Congress fucks things up for small businesses

[DocZaius]

This story hasn't gotten much play in the mainstream media, but it's certainly getting a lot of attention in the blogosphere.

In response to the Great Chinese Toy Scare of 2007, Congress passed the The Consumer Product Safety Improvement Act, a law which requires that toy and clothing manufacturers to extensively test their products for harmful chemicals like lead.

The problem is that Congress, in its haste to pass the law, didn't really think about the law's consequences. It doesn't exempt small manufacturers and it's written in such a way that many tests have to be repeated for each and every iteration of a product that a manufacturer makes.

For example, if a U.S. business makes t-shirts intended to be worn by children, it must test each and every size and style of the shirt even if all are made from the purest organically-grown cotton known to man.

This law has the potential to completely destroy thousands of small American businesses and unless Congress votes to delay its implementation, it will go into effect on February 10.

With the economy the way it is right now, something like this could really be devastating and yet very few major media sources are covering it.


Here are a few highlights from the blogosphere:

http://www.popehat.com/2009/01/28/the-consumer-product-safety-improvement-act-all-baby-no-bathwater/

As I wrote earlier, the CPSIA was enacted in response to 2007 voluntary product recalls of certain toys manufactured in China and imported to the United States, toys which were found to contain lead paint. The offending toys were a set of buckets featuring Thomas the Tank Engine and Curious George, and a magnetic toy made for Mattel and its subsidiary Fisher-Price. These toys were recalled amid another, more serious scare pertaining to Chinese products, the dog food scandal in which pets died due to toxic additives, similar to the scandal which China itself is now facing due to tainted milk.

One difference among these scares is that no federal legislation has been offered pertaining to pet food, or to milk. The lead painted toys did lead to a new law, the CPSIA, which requires anyone manufacturing or importing products intended for use by consumers under the age of 12 (we’ll call them “kids” for the sake of this discussion), to engage in costly testing, estimated among various sources at a low cost of $2,500 per lot of products (though I’ve read of much higher estimates), to rule out the presence of lead. The law as written extends to any product intended for kids, including products which obviously don’t contain lead, such as diapers, children’s books, wooden toys, trapper keepers, crayons, and Hanna Montana lunchboxes. The probable result, as a number have pointed out, will be the ruin of small and mid-sized businesses, which can’t afford to pay for this testing, and consolidation of the market for children’s products (those who have kids know what a vast market this is) in the hands of a few giant corporations, i.e., the Mattels and Fisher-Prices who started the problem by outsourcing their manufacture to China.

The other difference, the main difference so far as I can determine, is that unlike the dog food scandal and the milk scandal, no one died and no one was hurt in the lead paint scandal. How do I know that? I looked around.

I’m well aware of the costs that the CPSIA will impose on small and medium domestic business while our economy is already in the toilet. What I wasn’t sure of was its benefit. I’d read, and was pretty sure, that few if any kids were hurt as a result of the Chinese lead paint toy scare of 2007. I’d passed that on. But was it true?

Yes it is. So far as I can tell, there are no reports, whatsoever, of kids suffering injury as a result of ingesting lead paint from the toys that inspired this law.

As this guy points out, the only companies that can afford the testing are the big ones who outsource their manufacturing to China - the source of the tainted toys. Furthermore, this legislation appears to be addressing a non-existent problem. It's already illegal to put lead paint in kids' toys and there doesn't appear to be ANY report of injury from the 2007 scandal.

http://www.zianet.com/ehusman/weblog/2008/12/in-which-30-thousand-small.html

Contrary to popular reports, manufacturing is not dead in the United States. Up until the recent troubles (the recession, not the Bush Administration), we were making as much steel and other stuff as ever. I'm too jazzed to go looking up the stats - try the Statistical Abstract.

According to the 2002 Census, there were about 40,000 cut & sew apparel manufacturers in the US. Of those, approximately 68% were small businesses. You are a manufacturer if you make or cause something to be made (i.e. contract it out). That's about 30,000 small manufacturers, small being anything from sole proprietorship (employing yourself) to 19 employees.

