is that an intent-based law creates too much confusion and dislocation. Either a product is for children or it’s not, and what you think when you sell it should be irrelevant. If intent is essential to the definition, the result will be a smaller economy or a CPSC that will never cease issuing rulings. The CPSC, by the way, has had objective rules in place for many years governing age grading. Age grading is essentially a tool for deciding if something is a product intended for children. The confusing addition of the overly-broad definition of Children’s Product makes the rule on age grading harder to comprehend, and will create lasting confusion among companies attempting to sort out how to comply with law.
I do not think this is good public policy and will reverberate in our economy for some time to come. One common misconception is the debate about the CPSIA is that the current furor relates simply to February 10, the notorious “National Bankruptcy Day”. Actually, I think that’s just the beginning of the misery. While the frictional transition issues brought upon us by the September 12 legal opinion of the CSPC General Counsel will eventually pass, the costs from testing will soon begin to mount. After that, the monumental, suffocating and expensive chore of lot markings will kick in to do their economic damage, too. These elements of the CPSIA will cause many small decisions to be made. This letter sets out one of the change mechanism. Imagine decisions of this nature, times a million or ten, and then you may begin to see the true negative impact of the new law.
I need to note that this law is supposed to be about SAFETY. The above discussion notably has nothing to do with safety. Why? Because the misery caused by the CPSIA has never had anything to do with safety. No one can rationally argue that the enormous spectrum of affected products and industries have a long record of personal injuries caused by lead. There is simply so such data available. It is therefore no great leap to grasp the enormity of the economic calamity – we are going to severely distort our economic decisions because of legally-mandated waste of precious capital and suffer major losses all in the name of safety, although no one can link these activities with any actual safety risk. Theoretical safety risks are not worth the destruction of countless markets.
I call on Congress to take immediate steps to substantially revise the CPSIA to protect markets while providing reasonable assurance of safety for children.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
Sent: Tuesday, January 13, 2009 8:48 PM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; Dennis Goldman; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; 'cfalvey@cpsc.gov'; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org
Subject: CPSIA - The Misconception of a Marketing Intent-driven Law
The CPSIA presents puzzles for those intent on complying with its terms. I mentioned one perplexing consequence of the CPSIA in my letter entitled “CPSIA Problems Seem Endless” dated January 12, namely that the rules for total lead can apply differently for a manufacturer and its dealer for the VERY SAME PRODUCT. In that letter, I noted that an industrial product would not subject the manufacturer to CPSIA lead standards for good reason, as the product is not intended for children 12 years of age or younger. However, if the manufacturer sells the product to a dealer who puts it in a catalog that he then mails to schools, the dealer becomes subject to the total lead rules. The common understanding of the CPSIA rule defining a Children’s Product depends entirely on intent, in other words, what is in your heart and in your business plan when you offer the product for sale. The nature of the product does not govern the application of the new lead standards. In this particularly case, since the manufacturer is objectively free of testing obligations and the dealer is objectively subject to the testing standards, the law creates an immediate conflict in the supply chain. Since it is likely that the dealer sells only a small volume of the distributed product (and therefore cannot afford to test the product profitably) and because the manufacturer will lose very little business by refusing to test the product, this industrial product will be dropped from the school catalog. There is no information here to suggest that the product was not safe by any definition. We’ll never know, because no one will test it, and commerce in this item will stop in the school market.
These small stories are meaningful, especially when viewed in the aggregate. These battles in the marketplace are a direct result of the disruptive effect of a poorly designed rule. The definition of Children’s Product should be objective, so that all sellers of the same product are subject to the same rule. The principal reason for this change is that an intent-based law creates too much confusion and dislocation. Either a product is for children or it’s not, and what you think when you sell it should be irrelevant. If intent is essential to the definition, the result will be a smaller economy or a CPSC that will never cease issuing rulings. The CPSC, by the way, has had objective rules in place for many years governing age grading. Age grading is essentially a tool for deciding if something is a product intended for children. The confusing addition of the overly-broad definition of Children’s Product makes the rule on age grading harder to comprehend, and will create lasting confusion among companies attempting to sort out how to comply with law.
I do not think this is good public policy and will reverberate in our economy for some time to come. One common misconception is the debate about the CPSIA is that the current furor relates simply to February 10, the notorious “National Bankruptcy Day”. Actually, I think that’s just the beginning of the misery. While the frictional transition issues brought upon us by the September 12 legal opinion of the CSPC General Counsel will eventually pass, the costs from testing will soon begin to mount. After that, the monumental, suffocating and expensive chore of lot markings will kick in to do their economic damage, too. These elements of the CPSIA will cause many small decisions to be made. This letter sets out one of the change mechanism. Imagine decisions of this nature, times a million or ten, and then you may begin to see the true negative impact of the new law.
I need to note that this law is supposed to be about SAFETY. The above discussion notably has nothing to do with safety. Why? Because the misery caused by the CPSIA has never had anything to do with safety. No one can rationally argue that the enormous spectrum of affected products and industries have a long record of personal injuries caused by lead. There is simply so such data available. It is therefore no great leap to grasp the enormity of the economic calamity – we are going to severely distort our economic decisions because of legally-mandated waste of precious capital and suffer major losses all in the name of safety, although no one can link these activities with any actual safety risk. Theoretical safety risks are not worth the destruction of countless markets.
