National Bankruptcy Day

In the Wall Street Journal, Rick Woldenberg was quoted as describing February 10, 2009 as National Bankruptcy Day because that’s the day when many of us will go out of business due to the implementation of the CPSIA Regulations. I’m dismayed at how little it’s been discussed online and in the news. I’m shocked that so few manufacturers know about it. Of the ones that do know, most think it either doesn’t apply to them or it will magically disappear or it won’t be enforced so they can ignore it. Come February 10th, a lot of people will be hit hard by reality when their products are returned or their financing is declined.

To recap, this law was passed (424 votes to 1) to protect children from unsafe toys after last year’s widely publicized recalls (by the way, recalls have actually decreased by 46%). What few consumers realize is this legislation affects more than toys. What few clothing manufacturers realize is this also affects them. Of the ones who do know, most of them think it only applies to children’s clothes. Other than apparel the law includes diapers, blankets (housewares), books, videos, computer and electronic products, strollers, cribs, car seats, and anything humans come in contact with in their environment. Our objections are not higher standards for product safety or even the costs involved per se. The problem is Congress wrote the law and forced the CPSC to implement it before the regulations were written. These regulations are not written by people who are familiar with manufacturing and thus, impose unnecessary burdens.

A source I’m not at liberty to quote directly (but you can read it here) for legal advice -although she’s an attorney specializing in these matters AND an environmental engineer says

Another issue is lead paint limit. This limit applies only to painted or similar surface coatings – which would probably mostly be zippers, zipper pulls and perhaps buttons. This standard goes from 600 ppm (now) to 90 ppm. This applies for all painted materials for consumer use – not just kids stuff. I don’t know enough about your industry to know if this coating standard applies to painted on decorations on clothing. But, at the very least, any components of finished garments are going to have to meet this standard.

Three brief points:

  1. Regarding the phthalate regulations (a lengthy discourse omitted for brevity) testing for phthalates is roughly three times the cost of lead testing. For purposes of comparison, lead testing is expected to be about $30,000 for a ten piece line in three colorways.
  2. The lack of available labs needed to absorb the dramatic increase of testing required. Assuming everyone had the money and time to do it, it would still be impossible without the facilities and inspectors to do it.
  3. The requirement of “third party testing”. For our purposes this means you cannot avoid legal liability by relying on testing results supplied to you from your vendors. No no. You have to retest everything yourself. See why it’s problematic that these regulations were not written by those with a background in manufacturing?

Initially, we little guys were feeling a bit put out that these regulations would affect us a lot more than the big guys who have more money. As it turns out, they’ll be hurting in ways we won’t because they are factored. Selling to big box stores is done through loans, so called factoring. On the manufacturing side, loans are extended based on the receivables (invoices) that buyers owe the manufacturer. On the other side, factors lend money to stores to buy the inventory. Factors are a sort of financial middleman. Loans are more than just mere money changing hands; loans are legal contracts. To have a legal contract, the actions described within them must be legal. For example, a contract to hire a hit man is an illegal contract because the act of murder itself is illegal. Thus, loans for inventory and receivables cannot be legally extended unless the goods themselves are legal. Without the CPSIA compliance guaranty certificates, they won’t be.

Since most of the products intended for February delivery are either already made and on the way here or are in the process of being made and few to none of the inputs were tested beforeheand, all of these items will end up in bonded warehouses or landfills because it is illegal to sell them even as seconds. Products made domestically are not immune, they’re in the same boat. A factor is not going to break the law and make an illegal contract so a retailer can buy illegal goods. The end result is there will be a whole lot less product on store shelves. Since there won’t be much to pick from and costs are higher, consumers can expect to pay much higher prices. Prices will be rock bottom on February 9th, but overnight, prices will dramatically increase. The anticipated losses go into the hundreds of millions of dollars. This is not an exaggeration. According to 2002 U.S. Census Data (the last year for which data is available) just considering small U.S. clothing manufacturers, their contribution to the economy is over 900 million dollars annually. Small manufacturers with fewer than 20 employees comprise 68% of total apparel manufacturing in the U.S.. This of course does not include the untold numbers of stores that will go out of business too.

