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
Friday, February 6, 2009
Wednesday, February 4, 2009
CPSIA - The Blame Game
From: Rick Woldenberg
Sent: Wed 2/4/2009 5:50 PM
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); Cass Sunstein (csunstein@uchicago.edu)
Subject: CPSIA - The Blame Game
In the attached letter dated February 3, 2009, Representatives Waxman and Rush and Senators Rockefeller and Pryor call on President Obama to seek the replacement of Commissioner Nancy Nord as Acting Chairman of the CPSC. The argument presented in the February 3 Letter is that under the current administration of the agency, the CPSC has failed to give guidance, correct “misinformation” and otherwise smoothly implement the CPSIA. The authors of the letter place the blame squarely on the Acting Chairman, noting “[the agency’s] new authority and powers to better execute its mission” under the CPSIA. Unfortunately, the February 3 Letter misconstrues the law itself and the powers granted to the CPSC. The fault for the stalemate on implementation of the CPSIA lies with the law itself.
The urgent need for better “guidance” is a recurrent theme in discussions of the role of the CPSC under the CPSIA. Various parties and consumer groups contend that the CPSC has the “discretion” to act to relieve the “confusion” and “misunderstandings” under the CPSIA and that with their “guidance”, the issues relating to the lead limits could be resolved. The failure to issue that guidance in a form and at a speed suited to the CPSIA effectiveness dates has been deemed administrative “dysfunction”. Is this true?
Section 101(a)(2) “Total Lead” Limits are Very Clear. Under Section 101(a)(2) of the CPSIA, new lead limits were established, notably 600 parts per million “total lead content by weight for any part of the [children’s] product” effective as of February 10, 2009. The General Counsel of the CPSC issued an opinion letter on September 12, 2008 stating that these standards apply to all products in commerce on and after the effective date (including existing inventory and resale merchandise). Considerable criticism has been lavished on this new standard for its sweeping application to a wide range of products known to be safe. Much of the problem derives from the definition of “children’s product” (15 USC 2052(a)(16)) which now extends to all products “designed or intended primarily for children 12 years of age or younger”, even though children over six years of age are generally recognized as not being at risk from lead poisoning. The standard thus becomes a litmus test divorced from conceptions of risk.
The CPSIA Provides Limited Exceptions to the “Total Lead” Standards. The CPSIA provides that the Commission may by rule grant exceptions to the “total lead” limits, but carefully limits the ability of the CPSC to take such action. Outrage over toy recalls in 2007 led to a noose-like definition of what the CPSC could and could not do to ease the application of the Section 101(a) lead limits. By essentially blaming the CPSC for the 2007 recalls in its design of the CPSIA, Congress left the agency with few options but to follow the new lead limits strictly – regardless of the messy details.
The following text defines the discretion allowed to the CPSC under Section 101(b)(1) of the CPSIA in very narrow and specific terms:
“(1) CERTAIN PRODUCTS OR MATERIALS. – The Commission may, by regulation, exclude a specific product or material from the prohibition in subsection (a) if the Commission, after notice and a hearing, determines on the basis of the best available, objective, peer-reviewed, scientific evidence that lead in such product or material will neither –
(A) result in the absorption of any lead into the human body, taking into account normal and reasonable foreseeable use and abuse of such product by a child . . . nor
(B) have any other adverse impact on public health or safety.”
Notably, the CPSIA goes on to state in Section 101(e):
“(e) PENDING RULEMAKING PROCEEDINGS TO HAVE NO EFFECT. -- The pendency of a rulemaking proceeding to consider –
(1) A delay in the effective date of a limit or an alternate limit under this section related to technological feasibility,
(2) An exception for certain products or materials or inaccessibility guidance under subsection (b) of this section, or
(3) Any other request for modification of or exemption from any regulation, rule, standard, or ban under this Act or any other Act enforced by the Commission,
shall not delay the effect of any provision or limit under this section nor shall it stay general enforcement of the requirements of this section.”