I call on Congress to take immediate steps to substantially revise the CPSIA to protect markets while providing reasonable assurance of safety for children.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
Monday, January 12, 2009
CPSIA Confusion and Chaos
From: Rick Woldenberg
Sent: Mon 1/12/2009 11:33 PM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; Dennis Goldman; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; cfalvey@cpsc.gov; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org
Subject: CPSIA Confusion and Chaos
Christian and Robin,
I know you will want to read this article from the Boston Phoenix (http://thephoenix.com/Boston/News/74940-Congress-bans-kids-from-libraries/). This article highlights the now familiar problematic themes of the CPSIA:
a. Disruption of routine trade. In this case, libraries make the legitimate point that lending books is a form of selling. If you can't sell a book violating the CPSIA, presumably you can't lend it either. That implies no more libraries. This fits well with the well-documented future absence from the marketplace of telescopes and microscopes. As a member of the education community, I have a deep concern about the disruption of our education system under the CPSIA and am shocked that Congress seems so immune to this direct threat to our elementary educational system.
b. Chaos in the marketplace. The article cites a demand from Amazon.com to its vendors for certification by January 15 or face a mass return of merchandise - all at the vendors' expense, of course. Given the billions of dollars of trade with Amazon, this is presumably a serious concern to many companies. It also represents a golden opportunity for Amazon to lighten up on inventory after the holidays (nice for them). You have previously been advised of similar moves by other mass merchants. This will result in all-out commercial war and almost certainly major litigation, starting soon.
c. Counter-intuitive rules being imposed under the CPSIA. The very notion that books are a potential health hazard has many people scratching their heads. A reasonable question is raised: How did Congress become aware of a major national health risk that the trade, the public and the CPSC didn't know about? How did that knowledge make its way to Congress without any publisher finding out? Of course, this is not the only industry facing head-scratching rules. The thrift store industry, even after the recent advice from the CPSC, is left in a perilous position. I can assure you the education industry is in disarray, too. [I have raised the issue of science education numerous times in numerous settings.] The implementing rules have people asking why so many items are being regulated even though the CPSC acknowledges that they are very likely lead-free. This problem flows from an overly-broad law.
d. Confusion, confusion, confusion. It seems that many people are deeply troubled and confused about the law. Many legitimate questions have been posed because the law prohibits many normal and safe activities. The CPSC seems to be the party to blame this week. Nonetheless, it appears that confusion is persisting. Could this relate to the law itself? Is it really clear that everyone who is protesting this law is somehow unable to read and understand the law? Is that explanation plausible, or is that belief simply a refusal to face reality?
An interesting related question is whether any company regulated by this law needs to check existing inventory for compliance as of February 10. I have been informed that the law does not impose a direct requirement to inspect or certify but, then again, the CPSC clearly indicates that violations of the standards for existing inventory will be prosecuted. The issue seems to turn on the meaning of "knowingly" under the CPSA, as "knowledge" is required to be subject to the draconian penalties of the CPSIA. Is the meaning of "knowingly" unambiguous under the law? The definition is found at 15 U.S.C. 2069(d) and is old law:
"(d) “Knowingly” defined. As used in the first sentence of subsection (a)(1) of this section, the term “knowingly” means (1) the having of actual knowledge, or (2) the presumed having of knowledge deemed to be possessed by a reasonable man who acts in the circumstances, including knowledge obtainable upon the exercise of due care to ascertain the truth of representations."
This definition of "knowingly" means that due care must be taken by anyone to avoid penalties under the law. "Due care" is a serious obligation and a serious undertaking. This is why there is a national shortage of XRF guns now, as panicked manufacturers and retailers attempt to cover this due care obligation 24/7 with February 10 rapidly approaching. Libraries presumably need to scan every book to comply with the CPSIA. No one can safely or appropriately "guess: whether their goods comply or not under the CPSIA. I feel sorry for thrift stores.
I hope the magnitude of these problems will eventually overcome any pride of authorship in this law, and lead to action in resolving these issues. A lot is at stake.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
Congress bans kids from libraries?
New safety law may prohibit children under 12 from libraries – or make many books illegal By
LISSA HARRIS January 9, 2009 Recommended By 11 People
Is it possible that Congress has just inadvertently turned millions of children’s books into contraband? At the moment, anything seems possible with regard to the sprawling, 62-page Consumer Product Safety Improvement Act (CPSIA), passed this past August with overwhelming margins in both the House (424-1) and the Senate (89-3).
The CPSIA, intended to keep lead out of toys, may well also keep books out of libraries, says Emily Sheketoff, associate executive director of
“We are very busy trying to come up with a way to make it not apply to libraries,” said Sheketoff. But unless she succeeds in lobbying Capitol Hill for an exemption, she believes libraries have two choices under the CPSIA: “Either they take all the children’s books off the shelves,” she says, “or they ban children from the library.”