The point is now, what can we do? In the forum we’ve been devising a grassroots plan that we hope to launch tomorrow. One of our members who is familiar with regulatory processes, is drafting a letter you can mail to regulators. You can call your congressman. You can write a letter to the editor of any papers you read, on or offline. You can post about this on your own blog, post comments on blogs you read and talk it up in forums you belong to. You even need to lobby your suppliers too. Ask them what they’re doing about it. They’ll be hurting too if we’re not buying sewing machines or CAD systems. Resolve to post somewhere at least once a day.

The problem we have is that this is a very popular law with consumers and legislators. Because it is so complex, they don’t know what it really means or what its effects will be. In the upper echelons, most of the high level organizations like the AAFA, The Toy Association and the electronics industry are lobbying against it. Their problem is that they are not the grassroots. That’s you. The vast majority of Americans think this is a Great Law, striking back at unethically made low cost imports and thus, legislators are leery of what high level representatives say. That’s why it’s up to you to talk to other consumers like you. We need for consumers to know that this law will put many of us rather than importers out of business at a time when the economy can least absorb it. They need to know that come February, many of the products they expect to find in stores won’t be there. I think consumers will start to get the hint once they start getting tickets for transporting their infants without car seats because they can’t buy them in stores. Considering the consequences, there is little doubt the rules and regulations such as they are, will be rescinded. The only issue is, will they be rescinded before they bury too many of us? This law represents the last nail in the coffin of U.S. manufacturers. Even I’ll be out of a job. Why publish a blog if nearly no one can manufacture?

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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  1. Paula says:

    “See why it’s problematic that these regulations were not written by those with a background in manufacturing?”

    Let’s face it, these regulations are written by the 20-something staffers who work for the legislators.

  2. Pam says:

    Over the past 4 years I have built my business with financial help from family and friends and very small bank loans. Now, when I am on the brink of doing some real volume…this comes along!!!!

    Arrrrrgh! I feel helpless, hopeless, panicked, and seriously depressed.

  3. Paula says:

    Regarding section 102, although there is a statement about ALL manufacturers, the remainder of the language in that section is directed to children’s products. Usually, what happens with legislation / regulations such as this is that the agency involved issues clarifications and revisions that correct the language to agree to the intent of the Act. And, in true political fashion, that depends on what the definition of “similar” is. I am advocating waiting around for the interpretation.

  4. Teresia says:

    I am pulling back my business and idea for clothing for children with sensory sensitivities. I do not know how I can do it if this isn’t changed? I am not going out of business, but I haven’t done a whole lot than set up a few items and test them. We need to work together to get this changed. I can understand toys, but clothing?

  5. I’m really nervous about this. Any mom & pops like me would definitely go out of business. I can’t even sell a baby blanket w/ out a certificate! Ugh, I am freaking out and am trying to get the twitter group to respond/fight back (like they did w/ Motrin last weekend).
    twitter me:
    Lets get this info out there and people talking!

  6. john says:

    I wonder how it will affect us retailers? will everything have to have a certificate, and if it does not can we sell it with out facing fines?

  7. Jason Gold says:

    I am a small manufacturer of USA made natural toys. This legislation is devastating to our business. We created an alliance of like-minded companies that are seeking to bring awareness to the ramifications of this legislation. Please visit our site to learn more about our efforts. Jason Gold – Camden Rose &

  8. Molly says:

    This will definitely put me out of business as I only design and sell children’s clothing. My volume is just picking up and I have begun building a sales team that will be selling my clothing via trunk shows. So what happens now? Do I need to sell off all my inventory before Feb. 9th?

    Off to fight and write letters!

  9. michele says:

    This is just unreal! This congress has destroyed our country and there is no end in sight now. It is hard to believe these so called “smart” people are soooooooooooo STUPID!