In August of 2008, in the wake of many high profile recalls of stuff made in China, Congress passed and President Bush (yes, Bush, not Obama, contrary to some rumors (really!)) signed the Consumer Product Safety Improvement Act (CPSIA). It has some very laudable goals: eliminate phthalates and cut lead to trace levels in all children's goods. Children in this context are anyone 12 and under. This means clothing, toys, electronics, strollers, books, school supplies, school science projects, astroturf (yep), etc. Sounds pretty sweet, huh?

Well, there are some details. You can't just not use lead or phthalates. You can't just point out that you are using undyed organic hemp and wooden toggles. No, you must prove that you are lead- and phthalate-free. How? Well, at $600-2400 per item, you ship it off to a certified testing lab. Plus, it's destructive testing, so kiss 1-12 samples of whatever it is goodbye. Also, you need to make sure that it is a representative lot, so no more repurposing of used clothes. Also, you need to provide this General Compliance Certificate (GCC) to anyone downstream who wants it. At any time. And be sure you can trace it by lot. Also, you may have to put up a bond in case they want to recall your product so that they know you can cover the cost of the recall.

Now, there's something you may not know about apparel manufacture (and you still won't know at the end of this paragraph because I'm simplifying the heck out of it). You start by developing about 20 styles and see what gets bought. Once buyers buy on the strength of the sample, you order the material and start sewing. The CPSIA testing has to be done on the final product (unit testing), not the inputs (component testing). So even though you are using the same organic cotton cloth and 5 different dyes and 3 different buttons, you can't get by with doing 8 tests (the cloth in 5 colors plus tests on each button). Nope, you have to do testing on 20 different styles x 5 different colors = 100 tests. Of which only 5 styles will ultimately go to market. That's a minimum of $60,000 just for the testing, and you haven't even started to sell yet.

By the way, size does not matter in the eyes of this law. Haynes T-shirts? Yes, they have to test. Grandpa's handmade toys that he sells on E-bay? Yep, in fact E-bay and Etsy are already noting that legal compliance is a requirement of their user terms of use. Also, manufacturing location does not matter - whether you make in or contract to China, Los Angeles, or Lancaster County, you have to test.

"But I make handmade dresses from down from angel's wings, blessed by two rabbis, the pope, an imam, and a guru!" Too bad, where's that GCC?

One further thing: On February 10, if you don't have the GCC, you are selling illegally. So that date has been declared National Bankruptcy Day. You can also follow this in the forums and blog posts at fashion-incubator.com.

So, you would think that Congress would realize they made a huge mistake. The successful small businesses in the industry are absolutely in agreement that lead and phthalates are bad things: many of them are moms who got disgusted with the mass-produced junk in Wal-Mart and went into business with a sewing machine, some good ideas, and a determination to to things right, to be the good guys. But no, Congress doesn't even know there's a problem looming. Congress spent 3 hours and 20 minutes debating HR 4040 and whatever the Senate bill was. 3 hours and 20 minutes to debate a 62 page bill. There was one vote cast against it - Brownie points for whoever can guess who it was without look.... ah, hell, it was Ron Paul[/size]. Duh.

In fact, Congress is completely clueless about what is coming. In fact, some of them are pissed that the CPSC legal counsel advised that whereas Congress clearly intended the lead standards to go into effect right away (making your inventory worthless), they did not intend that for the phthalate ban. They think they should eat their inventory, which was legal prior to the law's passage, and would probably pass testing afterwards, but on 10 Feb 2009 will not have a GCC. And leading the way for them is Saint Nader's PIRG. NRDC is chiming in, too. They have been planting stories in newspapers, using their annual review of toys to lead parents into thinking that most if not all toys are simply die-cast lead with a sheen of phthalate gloss. Those stories tell you only that phthalates may be on the shelves for years to come. They don't tell you anything about the testing, about the certificates, about the cost, about the effect on small businesses and one-man or one-woman shops. They might as well also point out that dihydrogen monoxide is still legal for all the rigor and truthiness they are applying to this story.