On February 10, the new law gets teeth. After that day, all products for children under 12 — books, games, toys, sports equipment, furniture, clothes, DVDs, and just about every other conceivable children’s gadget and gewgaw — must be tested for lead, and fall below a new 600 part-per-million limit, or face the landfill. Thanks to a September 12 memo from the Consumer Product Safety Commission (CPSC), the lead limit applies not only to new products, but also to inventory already on store shelves.
“Under this new regime, you are suspect until proven safe,” says Allan Adler, the American Association of Publishers’ vice president for legal and governmental affairs.
As the February 10 deadline approaches, the CPSIA has been causing increasing consternation — and, at times, hysteria — among makers and sellers of children’s products, who are just beginning to realize the financial and logistical nightmare they face in trying to comply. Lead testing promises to be expensive — from several hundred to several thousand dollars per test, depending on the product. And each batch of each item must be tracked and tested, making compliance brutally expensive for items with small runs.
Historically, books have been considered more dangerous to read than to eat. Regardless, a memo from the CPSC, issued the day before Christmas Eve, explicitly quashed any hope that books might escape the new law. To make matters worse, even publishers that have already had their products tested for lead will be forced to retest. In the same memo, existing test results based on “soluble lead” — a measure of whether lead will migrate out of a product — were rejected by the CPSC because they did not measure “total lead content.”
The CPSC has not issued any ruling on whether libraries, schools, and other institutions that loan — rather than sell — books will be subject to the law. Without such clear guidance, says Adler, schools and libraries should assume they have to comply.
“If [the CPSC is] going to say that we’re being alarmist,” says Adler, “that’s fine, as long as they provide an explanation that we can understand and rely on. That’s what’s been missing from this entire discussion.”
Regardless of whether libraries and schools are affected, the CPSIA is poised to take a massive bite out of the book industry. Large retailers are beginning to demand that publishers comply, even in advance of the law’s deadline. This Wednesday, Amazon.com sent a general letter informing its vendors that, if they did not certify their products by January 15, the items would be returned at the sellers’ expense.
Like their peers in the toy and garment industries, many sellers of children’s books are just beginning to try to understand how the CPSIA will affect their businesses.
“All of us are totally in the dark,” says Terri Schmitz, owner of the Children’s Book Shop in Brookline. “I can’t make a decision, because I don’t know what the regulations are. We’re all sort of in limbo here.”
Libraries may yet escape unscathed. The CPSIA is changing rapidly as the CPSC scrambles to clarify the confusing lead law before it goes into effect. Thrift stores, consignment shops, and other used-goods stores got a partial reprieve yesterday in a hastily drafted CPSC memo: While resellers still face stiff civil and criminal penalties if they sell lead-contaminated items, used goods will not have to be tested for lead.
In lieu of actual testing, the memo urged resellers to “pay special attention to certain product categories,” like jewelry and painted toys, which are “likely to have lead content.”
Which prompts the obvious question: If other children’s products aren’t likely to contain lead, why is the CSPC regulating them?
From the sweeping language of the law, it appears Congress left them no choice. The Act covers any “consumer product designed or intended primarily for children 12 years of age and younger.”
“Consider for a minute that a twelve-year-old is a junior high school student,” says Adler. “This is not somebody who is likely to be chewing or sucking on a book.”
Sent: Mon 1/12/2009 11:33 PM
To: 'Christian.Fjeld@mail.house.gov'; 'robin.appleberry@mail.house.gov'
Cc: 'brian.mccullough@mail.house.gov'; 'shannon.weinberg@mail.house.gov'; 'william.carty@mail.house.gov'; 'mjg@brown-gidding.com'; Etienne Veber; 'challengeandfun@gmail.com'; 'kathleen@fashion-incubator.com'; 'Stephen Lamar (slamar@apparelandfootwear.org)'; 'Nancy Nord (nnord@cpsc.gov)'; 'Joe Martyak (jmartyak@cpsc.gov)'; 'Mary Toro (MToro@cpsc.gov)'; 'tmoore@cpsc.gov'; 'Patrick Magnuson (patrick.magnuson@mail.house.gov)'; 'Carter Keithley (ckeithley@toy-tia.org)'; 'Rick Locker (fblocker@LockerLaw.com)'; 'Desmond, Edward'; 'David Callet (calletd@gtlaw.com)'; 'ravitz.georgia@arentfox.com'; Dennis Goldman; 'Pamela Gilbert (pamelag@cuneolaw.com)'; 'Robert Adler'; 'Dan Marshall (dan@peapods.com)'; 'erik.lieberman@mail.house.gov'; cfalvey@cpsc.gov; Judy Bailey (judith.bailey@mail.house.gov); adele@narts.org; kmchugh@astratoy.org
Subject: CPSIA Confusion and Chaos
Christian and Robin,
I know you will want to read this article from the Boston Phoenix (http://thephoenix.com/Boston/News/74940-Congress-bans-kids-from-libraries/). This article highlights the now familiar problematic themes of the CPSIA:
a. Disruption of routine trade. In this case, libraries make the legitimate point that lending books is a form of selling. If you can't sell a book violating the CPSIA, presumably you can't lend it either. That implies no more libraries. This fits well with the well-documented future absence from the marketplace of telescopes and microscopes. As a member of the education community, I have a deep concern about the disruption of our education system under the CPSIA and am shocked that Congress seems so immune to this direct threat to our elementary educational system.