    We have to make our voice known…I’m afraid this will be just one in many battles we will have to deal with in the coming 4 yrs. MAKE THOSE CALLS AND WRITE LETTERS!!!!

  10. Kathleen says:

    This congress has destroyed our country and there is no end in sight now. It is hard to believe these so called “smart” people are soooooooooooo STUPID!

    We really need to move beyond blame now. What’s done is done. Congress was only following the mandate of consumers who cheered when the law was passed. Rather than blame, our onerous task is to educate and explain to consumers why this law is not in their best interests. Then they’ll lobby their representatives. Manufacturers are hampered in ways consumers are not because their interest is presumed to be strictly cost based.

    Impact to consumers can be summarized as:
    1. A dramatic reduction in the range of available products at retail.

    2. A substantial price increase -who can say what that’ll be but some designers say their costs increase to such extent that the retail price would double. If kids clothes are expensive now, they’re not going to get any cheaper now.

    3. Certain classes of products, specialized items used by the disabled, deaf and blind will effectively be banned. Being a tiny market, the manufacturers are likewise tiny and they don’t have the resources to pay for testing.

    4. Significant job losses in the US, all at a time the economy is least able to withstand it. This means more families who become marginalized, perhaps homeless but certainly without health care straining the safety net and burdening tax payers even more.

    Additionally, it seems many consumers resent the bureaucracy and duplicative unnecessary costs loaded into the law. Everyone can commiserate and are annoyed with unnecessary paperwork and regulations; they can relate.

  11. michele says:

    Well said Kathleen!! I just had to vent a little… I am contacting everyone I can think of including the news media to bring some attention to this….the impact of this will be huge and people need to get involved. I’m sure most of us know of someone who either has a boutique, make children items, etc.

  12. Michele, when you say “I’m afraid this will be just one in many battles we will have to deal with in the coming 4 yrs,” what kind of connection are you making between the current administration, who passed this law, and the new administration that will begin in 2009?

  13. I make and sell childrens sweaters and had just started developing a line of children clothing to sell on Etsy. I am so frustrated as I don’t know whether to continue or not. I’m retired and this helps to supplement my retirement income. Since we will have a new President, Senate and Congress, hopefully they won’t be as stupid as the last group. We only have a few months to get the law changed so that so many of us won’t have to close our businesses.

  14. carley says:

    Yes, this is very sad…the saddest part is that stores like Walmart who are known for carrying products from countries known to export “tainted” products will not be affected….I love how the “little guys” are always the ones that are hurt in this litigious society.

  15. I just signed a petition regarding this act. It’s at
    As the mom and grandmother of a family of latex sensitive children and grandchildren, some who also have eczema as I do, making things for my kids, grandkids and a few other people who suffer with the same things is more of a service than a business, but the fact remains that if I have to pay for this testing, I will be out of business. Apparently the act didn’t have much thought behind it. I understand the idea, but the impact on “the little man” will be disastrous. I urge anyone who can to go sign this petition, and to write senators and congressmen and raise a fuss.

  16. Peggie says:

    I hope something gets done to block this or change it. I am just starting out and this is so upsetting to me. I signed the petition and had not thought of the editorial etc. Thanks for bringing it up.

  17. Deb Stahl says:

    I’ve had my Etsy store less than a year, trying to work out when – and whether – I can ever make the jump from “hobby” to “business.” This legislation would put a nail in that coffin for sure: the business AND the hobby!

    In addition to contacting lawmakers, is there anything we can do to get some major press behind us? I’m thinking TV stations or papers like The Washington Post or NY Time?

  18. I am a small business owner that sells our products through large and small channels. Our very large channels sent me a letter last week asking that I contact my suppliers (all tiles and ceramic products) to confirm there is no lead in them – which there is not. I have not been asked by any of our other accounts to test my products. I am hoping this does not go into affect…..with the down economy this will be the nail in the coffin for us.