Incidentally, you might want to stock up on interesting children's clothing. This time next year, it will all be the same style and the same color.

This is insanity. Also, Ron Paul. RON PAUL.[/size]


One of my favorite blogs, Overlawyered, has some great coverage: http://overlawyered.com/tag/cpsia/

[IHateUGAlyDawgs]

good for Ron Paul on that one.

[radbag]

doc - shouldn't the extra precautionary measures create jobs?

[IHateUGAlyDawgs]

doc - shouldn't the extra precautionary measures create jobs?

only for businesses that can afford it.

[G8rMom7]

Won't they just pass along the cost to the consumer? Nevermind...the big companies won't have a problem with it, only the small ones...and if they pass along the cost to the consumer, no one will buy their stuff when they can get it from one of the bigger companies.

I really don't think Congress reads what they are signing...aren't a lot of them lawyers too? WTF?

[IHateUGAlyDawgs]

a lawyer does not necessarily equate to a businessman, nor does a businessman equate to a lawyer.

[annarborgator]

I'd be willing to wager that Congress generally does NOT read the bills before they vote. At best they have a staffer read the bill and write up a summary. At worst their staffers simply provide them with the talking points from "leadership". The most idiotic thing is the names we give our legislation--we name them in such a way that you better have a damn good, very clear and well thought out reason to vote against them. That's difficult given the crazy schedule of congress...like we've said they have trouble finding the time to even read the stuff.

Of course, if we stopped writing 500+ page legislation, a lot of these problems would go away. I still like Z's (I think it was Doc anyway) proposal of limiting each bill to one subject.

[DocZaius]

The good news is that Congress has finally listened and issued a stay of the February 10 effective date.

The bad news is that the national media is still ignoring the story.

One interesting unintended consequence affects the manufacturers of small motorized dirt bikes and ATVs, like Honda, which has issued a release to its dealers.

Dear Honda Dealer:

On August 14, 2008, Congress enacted the Consumer Product Safety Improvement Act of 2008 (CPSIA or Act). The Act was primarily in reaction to the recent influx of lead-tainted toys that resulted in numerous recalls and significant public outcry for more stringent government standards.

The CPSIA requires manufacturers of “Children’s Products,” defined as those products designed or intended primarily for children 12 years of age or younger, to meet increasingly stringent lead paint and lead content standards and to certify, based on third party testing, that the products meet the Act’s requirements. Products that fail to comply with the prescribed lead limits are considered a “banned hazardous substance” and cannot be sold or offered for sale. Violation of the prescribed limits (initial limits detailed below) can result in severe civil and criminal penalties.

Ban of lead in paint over 600ppm (parts per million)

Honda’s paint contains little or no lead and easily complies with even the most stringent requirement.

Ban of lead in substrate material over 600ppm

Honda is still in process of completing tests on all of the materials used in our small ATV’s and motorcycles; however, some alloy materials commonly used to manufacture motor vehicles may inherently contain levels of lead that are (or ultimately will be) above the current, or future more aggressive, limits set forth in the Act.

Honda and other members of the Motorcycle Industry Council and Specialty Vehicle Institute of America, which face the same issues as Honda, are actively working to exempt the alloy parts for small motorcycles and ATVs from the terms of the Act. The lead embedded in the alloys used in these products is not transferred through typical use of these products. Our shared belief is that Congress never intended the lead content provisions of the Act, which originally were aimed at toys that can be mouthed by children, to be applicable to small ATVs and motorcycles.

Even more concerning is that the Consumer Product Safety Commission (CPSC), the agency charged with enforcing the Act, recently ruled that Congress intended the lead content regulations to be retroactive. This means that, regardless of its date of manufacture or the fact that it complied with all applicable laws and regulations at the date of manufacture, any children’s product manufactured with even a single component part containing lead in excess of the limits will no longer be legal for sale as of February 10, 2009. The economic impact of the CPSC’s ruling will be substantial for both dealers and manufacturers in an already weakened economy.