b. Chaos in the marketplace. The article cites a demand from Amazon.com to its vendors for certification by January 15 or face a mass return of merchandise - all at the vendors' expense, of course. Given the billions of dollars of trade with Amazon, this is presumably a serious concern to many companies. It also represents a golden opportunity for Amazon to lighten up on inventory after the holidays (nice for them). You have previously been advised of similar moves by other mass merchants. This will result in all-out commercial war and almost certainly major litigation, starting soon.
c. Counter-intuitive rules being imposed under the CPSIA. The very notion that books are a potential health hazard has many people scratching their heads. A reasonable question is raised: How did Congress become aware of a major national health risk that the trade, the public and the CPSC didn't know about? How did that knowledge make its way to Congress without any publisher finding out? Of course, this is not the only industry facing head-scratching rules. The thrift store industry, even after the recent advice from the CPSC, is left in a perilous position. I can assure you the education industry is in disarray, too. [I have raised the issue of science education numerous times in numerous settings.] The implementing rules have people asking why so many items are being regulated even though the CPSC acknowledges that they are very likely lead-free. This problem flows from an overly-broad law.
d. Confusion, confusion, confusion. It seems that many people are deeply troubled and confused about the law. Many legitimate questions have been posed because the law prohibits many normal and safe activities. The CPSC seems to be the party to blame this week. Nonetheless, it appears that confusion is persisting. Could this relate to the law itself? Is it really clear that everyone who is protesting this law is somehow unable to read and understand the law? Is that explanation plausible, or is that belief simply a refusal to face reality?
An interesting related question is whether any company regulated by this law needs to check existing inventory for compliance as of February 10. I have been informed that the law does not impose a direct requirement to inspect or certify but, then again, the CPSC clearly indicates that violations of the standards for existing inventory will be prosecuted. The issue seems to turn on the meaning of "knowingly" under the CPSA, as "knowledge" is required to be subject to the draconian penalties of the CPSIA. Is the meaning of "knowingly" unambiguous under the law? The definition is found at 15 U.S.C. 2069(d) and is old law:
"(d) “Knowingly” defined. As used in the first sentence of subsection (a)(1) of this section, the term “knowingly” means (1) the having of actual knowledge, or (2) the presumed having of knowledge deemed to be possessed by a reasonable man who acts in the circumstances, including knowledge obtainable upon the exercise of due care to ascertain the truth of representations."
This definition of "knowingly" means that due care must be taken by anyone to avoid penalties under the law. "Due care" is a serious obligation and a serious undertaking. This is why there is a national shortage of XRF guns now, as panicked manufacturers and retailers attempt to cover this due care obligation 24/7 with February 10 rapidly approaching. Libraries presumably need to scan every book to comply with the CPSIA. No one can safely or appropriately "guess: whether their goods comply or not under the CPSIA. I feel sorry for thrift stores.
I hope the magnitude of these problems will eventually overcome any pride of authorship in this law, and lead to action in resolving these issues. A lot is at stake.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
Congress bans kids from libraries?
New safety law may prohibit children under 12 from libraries – or make many books illegal By
LISSA HARRIS January 9, 2009 Recommended By 11 People
Is it possible that Congress has just inadvertently turned millions of children’s books into contraband? At the moment, anything seems possible with regard to the sprawling, 62-page Consumer Product Safety Improvement Act (CPSIA), passed this past August with overwhelming margins in both the House (424-1) and the Senate (89-3).
The CPSIA, intended to keep lead out of toys, may well also keep books out of libraries, says Emily Sheketoff, associate executive director of
“We are very busy trying to come up with a way to make it not apply to libraries,” said Sheketoff. But unless she succeeds in lobbying Capitol Hill for an exemption, she believes libraries have two choices under the CPSIA: “Either they take all the children’s books off the shelves,” she says, “or they ban children from the library.”
On February 10, the new law gets teeth. After that day, all products for children under 12 — books, games, toys, sports equipment, furniture, clothes, DVDs, and just about every other conceivable children’s gadget and gewgaw — must be tested for lead, and fall below a new 600 part-per-million limit, or face the landfill. Thanks to a September 12 memo from the Consumer Product Safety Commission (CPSC), the lead limit applies not only to new products, but also to inventory already on store shelves.
“Under this new regime, you are suspect until proven safe,” says Allan Adler, the American Association of Publishers’ vice president for legal and governmental affairs.
As the February 10 deadline approaches, the CPSIA has been causing increasing consternation — and, at times, hysteria — among makers and sellers of children’s products, who are just beginning to realize the financial and logistical nightmare they face in trying to comply. Lead testing promises to be expensive — from several hundred to several thousand dollars per test, depending on the product. And each batch of each item must be tracked and tested, making compliance brutally expensive for items with small runs.
