CPSIA and Small Manufacturers

If you are a small company, this is probably one of the most important articles you’ll ever read here. Please read this carefully. Very carefully. Make note of verbiage such as “may”, “must” and “at this time” within the appropriate context.

There is some confusion regarding requirements that I will make more clearly; points of law brought to my attention by Jennifer Taggert, an attorney and environmental engineer who specializes in these matters. These distinctions and how they affect your business are significant based on company size (I’ll explain the differences and why it matters further along). For the sake of expediency, I’m only discussing lead; phthalates are omitted from discussion unless otherwise specifically stated.

First of all, the law is clear with respect to three pivotal matters regardless of company size:

  1. As of February 10, 2009, no more than 600 ppm lead can be present in products intended for children aged 12 and younger, as determined by a “reasonable testing program”.
  2. Third party testing, is not required until August 16, 2009.
  3. General Conformity Certificates (GCC) are required as of February 10, 2009.

Caution is in order.
Legally, you cannot blithely state your products don’t have lead just because you’re a small company making everything yourself, your products are “high quality” and issue your own GCC based on that assumption. Do you really know? I am shocked at the number of children’s tee shirts embellished with Swarovski crystals applied to them by home makers. These are nearly all lead! Likewise, what of applications like “puffy paint” or other paint applications or iron-on decals purchased at craft stores? How do you know those don’t contain lead or phthalates? As such, you are required to have a “reasonable testing program”. Unfortunately, “reasonable testing program” is unclear at this point but due diligence is implied. As the law reads now, effective August 16, 2009, CPSC certified third party testing is required. So, from February to August, you may have the option of using a reputable lab or testing service that is not an officially approved CPSC testing lab. Now, just because a lab is not currently approved doesn’t mean the lab isn’t any good but you have to do your homework. You will have to determine whether an official body such as the CPSC or your state’s Attorneys General (charged with enforcement) would consider your lab to be a legitimate resource. Some have suggested home testing kits for lead are an option but it is dubious that these would be acceptable. Most authorities agree that lead testing services provided by businesses such as Taggert’s are viable. Using an XRF gun, inventory samples can be scanned for lead. This is an attractive option for smaller producers because products remain saleable after testing (more comprehensive testing destroys products), it’s faster and it costs much less, perhaps $200 to $300 for a batch of samples.

In this entry on her blog, Jennifer Taggert makes the valid point that it is not true that existing inventory must be tested by a 3rd party but context is everything. I know how long you guys can hold onto inventory and she may not. Many of you hold inventory for much longer time periods than traditional manufacturers. Probably the best way to phrase this is that -at this time- inventory sold prior to August does not need third party testing. That doesn’t mean inventory doesn’t have to be tested, it does, it just means inventory isn’t subject to destructive and expensive CPSC certified third party testing. In summary, if you’re holding aging inventory (as I know many of you are) past the date of August 16, 2009, it will be subject to third party testing. Until then, you can use “reasonable testing” such as XRF gun scans.

“At this time”
A word about why this matters. Many of us are of the opinion that this law as written, is not sustainable due in part to costs and likely rampant non-compliance. There is little doubt there will be a fall out on February 10th that will disproportionately affect large producers. We are of the opinion that as a result, the regulations will evolve to more reasonable standards, hopefully before August when third party testing is required. As such, this may represent an opportunity for smaller companies. Worst case scenario, even if third part testing remains in effect, it is possible more labs will be approved by the time August rolls around. This means it may be that you can stay in the game and wait it out hoping for more favorable conditions in the future. I hope you all realize that any gains you realize will be coming at the grave expense of large firms so it remains inappropriate to sling any tactlessly worded verbiage towards them.

There is another reason it is inappropriate to speak badly of large manufacturers other than it’s just bad breeding and foul play since we’re all in this together and it serves no purpose to splinter. You stand to gain a lot more than they do. I realize it’s hard for you to see that now but more of them will be profoundly impacted by this law in ways you are not. Worse case scenario, littler players can wait it out a season or two but being smaller, it’s easier to get back into the game. Larger players can’t do that. How can they? Their product development time lines are 12 to 15 months out. Assuming they regroup (I think many will just throw in the towel) the smaller players who hid out for a season or two can get back in much faster and get higher margins in the short term (due to lack of product on shelves) which will help to recoup re-start up costs. I’m not saying you won’t be hurt, I’m not saying it won’t cost you but I am saying this is a matter of magnitude. The bigger they are, the harder they fall.

How the law disproportionately affects large firms.
When I was at that meeting in Washington last week, one man said “I don’t care what the CPSC wants”. You could have heard a pin drop but he has a very good point. He only cares what his customers want. Let me explain.

Very few retailers are environmental scientists cum attorneys and if the law confuses you, multiply that by a magnitude of “x”. They’re simply too busy to deal with it, they need easy standards to eliminate their liability because they are much larger targets for enforcement and lawsuits. As such, their fulfillment requirements are much stricter than the CPSC. They have to. They’re selling clothes and toys, not groceries. As I explained in the forum, this law is complex and retail doesn’t understand it anymore than we do. They don’t care that varying lead levels or third party testing is required on different dates. While they are set up to manage aging inventory according to seasonal calenders, they’re not selling groceries with rapid expiration dates. Retailers are not set up to cycle quickly expiring products in and out. They are not set up to buy and sell perishable products like milk. They’re not going to be able to track inventory at x lead levels according to a calender of X date in order to pull it from the shelves on time. So, they’ll do all or nothing, whichever is the least risk and ambiguity. They need blanket procedures to follow. Their definition is much stricter and more narrow than the CPSC.

In summary, to limit their liability, the largest stores are requiring third party testing for all goods sold after February 10th. They’re not waiting until August to implement it. If you don’t have any large retail accounts, this isn’t likely to affect you. If you do have big box customers, it would be safer to assume you’ll be getting product returned starting in mid January if you have not provided them with the required GCC so expect some sort of notification by mail. If you’re selling to smaller stores, I’m not surprised they know nothing of it. It has scarcely been mentioned in the trade press but with the upcoming fall selling season starting in January, rumors will be raging at market among smaller store owners. Hopefully you’ll be able to convince them your products are saleable without third party testing until August 2009. Remember, you are required to use a “reasonable testing program” to verify your lead levels as of February 10, 2009.

What you can do now:
Be sure to read Taggert’s entry for more information and background. You can also find a lot of information in the forum which is now open to the public. There’s a ning group focused on activism; Rob Wilson published a related entry on the topic of toy inventory today. You can sign the petition. Don’t hesitate to spread the word of the unintended consequences to anyone who will listen. Write letters to the editor and your legislators before this narrow window that only favors small companies closes in August 2009. Point people to all these sites (including National Bankruptcy Day) to bring those points home.

Related in the forum:
The War Room: CPSIA & Consumer Safety. This is a very active section with nearly 60 different threads and over 1,000 postings. Open to the public.

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