What all of this means to you is that – without Congressional or CPSC action -- you will not be able to sell new or used TRX 90, CRF 50F, CRF 70F, or CRF 80F models after February 10, 2009, stranding your investment in your new and used inventory. In fact, under the terms of the Act you cannot even display these models on your showroom floor, distribute brochures, or advertise them on your website.

**REVIEW IMMEDIATELY**

As Honda and others continue to work towards a satisfactory resolution to this dilemma, we urge you to support an industry effort by contacting your Congressional delegation and Senators and urging them to ensure that small motorcycles and ATVs are exempted from the lead-content provisions of the Act. Copies of letters already sent by the MIC and SVIA to various members of Congress are attached for your reference.

We ask for your patience and understanding as we work through this unfortunate process together. You may continue to sell these models lawfully and with all existing Honda retail support through February 9th, 2009. We will advise you if the industry is able to obtain an exemption from the lead content regulation. In the interim, we will keep you posted on developments and business actions necessary from February 10th forward to comply with this Act. With best regards, American Honda Motor Co., Inc.

That's right, there's lead in them thar motorcycles, and so they are banned under the new law.  Our glorious leaders have gone that extra step in protecting our children from eating such dangerous products and thereby ingesting said lead.  All hail Congress!

[DocZaius]

Also, libraries are not exempt under the law.

I knew the Consumer Product Safety Improvement Act wasn't what one would call a good piece of legislation. Sure, it sounds great. Who would disagree with keeping lead away from children's toys? But as I read more and most posts, like the impact it would have on small businesses and thrift stores I was concerned. Then I saw the impact that the CPSIA would have on people who sold items on on Etsy. But last week I saw something that stopped me in my tracks. I saw the American Library Association's press release on the impact it would have on libraries.

Under the CPSIA, which was passed by Congress in August, children’s products are required to undergo stringent testing for lead and phthalates. Currently, the General Counsel of the CPSC is interpreting the law to apply to ordinary, paper-based books for children 12 years of age or younger, so that all such books and product would have to be tested for lead content. Therefore, public, school, academic and museum libraries would be required either to remove all their children’s books or ban all children under 12 from visiting the facilities as of February 10.

Now, I know what you are thinking. You are thinking that it's ridiculous and there's no way that libraries would really ban children under the age of 12 from visiting libraries. And there's no way that school libraries would close. They are just being dramatic, right?

As with anything concerning the CPSIA it's not that cut and dry. If libraries really had to test each and every children's book on their shelves the cost would not be insignificant. Each component of a book has to be tested for phthalates and lead and each test costs hundreds of dollars. Add into that the components that are added to library books - classification stickers, bar codes, perhaps a clear dust jacket and you add most costs. That $10 copy of Goodnight Moon would suddenly cost a few thousand dollars. Just think of what that would do to your local library's budget.

 

[MinGator]

The law of unintended consequences and knee jerk reaction policy making create a staggering effect.

[annarborgator]

The law of unintended consequences and knee jerk reaction policy making create a staggering effect.

Combine those two with the inherent and fundamental shortsightedness of elected politicians and you have a DEADLY concoction for democracies as the time horizon increases. It's like a toxicity level building up over time in the body.

[DocZaius]

This thing is having a real impact, and for whatever reason, mainstream national news coverage has been very weak.

For example, many dealers of youth motorcycles have begun refusing to even sell replacement parts for fear of liability under the law.

Even worse, many thrift and vintage book stores are pulling their inventory.

In these tough economic times, how does ANYONE in leadership think this law doesn't need revision?

Unless this law is revised, thousands (tens or hundreds of thousands?) of jobs are going to be lost as a direct result of hamfisted government intervention. Small businesses will close shop. Libraries and book stores are actually pulling books off shelves - not because they are dangerous but because they cannot absorb the cost of compliance.

Larger businesses that can afford the costs of compliance will pass on those costs to the consumer.

I don't think I've ever been so up-in-arms about anything the government has done. It's such an obvious problem and very few are trying to fix it.

[G8rMom7]

^^^I think you are up in arms because you see danger and the mainstream media has not seen it yet. And they likely won't until it really blows up and then of course the loss of jobs will be blamed on George W and that will be all that happens.