Historically, books have been considered more dangerous to read than to eat. Regardless, a memo from the CPSC, issued the day before Christmas Eve, explicitly quashed any hope that books might escape the new law. To make matters worse, even publishers that have already had their products tested for lead will be forced to retest. In the same memo, existing test results based on “soluble lead” — a measure of whether lead will migrate out of a product — were rejected by the CPSC because they did not measure “total lead content.”
The CPSC has not issued any ruling on whether libraries, schools, and other institutions that loan — rather than sell — books will be subject to the law. Without such clear guidance, says Adler, schools and libraries should assume they have to comply.
“If [the CPSC is] going to say that we’re being alarmist,” says Adler, “that’s fine, as long as they provide an explanation that we can understand and rely on. That’s what’s been missing from this entire discussion.”
Regardless of whether libraries and schools are affected, the CPSIA is poised to take a massive bite out of the book industry. Large retailers are beginning to demand that publishers comply, even in advance of the law’s deadline. This Wednesday, Amazon.com sent a general letter informing its vendors that, if they did not certify their products by January 15, the items would be returned at the sellers’ expense.
Like their peers in the toy and garment industries, many sellers of children’s books are just beginning to try to understand how the CPSIA will affect their businesses.
“All of us are totally in the dark,” says Terri Schmitz, owner of the Children’s Book Shop in Brookline. “I can’t make a decision, because I don’t know what the regulations are. We’re all sort of in limbo here.”
Libraries may yet escape unscathed. The CPSIA is changing rapidly as the CPSC scrambles to clarify the confusing lead law before it goes into effect. Thrift stores, consignment shops, and other used-goods stores got a partial reprieve yesterday in a hastily drafted CPSC memo: While resellers still face stiff civil and criminal penalties if they sell lead-contaminated items, used goods will not have to be tested for lead.
In lieu of actual testing, the memo urged resellers to “pay special attention to certain product categories,” like jewelry and painted toys, which are “likely to have lead content.”
Which prompts the obvious question: If other children’s products aren’t likely to contain lead, why is the CSPC regulating them?
From the sweeping language of the law, it appears Congress left them no choice. The Act covers any “consumer product designed or intended primarily for children 12 years of age and younger.”
“Consider for a minute that a twelve-year-old is a junior high school student,” says Adler. “This is not somebody who is likely to be chewing or sucking on a book.”
Sunday, January 11, 2009
Can We Put Humpty Back Together Again after February 10?
From: Rick Woldenberg
Sent: Sun 1/11/2009 10:20 PM
To: erik.lieberman@mail.house.gov
Cc: Stephen Lamar (slamar@apparelandfootwear.org); Etienne Veber; Michael Gidding (mjg@brown-gidding.com); Rob Wilson (rob@challengeandfun.com); Patrick Magnuson (patrick.magnuson@mail.house.gov); kathleen@fashion-incubator.com; Nancy Nord (nnord@cpsc.gov); Joe Martyak (jmartyak@cpsc.gov); tmoore@cpsc.gov; cfalvey@cpsc.gov; Mary Toro (MToro@cpsc.gov); Christian Tamotsu Fjeld (Christian.Fjeld@mail.house.gov); Judy Bailey (judith.bailey@mail.house.gov); Robin Appleberry (robin.appleberry@mail.house.gov); Brian McCullough (brian.mccullough@mail.house.gov); Shannon Weinberg (shannon.weinberg@mail.house.gov); Will Carty (william.carty@mail.house.gov); Dan Marshall (dan@peapods.com); Pamela Gilbert (pamelag@cuneolaw.com); Robert Adler
Subject: RE: CPSIA and Small Business
Eric,
Here's an article from the Christian Science Monitor (Jan. 9 issue) on the Small Business issues under the CPSIA. This article, which I only discovered this evening, echoes many points I have made in correspondence with the Rush Subcommittee, notably that the CPSC cannot fix the law, that the age limits in the definition of Children's Products are inappropriate and that the law presents a broad threat to literally thousands of businesses, notably Small Business. No one in the article seems to think that this law is necessary to assure safety, another view I share. The economic issues under the CPSIA are manifold, as this article confirms. Despite the focus of the article on toys, the threats span many industries - in fact, ALL industries making products for children up to 12 years of age. Imagine the breadth of that impact - it's mindboggling.
I hope your committee will be able to shed some light on these issues shortly, as February 10 promises to be quite deadly if nothing is done. I would hate to see all the dread predictions come true - there will no satisfaction in seeing needless economic devastation based on a flimsy and poorly thought-through safety rationale. And I fear that, like children's rhyme instructs, all the king's horses and all the king's men won't be able to put Humpty together again. I think we can do much better than that - with the help of Congress, safety can be assured while the interests of Small Business (and other business) can be protected. This won't involve trading money or jobs for safety, either.
Thanks for your interest in this matter.