Thus, the CPSC must take the following steps to grant ANY relief from the new “total lead” standards:
a. Issue regulations to exclude specific products or materials.
b. Must hold public hearings before issuing those exclusionary regulations. [The CPSC currently takes the position that solicitation of public comments satisfies this requirement.]
c. Must base ANY exemptions on the (i) best available, (ii) objective, (iii) peer-reviewed, AND (iv) scientific evidence that lead in such product will not result in the absorption of ANY lead into the human body, or have ANY other adverse impact on public health or safety.
These high standards and demanding requirements make it exceptionally difficult for the CPSC to grant quick or meaningful relief from intentionally over-broad hazard definitions. Because of the limited discretion granted the Commission under the new law, relatively few children's products will ultimately be exempted, while many others will continue to be impacted even though an objective review would show that they present no quantifiable risk of injury. Notably, there is nothing in Section 101(e) that permits the agency to exempt thrift stores for “good faith” compliance. There is likewise no “good faith” exemption for our company either. The standards are ABSOLUTE and are UNRELATED TO RISK OF INJURY.
In addition, the CPSC’s arduous task of creating these regulations, regardless of how long it takes or how necessary (or obvious) the regulations are, will NOT delay the impact or implementation of the Section 101(a) limits. Thus, there may be extended periods of time, like now, when bad law prevails despite everyone’s desire to fix it. This is apparently by design.
So What Does This Mean? The law, plainly and unambiguously, does not allow the CPSC to override the new “total lead” standards. The CPSC has no discretion to consider risk in granting exemptions. With the bar for exemptions raised so high, the CPSC cannot give any guidance other than that companies must meet the standards for any product within the definition of a “children’s product”. Blaming Chairman Nord or the agency for following the law itself is not fair and is not right. It is highly likely that the problems facing the agency under Nord will also dog the agency under the next Chairman. The problem is with the law itself.
The language of the CPSIA was drafted specifically to prevent the CPSC from doing its job. The law creates a bright line standard for “total lead” which the CPSC is basically prohibited from adjusting. The “prohibition” imposed on the CPSC is essentially administrative in nature, preventing a speedy or unfettered reconsideration or modification of the standards. In its new law, Congress made clear that it was not open to feedback from the agency on what the standards should be and left no room for regulators overrule the CPSIA by administrative action.
To criticize the CPSC for their “slow progress” is cynical and misleading. Let’s not beat around the bush – there was no intention to allow the CPSC to do its work as a safety administrator under the CPSIA and to make the kind of decisions that Congress created it to make. To contend today that the CPSC should be doing or even could be doing this work more efficiently, is to distract the public from closely examining a defective and poorly-conceived law. The CPSIA doesn’t work – and blaming the CPSC or Chairman Nord for the mess won’t absolve Congress of its responsibility for the damage the CPSIA is wreaking.
Final Thoughts. There are many aspects of the February 3 Letter that I disagree with but I want to close with a simple message: We are not confused about this law or its implications. Those who oppose this dangerous and misguided law understand it all too well. The CPSIA impairs our ability to make or sell safe products that our customers, our valued consumers, depend upon. If we don’t stick up for our right to make these safe and responsible items, our customers, our employees and associates and our country will SUFFER. There is nothing wrong with more effective safety legislation in principle. The CPSIA is not the right approach. It doesn’t work and can’t be made to work.
Let’s stop arguing and fix this law. Congress, the CPSC and the business community can unite to make children safer. Now is the time to act.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
Follow my blog at www.learningresources.com/CPSIA or at www.twitter.com/rwoldenberg
Download February 3rd, 2009 letter to President Obama>>>
Sent: Wed 2/4/2009 5:50 PM
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); Cass Sunstein (csunstein@uchicago.edu)
Subject: CPSIA - The Blame Game
In the attached letter dated February 3, 2009, Representatives Waxman and Rush and Senators Rockefeller and Pryor call on President Obama to seek the replacement of Commissioner Nancy Nord as Acting Chairman of the CPSC. The argument presented in the February 3 Letter is that under the current administration of the agency, the CPSC has failed to give guidance, correct “misinformation” and otherwise smoothly implement the CPSIA. The authors of the letter place the blame squarely on the Acting Chairman, noting “[the agency’s] new authority and powers to better execute its mission” under the CPSIA. Unfortunately, the February 3 Letter misconstrues the law itself and the powers granted to the CPSC. The fault for the stalemate on implementation of the CPSIA lies with the law itself.