[Tipmoose]

Its already started at the thrift shops here in NC. A friend went into one last weekend and noticed an employee removing most of the children's clothes. When asked why, she was told "I have to get rid of any children's clothes with buttons or zippers on them. They MIGHT have lead in them."

So...tons of kids clothes will be in the landfill soon.

[G8rMom7]

So we're going to have a bunch of naked kids running around? The pedophiles will be happy? WTF?

[DocZaius]

I hope your husband doesn't sell equipment to 12-and-under teams.

[G8rMom7]

He does...but I don't think any parts they use are from China. I was just thinking about this yesterday. I know the paint on the helmets is SPRAYED ON here in the US. He does sell to some youth leagues...not a ton though. Will it affect middle and high school age? How do they distinguish that? Some toys may be played with by older children but that are really made for smaller kids and vice versa.

I am going to ask Bill...MOST of the stuff he sells is made in the USA from what I know...however, he just started selling uniforms from an American company but I can't imagine the cloth is made here. Do they even make cloth in this country anymore?

[DocZaius]

He does...but I don't think any parts they use are from China. I was just thinking about this yesterday. I know the paint on the helmets is SPRAYED ON here in the US. He does sell to some youth leagues...not a ton though. Will it affect middle and high school age? How do they distinguish that? Some toys may be played with by older children but that are really made for smaller kids and vice versa.

I am going to ask Bill...MOST of the stuff he sells is made in the USA from what I know...however, he just started selling uniforms from an American company but I can't imagine the cloth is made here. Do they even make cloth in this country anymore?

See, that's just the problem. The law doesn't distinguish stuff like that. Seriously, read some of the links I posted. This isn't just about lead paint.

I don't mean to panic you, but from what I can tell, many companies are concerned that every component on every item they sell MUST be tested for lead and phthalates, even if there's no chance of contamination or of children eating said components.

It's a completely and utterly ridiculous law.

[DocZaius]

What I mean is, this doesn't apply just to imports. If your product is made from the hair of the purest virgin Kansas farmgirl, it still has to be tested and certified as lead- and phthalate-free.

[G8rMom7]

I just read the article above again...wow, this will definitely affect Bill's ability to sell uniforms to the youth leagues. Probably won't have youth league football anymore really...I can't imagine any of these small manufacturers being able to afford that kind of testing.

How enforcable do you think it could be Doc? (I just read you post after I wrote the above). What can you do? Just write your congressmen I suppose?

[Tipmoose]

You can file suit against it, I guess. Not sure what grounds you could challenge it on tho...

[DocZaius]

Well, there's a 1-year stay of enforcement right now, so it's not an immediate thing (though technically, all businesses are still required to comply).

But, yeah, write your Congresscritters. That's a good start. Ask them to support Senator Jim DeMint's reform bill - S. 374 - which will (among other things) supposedly waive testing requirements for businesses which get their supplies from certified manufacturers. That requirement ought to quell the worst of the law's impact (though I dispute that this law was needed in the first place).

[G8rMom7]

I just wrote my congressman who coincidentally is the dad of one of my old work friends. He used to be in the state congress back when I worked with her but he was based in the Brevard County area. When I saw his name on signs and my ballot I voted for him because he was a Repub but I wondered if it was the same guy (I never knew his first name). Anyway, I went to his website and he had a picture of him being sworn in and there was my friend with her daughter so I knew it was him.

So I wrote him an email saying if they think they are keeping kids safe how about watching a bunch of kids play football with no protective gear...does that sound safe? LOL. I'm sure it will go into a file...but I did mention my friendship with his daughter so who knows.

Crap, I wish I saw your post above before I wrote him!

[G8rMom7]

Okay, so I just became one of those crazy people that writes their congressmen a ton of letters...I just sent another one mentioning the reform bill Doc.

[DocZaius]

Go one step further and actually snail-mail him a typed letter. I don't believe anyone in his office will actually read your email. They probably won't read your snail-mail letter, either, but from what I've been told, it's more likely to be read than an email.

Send one to your Senators, too, just for fun.