Best Regards,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
http://www.csmonitor.com/2009/0109/p25s23-hfgn.html
Ava Mar, 8, played with a wooden train set at the Play Store in Palo Alto, Calif., on Dec. 22, 2008. Worries over lead paint in mass-market toys made the holidays a little brighter for handcrafted toy makers last year, but now the federal government's response to the scare has some workshops fearful that this Christmas might be their last.
Marcio Jose Sanchez/AP
A new law hurts small toy stores and toymakers
New regulations banning harmful chemicals in children's items has had unintended consequences for small businesses and crafters.
By Yvonne Zipp Correspondent of The Christian Science Monitor
posted January 9, 2009 at 4:40 p.m. EST
Amy Turn Sharp started making toys because of Thomas the Tank Engine. The 2007 recall of wooden trains with lead paint inspired Ms. Turn Sharp and her husband, a master carpenter, to start making wooden toys for babies.
"It's really just Joseph and me in our backyard. No machinery, no workers," says Turn Sharp, whose toymaking business, Little Alouette, makes it feasible for her to stay home with her two children. (Making toys is a family affair: Their 4-1/2 year-old son likes to help rub organic flaxseed into the finished wood teethers, blocks, and trains.) The Worthington, Ohio, couple make all their products from maple, felled by a neighboring farmer. "It's just us producing things by hand."
But now fallout from the recall that got them started and others may very well close them down. "We started our company because of Thomas the Tank Engine. We were sick of unsafe toys," says Turn Sharp. "And here we are, and we're going to go out of business because of unsafe toys."
After the recall of millions of toys manufactured in China in 2007, Congress passed the Consumer Products Safety Improvement Act (CPSIA) last year to protect children from lead and phthalates. Under the new guidelines, which are set to take effect Feb. 10, any product manufactured for children under 12 must undergo third-party testing for certification.
The law isn't just for toys, stress critics, who say it is too sweeping and will unfairly impact small businesses. Clothing, backpacks, bicycles, books, science equipment – anything intended for a child under 12 is affected. They argue that the law, however well-intentioned, has the potential to cause thousands of small US businesses to close at a time when unemployment is surging and the country is entering its second year of recession.
"Once again, here's a situation where it's the small business that suffers the most," says Kathryn Howard, an environmental and consumer expert with the New York State Pollution Prevention Institute at Rochester Institute of Technology. "Mattel can easily afford to test every one of their Barbie dolls. The smaller guys are the ones that manufacture in the US – as opposed to China and other parts of the world.
"I see the environmental benefit," she says. But she suggests that the government explore ways to make the testing more affordable for small companies and phase it in over a longer period of time.
Testing costs can start from $400 to $500 and run into thousands of dollars, according to some estimates, depending on the complexity of the item. Each unique product has to be tested – meaning that small, medium, and large shirts must be tested individually. In a line of stuffed toys birds, for example, the chickadee, robin, and eagle all need a separate test.
The prospective bill is causing sticker shock and cries of outrage from small US-based artisans and manufacturers, independent toy shops, and baby boutique stores.
"We need an outcry from consumers: 'Wait we asked for safe toys, we didn't ask you to put the industry out of business,' " says Kathleen McHugh, president of American Specialty Toy Retailing Association in Chicago, which has 1,000 members.
She says that independent toy stores have two alternatives, neither of them good: They can have all their products tested or throw all their untested inventory out. Either scenario would put them out of business, she says.
That indeed is the scenario facing Debbie Baillie's Rowdy Rascals toy store in Snohomish, Wash. "I cannot afford to get rid of my inventory and get in new [before Feb. 10]. I will go bankrupt. ... We have just over a month to get in compliance, and I don't know how to do that," says Ms. Baillie, who explains that her family can't afford to have the store fail. Her parents took out equity in their home so she could open the store, and her sister is her partner. If Rowdy Rascals shop goes go under, her entire family will be in financial trouble.
Baillie opened the store because she wanted to create a place for the community. "I wanted to be that old toy-store lady who knew all the kids and their kids. To see it crushed by something like this, it just breaks my heart."
"The commission is working to determine if there is any flexibility in the law for small businesses," says Patty Davis, spokeswoman for the CPSC. It is considering exemptions for electronics and other specific product categories. They may include products where the amounts of lead naturally falls below the limits. Lead, for example, is not found in cotton, wool, or wood.
But, says Julie Vallese, director of public affairs for the CPSC, "The agency has the authority to enforce the law, not change the law. Congress wrote a very specific, one-size fits all piece of legislation.... Because Congress wrote the law in a very specific way, relief may only be able to come from Congress."
Another sector of the economy, thrift and consignment shops, who had been among the most vocal about the economic hardship the new testing requirements would cause, received relief Thursday. The CPSC ruled that they would not have to test the items on their shelves – although the CPSC says owners still need to be confident that items for sale meet the new safety requirements.
That's good news for owners of children's consignment shops, such as Carol Vaporis, owner of Duck Duck Goose in Newport Richey, Fla., who had said that testing would have meant she had to close her doors.
It's also good news for lower-income families, many of whom rely on consignment and thrift stores to clothe their children.