The urgent need for better “guidance” is a recurrent theme in discussions of the role of the CPSC under the CPSIA. Various parties and consumer groups contend that the CPSC has the “discretion” to act to relieve the “confusion” and “misunderstandings” under the CPSIA and that with their “guidance”, the issues relating to the lead limits could be resolved. The failure to issue that guidance in a form and at a speed suited to the CPSIA effectiveness dates has been deemed administrative “dysfunction”. Is this true?
Section 101(a)(2) “Total Lead” Limits are Very Clear. Under Section 101(a)(2) of the CPSIA, new lead limits were established, notably 600 parts per million “total lead content by weight for any part of the [children’s] product” effective as of February 10, 2009. The General Counsel of the CPSC issued an opinion letter on September 12, 2008 stating that these standards apply to all products in commerce on and after the effective date (including existing inventory and resale merchandise). Considerable criticism has been lavished on this new standard for its sweeping application to a wide range of products known to be safe. Much of the problem derives from the definition of “children’s product” (15 USC 2052(a)(16)) which now extends to all products “designed or intended primarily for children 12 years of age or younger”, even though children over six years of age are generally recognized as not being at risk from lead poisoning. The standard thus becomes a litmus test divorced from conceptions of risk.
The CPSIA Provides Limited Exceptions to the “Total Lead” Standards. The CPSIA provides that the Commission may by rule grant exceptions to the “total lead” limits, but carefully limits the ability of the CPSC to take such action. Outrage over toy recalls in 2007 led to a noose-like definition of what the CPSC could and could not do to ease the application of the Section 101(a) lead limits. By essentially blaming the CPSC for the 2007 recalls in its design of the CPSIA, Congress left the agency with few options but to follow the new lead limits strictly – regardless of the messy details.
The following text defines the discretion allowed to the CPSC under Section 101(b)(1) of the CPSIA in very narrow and specific terms:
“(1) CERTAIN PRODUCTS OR MATERIALS. – The Commission may, by regulation, exclude a specific product or material from the prohibition in subsection (a) if the Commission, after notice and a hearing, determines on the basis of the best available, objective, peer-reviewed, scientific evidence that lead in such product or material will neither –
(A) result in the absorption of any lead into the human body, taking into account normal and reasonable foreseeable use and abuse of such product by a child . . . nor
(B) have any other adverse impact on public health or safety.”
Notably, the CPSIA goes on to state in Section 101(e):
“(e) PENDING RULEMAKING PROCEEDINGS TO HAVE NO EFFECT. -- The pendency of a rulemaking proceeding to consider –
(1) A delay in the effective date of a limit or an alternate limit under this section related to technological feasibility,
(2) An exception for certain products or materials or inaccessibility guidance under subsection (b) of this section, or
(3) Any other request for modification of or exemption from any regulation, rule, standard, or ban under this Act or any other Act enforced by the Commission,
shall not delay the effect of any provision or limit under this section nor shall it stay general enforcement of the requirements of this section.”
Thus, the CPSC must take the following steps to grant ANY relief from the new “total lead” standards:
a. Issue regulations to exclude specific products or materials.
b. Must hold public hearings before issuing those exclusionary regulations. [The CPSC currently takes the position that solicitation of public comments satisfies this requirement.]
c. Must base ANY exemptions on the (i) best available, (ii) objective, (iii) peer-reviewed, AND (iv) scientific evidence that lead in such product will not result in the absorption of ANY lead into the human body, or have ANY other adverse impact on public health or safety.
