CPSIA, Denial and Retailer’s Liability

Preamble: I appreciate the patience of my readers who are not affected by the CPSIA crisis. I intend to get back to regular posting …tomorrow! I have a special treat planned for you just in time for the holidays. Tomorrow I’ll be posting a tutorial on a single welt pocket.

Retailers are becoming aware of their potential liability in this CPSIA mess so this entry is intended for them. Actually, just small retailers because the large operations have their own legal departments to manage it. I can’t go back and summarize the Consumer Product Safety Improvement Act but I’ll provide the links at close. Let’s deal with the potential problems you have regarding inventory and what to do about it. By way of example, one retailer mistakenly informed colleagues saying:

My suppliers of wholesale children’s organic cotton clothing say this new legislation does not apply to textile based products or clothing such as tee shirts and diapers so you don’t need to worry about it.

There’s a couple of things going on here, mostly denial and misinformation all around. When vendors misinform their buyers it bothers me because I see this as an issue of integrity. It is a matter of integrity to suspend your own self interest and answer questions truthfully. If you’re not sure of the truth, you can’t put someone in peril based on your opinion or what feels fair. It is a matter of integrity to know the issues. This is a trust relationship; people are counting on you.

Retailers must know there is a huge liability involved with taking a vendor at their word. There’s a fine of $100,000 and potential prison time of five years per incident. As a retailer, you are liable if you sell or distribute (give away) non compliant product. As such, retailers must ask themselves if they are willing to risk a potential six figure fine and jail time on a vendor’s (understandably self-serving) assurances. If it were my liability, I wouldn’t take anyone’s word for it. A vendor isn’t going to pay a fine or do the jail time for a retailer who’s found to be selling their non-compliant goods. This law is injurious to retailers, not just manufacturers because there will be shortages with difficulty buying products to stock the shelves.

Just as amongst us, there’s a lot of rumors flying around among retailers. There is no central list of items affected by the legislation so you won’t find one no matter how long you look. Within our niche, it’s said that “plain” clothing, 100% certified organic items, nylon bracelets, baby blankets, swaddles, diapers and baby slings aren’t included. This is false. This rumor is going around because someone scanned the law to the only section where textiles are mentioned specifically but they misinterpreted the context. This section of the law only says these items are not durable goods. Anyone who’s taken Economics 101 knows textile products aren’t durable goods; a durable good is a refrigerator. That these items not a durable good does not mean they’re not required to be tested. They are.

At the meeting I attended in Washington DC, the CPSC General Counsel Cheryl Falvey told us point blank that all textile products intended for the use of children aged 12 and under required testing. Organic clothing and baby slings were specifically mentioned as being included. The problem is a lot of people are in denial. Saying products are exempt doesn’t cost a vendor anything to say. Or rather, a vendor has a lot to lose if their buyers believe it. This is why I say it’s an issue of integrity.

My advice to retailers is that unless your vendors will sign a legal contract stating that they will accept the return of their products if these prove to be unsaleable after August 16th and give you your money back, I wouldn’t buy more product. The problem is though, that being in denial and presumably having failed to make contingency plans, they’ll probably go broke so you won’t get your money back. Either way, the vendor isn’t going to pay your fine or do the jail time for you if they haven’t complied so I wouldn’t risk it. Another retailer said:

Recently we’ve been approached by many suppliers of baby products and they are all offering very good discounts. We are all getting creative with discounts and incentives to attract more business, but I also wonder if some of these vendors are trying to get rid of their untested inventory before the new regulations take effect in February.

If it is likely you’re holding any children’s products in inventory that do not comply on 2/10/09, you have very few choices, neither of them palatable for either party.

  1. Ask the vendor to supply you with GCCs for the SKUs you’re holding.

  2. Return the product to the vendor for testing.
  3. Have a sale to move all product by February 10, 2009.
  4. Ask your vendor for a discount to help move inventory before the deadline. No they won’t be happy but sharing the burden of a liquidation sale is preferable for both parties.
  5. If they cannot supply GCCs or are unwilling to test, you will either have to return the product to the vendor and steel yourself for a discussion of a refund or eat the loss for any inventory you’re holding after the deadlines.
  6. Lastly, you can have your inventory tested with an XRF gun. This will allow you to continue to sell these products until August at which time they will fall under the more stringent third party testing rule.

As I said, none of these options are palatable for anyone, least of all consumers. Consumers just don’t know that their choices and prices have been impacted yet. If you’re interested in pursuing XRF testing -a temporary solution- contact Jennifer Taggert. She’s charging so little ($5 per scan) I can’t imagine how she’s covering her costs. Jennifer is not just a crunchy-granola blogger mom who provides XRF testing services in between her children’s naps. She’s an attorney who can advise you in these matters and if that weren’t enough, she’s also an environmental engineer.

Related entries in order:
New product safety regulations that affect manufacturers
National Bankruptcy Day
Unit vs Component Testing
What must be tested
Confusion run amok
CPSIA and small manufacturers
CPSIA Activism and what you can do
How to move forward, coping with crisis
CPSIA and tracking label requirements

There’s also the forum for one on one assistance.

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