  19. Lugia says:

    Can someone tell me if this affects stuffed animals or mascot costumes? Knowing people have worked for 20 years plus, on mascot costumes for conventions and making a living- as i’m one of those artists…. Well, I do need to know if it does affect long furred costumes as well. I mean, thousands and thousands of hours just to get good at it- talking about the professionals here. Do reply, thank you.

  20. Kitty says:

    This just goes to show what consumer paranoia can accomplish. I long for the 50s, 60s and even the 70s where parents still bought tonka trucks made of painted metal, real wood toys (also painted) and handmade clothing and handmedowns were the norm. Back then parent’s weren’t so overly anxious about lead paint, germs, sharp edges and stuff – maybe it’s because back then parents actually still watched their kids. And kids learned by experience, if they hurt themselves using a toy improperly they would know better next time, if they got sick from something they would avoid it in the future. Overprotective parents have fueled an entire economy of germ killing products and as a result we now have lots of kids who’s immune systems are compromised because they had no chance to build up antibodies, allergies and asthma are at their highest levels. This new legislation is just the next step. I see a future of kids living in sanitary white rooms wearing non-colored clothing and not being allowed outside for fear they may catch something or hurt themselves in anyway. Good Grief!

  21. Bettie says:

    This law will totally wipe out my small business of sewing maternity/nursing dresses and children and adult clothing! So much for Big Daddy Government. Whatever happened to “father (and mother) knows best?!”

  22. Penny says:

    This is really heartbreaking for those of us who not only sell used kids clothes, but also for those of us who buy used. Not to mention we who donate to the second hand shops. Will this horrid law also effect charities such as my church who give clothing to the needy?

  23. Jim says:

    Another poster figures 20 yr. old staffers wrote this legislation. Maybe so in it’s idiocy.
    If this goes thru as written i’m done – no choice.
    My gut feeling, especially with it done under W and fast, is a way for the big boys to consolidate wealth.
    Who wants to bet every politicians brother, uncle, friend, etc. owns a testing facility?
    My current endeavor was to replace lost income from basically beig outsourced. Now this?
    Won’t be long now ’til the thirty second rule applies!

  24. Alice says:

    Our local Women’s Shelter has a history of lifting impoverished, disadvantaged and distressed mothers out of dire circumstances into self-sufficient positions of responsibility in the community. What will happen to them when the community can no longer support this program with donations of good used children’s clothing, toys, and equipment? The Shelter can’t afford the testing. Must the Shelter refuse the donations?

  25. Elizabeth Reyes says:

    If this law really does come into effect, how are they going to enforce it? How are the authorities going to ensure that the toys sold at garage sales are safe? What about used toys sold/auctioned on sites like eBay or Barnes&

  26. Hope Anne says:

    Ebay WILL enforce and police it as much as they can. Trust me on this–I’ve seen enough as a long-term Ebayer–both seller and buyer. I’ve had a listing or two pulled myself when I inadvertantly violated a home-school companies law about reselling curriculum of theirs! Ebay DOES keep close tabs, so don’t expect to be able to buy or sell much on Ebay that is banned.

  27. I see a future of kids living in sanitary white rooms wearing non-colored clothing and not being allowed outside for fear they may catch something or hurt themselves in anyway. Good Grief!

  28. Melodie-Boulder CO says:

    I work in the outdoor apparel industry. The lack of planning and understanding for the financial impact on the apparel industry on the part of congress is hitting us hard. The implementation of this legislation did not take into consideration the timing and manufacturing lead time of apparel. What’s more, the exact test method has not been specified for compliance.

  29. Ruth Koress says:

    I am a manufacture’s representative for many lines pertaining to the fashion industry and I have
    received this e-mail from one of my very new clieints that is just starting out with a children’s
    line. I know that all these restrictions and testing will unable her to put her line out. I know
    that this will affect many of my customers, even the ones that have managed to survive in
    this unresting ecomomy, and there should be some other voices heard from those in charge
    on this very terrifying subject.

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