These high standards and demanding requirements make it exceptionally difficult for the CPSC to grant quick or meaningful relief from intentionally over-broad hazard definitions. Because of the limited discretion granted the Commission under the new law, relatively few children's products will ultimately be exempted, while many others will continue to be impacted even though an objective review would show that they present no quantifiable risk of injury. Notably, there is nothing in Section 101(e) that permits the agency to exempt thrift stores for “good faith” compliance. There is likewise no “good faith” exemption for our company either. The standards are ABSOLUTE and are UNRELATED TO RISK OF INJURY.
In addition, the CPSC’s arduous task of creating these regulations, regardless of how long it takes or how necessary (or obvious) the regulations are, will NOT delay the impact or implementation of the Section 101(a) limits. Thus, there may be extended periods of time, like now, when bad law prevails despite everyone’s desire to fix it. This is apparently by design.
So What Does This Mean? The law, plainly and unambiguously, does not allow the CPSC to override the new “total lead” standards. The CPSC has no discretion to consider risk in granting exemptions. With the bar for exemptions raised so high, the CPSC cannot give any guidance other than that companies must meet the standards for any product within the definition of a “children’s product”. Blaming Chairman Nord or the agency for following the law itself is not fair and is not right. It is highly likely that the problems facing the agency under Nord will also dog the agency under the next Chairman. The problem is with the law itself.
The language of the CPSIA was drafted specifically to prevent the CPSC from doing its job. The law creates a bright line standard for “total lead” which the CPSC is basically prohibited from adjusting. The “prohibition” imposed on the CPSC is essentially administrative in nature, preventing a speedy or unfettered reconsideration or modification of the standards. In its new law, Congress made clear that it was not open to feedback from the agency on what the standards should be and left no room for regulators overrule the CPSIA by administrative action.
To criticize the CPSC for their “slow progress” is cynical and misleading. Let’s not beat around the bush – there was no intention to allow the CPSC to do its work as a safety administrator under the CPSIA and to make the kind of decisions that Congress created it to make. To contend today that the CPSC should be doing or even could be doing this work more efficiently, is to distract the public from closely examining a defective and poorly-conceived law. The CPSIA doesn’t work – and blaming the CPSC or Chairman Nord for the mess won’t absolve Congress of its responsibility for the damage the CPSIA is wreaking.
Final Thoughts. There are many aspects of the February 3 Letter that I disagree with but I want to close with a simple message: We are not confused about this law or its implications. Those who oppose this dangerous and misguided law understand it all too well. The CPSIA impairs our ability to make or sell safe products that our customers, our valued consumers, depend upon. If we don’t stick up for our right to make these safe and responsible items, our customers, our employees and associates and our country will SUFFER. There is nothing wrong with more effective safety legislation in principle. The CPSIA is not the right approach. It doesn’t work and can’t be made to work.
Let’s stop arguing and fix this law. Congress, the CPSC and the business community can unite to make children safer. Now is the time to act.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
Follow my blog at www.learningresources.com/CPSIA or at www.twitter.com/rwoldenberg
Download February 3rd, 2009 letter to President Obama>>>
Monday, February 2, 2009
CPSIA - Don't Believe the Consumer Groups' Snow Job!
From: Rick Woldenberg
Sent: Monday, February 02, 2009 10:09 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: RE: CPSIA - Don't Believe the Consumer Groups' Snow Job!
On January 30, several consumer advocate groups supporting the CPSIA issued a press release (“January 30 PR”) to “set the record straight” (see http://www.citizen.org/pressroom/release.cfm?ID=2812). In this letter, the authors make many assertions in their arguments in favor of the bill and against the “misleading statements” appearing in “the media, on blogs and on other Web sites”.