The implications for parents aren't only economic. If the law isn't changed, Ms. Howard says that parents are also going to find fewer toys for children not made by the giants of the industry, and those that are available from smaller manufacturers will likely be more expensive, to help offset the costs of testing.
"You now have an even bigger gap between the toys the rich kids play with and the toys the not-so-rich kids play with," she says. "Now your kids are forced to play with toys that are not the best – maybe they just barely meet the criteria."
Howard also suggests that perhaps the age limit in the law should be rethought. "The reasoning behind the law is to protect young children. Twelve-year-old kids aren't putting things in their mouths. If a kid is old enough to ride a bike, they're old enough not to be chewing on it."
Back in Ohio, the Turn Sharps are unsure how to proceed. Little Alouette had a booming holiday season. "We made so many toys, Joseph had blisters on his hands," Turn Sharp says.
But their business is so small, they simply can't afford the mandatory lead testing required under the new guidelines, she says. "This law was intended for the big, big boys."
"I don't know what I'll be making on Feb. 10," says Turn Sharp. "I don't know that I'll be making anything."
But she's not giving up. "I'm pretty hopeful that government will have to take a look around. Hopefully, they'll say, 'We don't want to destroy people's livelihood.' "
Still, she adds, "If you need any baby gifts, buy them before Feb. 10."
Sent: Sun 1/11/2009 10:20 PM
To: erik.lieberman@mail.house.gov
Cc: Stephen Lamar (slamar@apparelandfootwear.org); Etienne Veber; Michael Gidding (mjg@brown-gidding.com); Rob Wilson (rob@challengeandfun.com); Patrick Magnuson (patrick.magnuson@mail.house.gov); kathleen@fashion-incubator.com; Nancy Nord (nnord@cpsc.gov); Joe Martyak (jmartyak@cpsc.gov); tmoore@cpsc.gov; cfalvey@cpsc.gov; Mary Toro (MToro@cpsc.gov); Christian Tamotsu Fjeld (Christian.Fjeld@mail.house.gov); Judy Bailey (judith.bailey@mail.house.gov); Robin Appleberry (robin.appleberry@mail.house.gov); Brian McCullough (brian.mccullough@mail.house.gov); Shannon Weinberg (shannon.weinberg@mail.house.gov); Will Carty (william.carty@mail.house.gov); Dan Marshall (dan@peapods.com); Pamela Gilbert (pamelag@cuneolaw.com); Robert Adler
Subject: RE: CPSIA and Small Business
Eric,
Here's an article from the Christian Science Monitor (Jan. 9 issue) on the Small Business issues under the CPSIA. This article, which I only discovered this evening, echoes many points I have made in correspondence with the Rush Subcommittee, notably that the CPSC cannot fix the law, that the age limits in the definition of Children's Products are inappropriate and that the law presents a broad threat to literally thousands of businesses, notably Small Business. No one in the article seems to think that this law is necessary to assure safety, another view I share. The economic issues under the CPSIA are manifold, as this article confirms. Despite the focus of the article on toys, the threats span many industries - in fact, ALL industries making products for children up to 12 years of age. Imagine the breadth of that impact - it's mindboggling.
I hope your committee will be able to shed some light on these issues shortly, as February 10 promises to be quite deadly if nothing is done. I would hate to see all the dread predictions come true - there will no satisfaction in seeing needless economic devastation based on a flimsy and poorly thought-through safety rationale. And I fear that, like children's rhyme instructs, all the king's horses and all the king's men won't be able to put Humpty together again. I think we can do much better than that - with the help of Congress, safety can be assured while the interests of Small Business (and other business) can be protected. This won't involve trading money or jobs for safety, either.
Thanks for your interest in this matter.
Best Regards,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
http://www.csmonitor.com/2009/0109/p25s23-hfgn.html
Ava Mar, 8, played with a wooden train set at the Play Store in Palo Alto, Calif., on Dec. 22, 2008. Worries over lead paint in mass-market toys made the holidays a little brighter for handcrafted toy makers last year, but now the federal government's response to the scare has some workshops fearful that this Christmas might be their last.
Marcio Jose Sanchez/AP
A new law hurts small toy stores and toymakers
New regulations banning harmful chemicals in children's items has had unintended consequences for small businesses and crafters.
By Yvonne Zipp Correspondent of The Christian Science Monitor
posted January 9, 2009 at 4:40 p.m. EST
Amy Turn Sharp started making toys because of Thomas the Tank Engine. The 2007 recall of wooden trains with lead paint inspired Ms. Turn Sharp and her husband, a master carpenter, to start making wooden toys for babies.
"It's really just Joseph and me in our backyard. No machinery, no workers," says Turn Sharp, whose toymaking business, Little Alouette, makes it feasible for her to stay home with her two children. (Making toys is a family affair: Their 4-1/2 year-old son likes to help rub organic flaxseed into the finished wood teethers, blocks, and trains.) The Worthington, Ohio, couple make all their products from maple, felled by a neighboring farmer. "It's just us producing things by hand."