Frankly, it has proven challenging to oppose the CPSIA in part because the law is known to be supported by the various consumer groups issuing the January 30 PR. Who would oppose such meritorious organizations? Every American has benefited in one way or another from the work of these groups over the years. Is it possible that their letter is misleading itself, a last ditch effort to support their law in the midst of sagging support? Let’s examine the facts:
January 30 PR Includes Misleading Statistics. The January 30 PR states: “In 2007, there were 473 recalls of children’s products, including millions of toys that contained dangerous levels of lead paint and other toxins. In 2008, consumers fared even worse with 563 recalls, including nearly 8 million toys.” Is this true? I have summarized the posted recalls from the CPSC website on the attached spreadsheet. I encourage you to open each of its seven pages and check my work (the citations are there). This is what the CPSC says happened:
2007: 212 Recalls, 47,626,080 units of which 10,291,440 were due to
lead-in-paint
2008: 178 Recalls, 18,256,110 units of which 3,971,264 were due to
lead-in-paint
2009: 19 recalls (through Jan. 30), 2,375,100 units of which 23,950
were due to lead-in-paint
Of the 125 recalls due to lead-in-paint since January 1, 2007, 36 were for less than 5,000 units and like many (if not the vast majority), were very likely disclosed voluntarily by the companies themselves. Contrary to the assertions of the authors of the January 30 PR, the trend in recalls is SHARPLY DOWNWARD.
The misleading statistics used in the January 30 PR include crib and bassinet recalls, hoodie recalls, flammable clothing recalls, magnet recalls, and so on. This careless misuse of statistics has the effect of whipping up fear among legislators and the public. Fear is displaced, leading to support for a safety bill that will horribly miss its target. Notably, as I have been saying in my correspondence with you for three months, the vast majority of lead infractions are from LEAD-IN-PAINT AND JEWELRY. The consumer groups don’t mention this, but only ONE lead recall (10,000 pieces) in this period was due to substrate. [The circumstances are not clear.] EVERY OTHER LEAD RECALL RELATED TO L-I-P OR JEWELRY. Notably, none of the L-I-P recalls involved a reported injury. Consider the expense imposed on industry with that statistic in mind.
I suggest one can tentatively conclude the following:
a. The laws preceding the CPSIA were sufficient to control L-I-P and lead in jewelry, as shown by the statistics for recalls in this period. Obviously, the CPSC was hard at work recalling those items without the benefit of the CPSIA. There is nothing in these statistics or other information publicly available to suggest that any lead human health issue exists that the CPSC is not empowered to address using the pre-CPSIA law.
b. It is not reasonable to assert that lead in other forms is dangerous without data. In this very active two-year period, apparently ZERO reports of injury from lead in substrates were reported. [There was one report of injury from L-I-P.] As noted again and again in my letters, the prohibition against “total lead” will not change “safety” but will impoverish the companies attempting to serve the children’s product markets.
c. The current enforcement environment, plus all the negative publicity from recalls, is having the desired effect on recalls. Recalls declined in all columns from 2007 to 2008, and continues to decline in 2009. Please note that there have been successively fewer recalls, fewer units recalled, and fewer repeat offenders. At the pace of 2009 recalls for January, L-I-P recalls are on track for a meager 300,000 units this year, down from 10 million two years ago. All without the benefit of the draconian CPSIA penalties and prohibitions.
The January 30 PR letters goes on to state: “These recalls prove that the law’s implementation cannot come too soon.” It is not possible to make this statement after examination of the data on the CPSC website. Did the authors bother to check their facts?
The January 30 PR Misstates that Exemptions Material-by-Material is Workable. To rationalize the design of the CPSIA, the January 30 PR asserts that the CPSC has the ability to exempt materials provided that “there is no risk of harm to the public health”. Interestingly, the House and Senate leadership behind this bill has a different notion (in their letter dated January 16, Reps. Waxman and Rush and Senators Rockefeller and Pryor state that exemptions are allowed for “certain materials – those that inherently do not contain lead or contain lead at levels that do not or would not exceed the law’s limits”, see
http://energycommerce.house.gov/images/stories/Documents/PDF/Newsroom/nord%20moore%202009%201%2016.pdf). Even if the CPSC could make the judgment under the law as the consumer advocates suggest, the resulting system would be so mind bogglingly complex and incomprehensible that it would be defeated in practice within weeks. Most products have many components by the definition contemplated by the CPSIA. With exceptions for certain materials, a typical testing package will be a fat packet represented to be a complete set of tests on only those component materials still subject to testing – it will be impossible to reconcile the reports to the original item. And this is going to IMPROVE safety in the United States by making testing transparent?
It is not possible to create a workable system out of a hodgepodge of testable and exempt materials in a world of real products. Only a non-businessman could come up with a system like this and think it would work.
The January 30 PR Misleads on Testing. The authors of the January 30 PR state that “testing costs have been exaggerated”. Not unlike their assertions on recall statistics, they do not supply invoices or quotes to show affected American businesses how to solve their testing dilemma. I have submitted actual quotes to you previously (see my letters of November 26 and December 12 at http://www.learningresources.com/text/pdf/no_more_telescopes.pdf). If testing is so cheap, why don’t these consumer groups reveal their excellent sources?
The January 30 PR also misleads in stating that under the CPSIA, “big corporations can’t skimp on safety by manufacturing toys in countries with lower safety standards, such as China.” This is highly misleading for more than one reason. First, U.S. corporations are responsible to obey the laws of the United States when they sell products here. Whether they manufacture here or on the Moon, they are still subject to this country’s laws. Blaming China is rather convenient, but the legally responsible parties are still the importers. U.S. importers have always had an obligation to control their supply chains, so China’s willingness or unwillingness to comply with U.S. laws is moot – we need to patrol our own products. Second, as the above statistics demonstrate, U.S. corporations were never able to skimp on safety, not if they had any concern over breaching our laws. It goes without saying that skimping on safety is not a good way to build a business with consumers, either. The January 30 PR relies on convenient conclusions to make its arguments.
The January 30 PR Misleads on Resale Stores (or Just Doesn’t Get It). In reassuring the resale stores are fine, just fine, under the CPSIA, the authors of the January 30 PR state: “the responsibility and expense of certifying the safety of a product belongs to a manufacturer.” Actually, I believe the law states quite clearly that “no person” may “sell, offer for sale . . . distribute in commerce . . . any consumer product” which violates the new CPSIA standards (15 USC §2068(a)(1)). So while resale stores don’t have to test, they still can’t violate the standards. And how, exactly, is a store supposed to pull that one off? Should anyone be troubled by the “knowingly” standard under 15 USC §2069(d) which makes it impossible to play “don’t ask, don’t tell” without exposing your business to high penalties and potentially exposing yourself to jail time? The authors of the January 30 PR provide a laundry list of items that it thinks stores should particularly watch out for. That’s very helpful; can we use their letter as our defense?
The January 30 PR Blames the CPSC for the Failings of Its Law.The authors of the January 30 PR continue their public bashing of the CPSC, fixating blame on the agency for failing in their impossible task: “We called on the agency several weeks ago to urge them to offer more guidance.” They cite “numerous other problems with the agency’s implementation of the law”. Nowhere do the authors address the fact that the law as explained by the above January 16 letter leaves it NO AUTHORITY to make the changes necessary to fix this law. It is not fixable, and as such, the agency cannot work magic.
There is Something I Agree with in the January 30 PR. The authors state: “The continued circulation of misinformation about the new law helps no one.” ‘Nuf said.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
View CPSC Children's Product Recalls 2007 - 2009 >>>
Sent: Monday, February 02, 2009 10:09 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: RE: CPSIA - Don't Believe the Consumer Groups' Snow Job!
On January 30, several consumer advocate groups supporting the CPSIA issued a press release (“January 30 PR”) to “set the record straight” (see http://www.citizen.org/pressroom/release.cfm?ID=2812). In this letter, the authors make many assertions in their arguments in favor of the bill and against the “misleading statements” appearing in “the media, on blogs and on other Web sites”.