But now fallout from the recall that got them started and others may very well close them down. "We started our company because of Thomas the Tank Engine. We were sick of unsafe toys," says Turn Sharp. "And here we are, and we're going to go out of business because of unsafe toys."
After the recall of millions of toys manufactured in China in 2007, Congress passed the Consumer Products Safety Improvement Act (CPSIA) last year to protect children from lead and phthalates. Under the new guidelines, which are set to take effect Feb. 10, any product manufactured for children under 12 must undergo third-party testing for certification.
The law isn't just for toys, stress critics, who say it is too sweeping and will unfairly impact small businesses. Clothing, backpacks, bicycles, books, science equipment – anything intended for a child under 12 is affected. They argue that the law, however well-intentioned, has the potential to cause thousands of small US businesses to close at a time when unemployment is surging and the country is entering its second year of recession.
"Once again, here's a situation where it's the small business that suffers the most," says Kathryn Howard, an environmental and consumer expert with the New York State Pollution Prevention Institute at Rochester Institute of Technology. "Mattel can easily afford to test every one of their Barbie dolls. The smaller guys are the ones that manufacture in the US – as opposed to China and other parts of the world.
"I see the environmental benefit," she says. But she suggests that the government explore ways to make the testing more affordable for small companies and phase it in over a longer period of time.
Testing costs can start from $400 to $500 and run into thousands of dollars, according to some estimates, depending on the complexity of the item. Each unique product has to be tested – meaning that small, medium, and large shirts must be tested individually. In a line of stuffed toys birds, for example, the chickadee, robin, and eagle all need a separate test.
The prospective bill is causing sticker shock and cries of outrage from small US-based artisans and manufacturers, independent toy shops, and baby boutique stores.
"We need an outcry from consumers: 'Wait we asked for safe toys, we didn't ask you to put the industry out of business,' " says Kathleen McHugh, president of American Specialty Toy Retailing Association in Chicago, which has 1,000 members.
She says that independent toy stores have two alternatives, neither of them good: They can have all their products tested or throw all their untested inventory out. Either scenario would put them out of business, she says.
That indeed is the scenario facing Debbie Baillie's Rowdy Rascals toy store in Snohomish, Wash. "I cannot afford to get rid of my inventory and get in new [before Feb. 10]. I will go bankrupt. ... We have just over a month to get in compliance, and I don't know how to do that," says Ms. Baillie, who explains that her family can't afford to have the store fail. Her parents took out equity in their home so she could open the store, and her sister is her partner. If Rowdy Rascals shop goes go under, her entire family will be in financial trouble.
Baillie opened the store because she wanted to create a place for the community. "I wanted to be that old toy-store lady who knew all the kids and their kids. To see it crushed by something like this, it just breaks my heart."
"The commission is working to determine if there is any flexibility in the law for small businesses," says Patty Davis, spokeswoman for the CPSC. It is considering exemptions for electronics and other specific product categories. They may include products where the amounts of lead naturally falls below the limits. Lead, for example, is not found in cotton, wool, or wood.
But, says Julie Vallese, director of public affairs for the CPSC, "The agency has the authority to enforce the law, not change the law. Congress wrote a very specific, one-size fits all piece of legislation.... Because Congress wrote the law in a very specific way, relief may only be able to come from Congress."
Another sector of the economy, thrift and consignment shops, who had been among the most vocal about the economic hardship the new testing requirements would cause, received relief Thursday. The CPSC ruled that they would not have to test the items on their shelves – although the CPSC says owners still need to be confident that items for sale meet the new safety requirements.
That's good news for owners of children's consignment shops, such as Carol Vaporis, owner of Duck Duck Goose in Newport Richey, Fla., who had said that testing would have meant she had to close her doors.
It's also good news for lower-income families, many of whom rely on consignment and thrift stores to clothe their children.
The implications for parents aren't only economic. If the law isn't changed, Ms. Howard says that parents are also going to find fewer toys for children not made by the giants of the industry, and those that are available from smaller manufacturers will likely be more expensive, to help offset the costs of testing.
"You now have an even bigger gap between the toys the rich kids play with and the toys the not-so-rich kids play with," she says. "Now your kids are forced to play with toys that are not the best – maybe they just barely meet the criteria."
Howard also suggests that perhaps the age limit in the law should be rethought. "The reasoning behind the law is to protect young children. Twelve-year-old kids aren't putting things in their mouths. If a kid is old enough to ride a bike, they're old enough not to be chewing on it."
Back in Ohio, the Turn Sharps are unsure how to proceed. Little Alouette had a booming holiday season. "We made so many toys, Joseph had blisters on his hands," Turn Sharp says.
But their business is so small, they simply can't afford the mandatory lead testing required under the new guidelines, she says. "This law was intended for the big, big boys."
"I don't know what I'll be making on Feb. 10," says Turn Sharp. "I don't know that I'll be making anything."
But she's not giving up. "I'm pretty hopeful that government will have to take a look around. Hopefully, they'll say, 'We don't want to destroy people's livelihood.' "
Still, she adds, "If you need any baby gifts, buy them before Feb. 10."
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