Frankly, it has proven challenging to oppose the CPSIA in part because the law is known to be supported by the various consumer groups issuing the January 30 PR. Who would oppose such meritorious organizations? Every American has benefited in one way or another from the work of these groups over the years. Is it possible that their letter is misleading itself, a last ditch effort to support their law in the midst of sagging support? Let’s examine the facts:
January 30 PR Includes Misleading Statistics. The January 30 PR states: “In 2007, there were 473 recalls of children’s products, including millions of toys that contained dangerous levels of lead paint and other toxins. In 2008, consumers fared even worse with 563 recalls, including nearly 8 million toys.” Is this true? I have summarized the posted recalls from the CPSC website on the attached spreadsheet. I encourage you to open each of its seven pages and check my work (the citations are there). This is what the CPSC says happened:
2007: 212 Recalls, 47,626,080 units of which 10,291,440 were due to
lead-in-paint
2008: 178 Recalls, 18,256,110 units of which 3,971,264 were due to
lead-in-paint
2009: 19 recalls (through Jan. 30), 2,375,100 units of which 23,950
were due to lead-in-paint
Of the 125 recalls due to lead-in-paint since January 1, 2007, 36 were for less than 5,000 units and like many (if not the vast majority), were very likely disclosed voluntarily by the companies themselves. Contrary to the assertions of the authors of the January 30 PR, the trend in recalls is SHARPLY DOWNWARD.
The misleading statistics used in the January 30 PR include crib and bassinet recalls, hoodie recalls, flammable clothing recalls, magnet recalls, and so on. This careless misuse of statistics has the effect of whipping up fear among legislators and the public. Fear is displaced, leading to support for a safety bill that will horribly miss its target. Notably, as I have been saying in my correspondence with you for three months, the vast majority of lead infractions are from LEAD-IN-PAINT AND JEWELRY. The consumer groups don’t mention this, but only ONE lead recall (10,000 pieces) in this period was due to substrate. [The circumstances are not clear.] EVERY OTHER LEAD RECALL RELATED TO L-I-P OR JEWELRY. Notably, none of the L-I-P recalls involved a reported injury. Consider the expense imposed on industry with that statistic in mind.
I suggest one can tentatively conclude the following:
a. The laws preceding the CPSIA were sufficient to control L-I-P and lead in jewelry, as shown by the statistics for recalls in this period. Obviously, the CPSC was hard at work recalling those items without the benefit of the CPSIA. There is nothing in these statistics or other information publicly available to suggest that any lead human health issue exists that the CPSC is not empowered to address using the pre-CPSIA law.
b. It is not reasonable to assert that lead in other forms is dangerous without data. In this very active two-year period, apparently ZERO reports of injury from lead in substrates were reported. [There was one report of injury from L-I-P.] As noted again and again in my letters, the prohibition against “total lead” will not change “safety” but will impoverish the companies attempting to serve the children’s product markets.
c. The current enforcement environment, plus all the negative publicity from recalls, is having the desired effect on recalls. Recalls declined in all columns from 2007 to 2008, and continues to decline in 2009. Please note that there have been successively fewer recalls, fewer units recalled, and fewer repeat offenders. At the pace of 2009 recalls for January, L-I-P recalls are on track for a meager 300,000 units this year, down from 10 million two years ago. All without the benefit of the draconian CPSIA penalties and prohibitions.
The January 30 PR letters goes on to state: “These recalls prove that the law’s implementation cannot come too soon.” It is not possible to make this statement after examination of the data on the CPSC website. Did the authors bother to check their facts?
The January 30 PR Misstates that Exemptions Material-by-Material is Workable. To rationalize the design of the CPSIA, the January 30 PR asserts that the CPSC has the ability to exempt materials provided that “there is no risk of harm to the public health”. Interestingly, the House and Senate leadership behind this bill has a different notion (in their letter dated January 16, Reps. Waxman and Rush and Senators Rockefeller and Pryor state that exemptions are allowed for “certain materials – those that inherently do not contain lead or contain lead at levels that do not or would not exceed the law’s limits”, see
http://energycommerce.house.gov/images/stories/Documents/PDF/Newsroom/nord%20moore%202009%201%2016.pdf). Even if the CPSC could make the judgment under the law as the consumer advocates suggest, the resulting system would be so mind bogglingly complex and incomprehensible that it would be defeated in practice within weeks. Most products have many components by the definition contemplated by the CPSIA. With exceptions for certain materials, a typical testing package will be a fat packet represented to be a complete set of tests on only those component materials still subject to testing – it will be impossible to reconcile the reports to the original item. And this is going to IMPROVE safety in the United States by making testing transparent?
It is not possible to create a workable system out of a hodgepodge of testable and exempt materials in a world of real products. Only a non-businessman could come up with a system like this and think it would work.
The January 30 PR Misleads on Testing. The authors of the January 30 PR state that “testing costs have been exaggerated”. Not unlike their assertions on recall statistics, they do not supply invoices or quotes to show affected American businesses how to solve their testing dilemma. I have submitted actual quotes to you previously (see my letters of November 26 and December 12 at http://www.learningresources.com/text/pdf/no_more_telescopes.pdf). If testing is so cheap, why don’t these consumer groups reveal their excellent sources?
The January 30 PR also misleads in stating that under the CPSIA, “big corporations can’t skimp on safety by manufacturing toys in countries with lower safety standards, such as China.” This is highly misleading for more than one reason. First, U.S. corporations are responsible to obey the laws of the United States when they sell products here. Whether they manufacture here or on the Moon, they are still subject to this country’s laws. Blaming China is rather convenient, but the legally responsible parties are still the importers. U.S. importers have always had an obligation to control their supply chains, so China’s willingness or unwillingness to comply with U.S. laws is moot – we need to patrol our own products. Second, as the above statistics demonstrate, U.S. corporations were never able to skimp on safety, not if they had any concern over breaching our laws. It goes without saying that skimping on safety is not a good way to build a business with consumers, either. The January 30 PR relies on convenient conclusions to make its arguments.
The January 30 PR Misleads on Resale Stores (or Just Doesn’t Get It). In reassuring the resale stores are fine, just fine, under the CPSIA, the authors of the January 30 PR state: “the responsibility and expense of certifying the safety of a product belongs to a manufacturer.” Actually, I believe the law states quite clearly that “no person” may “sell, offer for sale . . . distribute in commerce . . . any consumer product” which violates the new CPSIA standards (15 USC §2068(a)(1)). So while resale stores don’t have to test, they still can’t violate the standards. And how, exactly, is a store supposed to pull that one off? Should anyone be troubled by the “knowingly” standard under 15 USC §2069(d) which makes it impossible to play “don’t ask, don’t tell” without exposing your business to high penalties and potentially exposing yourself to jail time? The authors of the January 30 PR provide a laundry list of items that it thinks stores should particularly watch out for. That’s very helpful; can we use their letter as our defense?
The January 30 PR Blames the CPSC for the Failings of Its Law.The authors of the January 30 PR continue their public bashing of the CPSC, fixating blame on the agency for failing in their impossible task: “We called on the agency several weeks ago to urge them to offer more guidance.” They cite “numerous other problems with the agency’s implementation of the law”. Nowhere do the authors address the fact that the law as explained by the above January 16 letter leaves it NO AUTHORITY to make the changes necessary to fix this law. It is not fixable, and as such, the agency cannot work magic.
There is Something I Agree with in the January 30 PR. The authors state: “The continued circulation of misinformation about the new law helps no one.” ‘Nuf said.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
rwoldenberg@learningresources.com
View CPSC Children's Product Recalls 2007 - 2009 >>>
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