CPSIA is sending us to China!

From the if-you-can’t-beat-them-join-them department is Jason Cheung. At least for him, CPSIA has been an unintended blessing. Did Congress intend for us all to move to China? They’ve certainly made the decision easier for Jason who writes:

With all the bad news and negativity surrounding the CPSIA. I’ve actually found a silver lining in it. Our family was recently able to purchase a new home! Unfortunately, that home is in Hong Kong China. How were we able to do that? Well, the rate we were offered is a low 3.5%. What’s even better though is that you can open a bank account and they will give you the same 3.5% interest rate for the money you put in there. Go ahead and read that again. Yes, that’s 0% financing on whatever you have in the bank. In addition to that, we’re also in the process of securing a 3% business loan that the Hong Kong government is offering as a stimulus. Where do you think Hong Kong gets the money for this? Maybe it’s coming from their 16% maximum income tax. How much money would you have left over if the government took only 16% of your wages? It’s actually less than 16%, if you’re married, own a home, etc. Now also imagine almost all the testing fees people are paying being funneled into one city … not a state, but one city. That has got to help. When the CPSIA went through, I never had to wait so long for someone to take my money.

More good news, our company taxes have gone down this year because I sent all my profits back to Hong Kong for safety testing! Hopefully the 8th largest economy in the world (California) can get through a budget crisis without my tax contribution.

Jason Cheung
General Manager
Huntar Company, Inc.

To put this in the proper perspective, here’s the first letter in this series he sent to his representatives in Congress:

My company is family owned, currently run by my brother and I.  We do toy design, wholesale and manufacturing for us as well as other companies.  While there may be good intention, the CPSIA is dangerous and ridiculous.  In today’s economy, this law has already cost my company over $50K.  This does not include any loss sales, potential opportunities, etc.  This is literally only from the cost of testing I’ve incurred as well as other costs, such as increases in insurance.  That in itself increased from $6K to $18K this year.  By the way, 20+ companies wouldn’t even give us a quote, even though we’ve never even had a claim.  Do you know where that $50K came from?   It came from my employee bonuses, money I would’ve used to purchase a new car, money I would have used on new product development with designers and engineers.  Instead, I sent the money to an overseas testing lab to tell me something I already knew.

Because of the manufacturing aspect of our business, we’re constantly exposed to new safety regulations both in the United States and Europe.  To be honest, we’ve already started cutting phthalates and opportunities for phthalates from our business two years ago as it began as an issue in Europe.  We also source paint from Germany to make sure it is consistently lead free.  In addition to these, we inspect supplier factories to ensure we receive safe product.  We also require they provide us with safety testing every 6 months for things such as paint and glue.  By the time I sent samples for CPSIA testing, I had already received tests stating materials were safe, conducted an in house test to verify the tests for lead, and had an existing test showing the completed product was safe.  Regardless, I had to test once again.  That’s correct, some of the inventory I hold has now been tested four times for the same thing.  The best part is, I’m not even finished yet.  I don’t have enough money to continue testing the rest of my line for phthalates in ABS.  FYI, phthalates is a softener used in PVC plastic.  It makes no sense to have it in ABS, but I’ll have to test it anyways.  It’s sort of like testing a rock for lead.  Wait … that’s actually not a good example, because testing labs have told me a rock would never pass.  I guess you can’t really sell rocks either.  Make sure you let playgrounds and schools know to clear their areas and classrooms of any rocks or pebbles.

While I enjoy what I do, if this continues to where it seems to be heading, I will have no choice to stop.  I am not financially able to do what is required by law.  I honestly do not care to be fined into bankruptcy or charged with felonies either.  I won’t go bankrupt, I’ll be ok.  I can still rent out our warehouse or find other means of income.  However, I’m not sure what my employees will do.  In today’s economy, I’m not sure they’ll be re-employed.  If anything, that’s why I think they were ok with paying for some of the required testing.  Then there’s also people we contract out to.  I wonder if the graphic artists we normally pay $20K+ each year will be missing our business.  I suppose the freight/shipping companies can always ship something else too.  To be honest, I don’t have the time to worry about them.  At this point, I’m just hoping I won’t get arrested.

Jason Cheung
General Manager
Huntar Company, Inc.

National Bankruptcy Day

The heavens haven’t opened and rained fire today; the stay mitigated some effects which is in some ways, unfortunate, putting off for tomorrow that which will surely pass. The day will be all but seamless to consumers. However, over the coming months, I have little doubt consumers will increasingly complain there is little choice and selection in children’s products. They can’t buy things they took for granted such as replacement parts for bicycles. Prices will increase and product choices will decrease; even among used items. Unfortunately, consumers will look at the “evidence” on store shelves and blame manufacturers for being cheap and greedy. Consumers won’t know to blame the special interest groups behind this law, and since they certainly can’t blame all the manufacturers who went out of business, they’ll just blame what few remain standing. It all started with this law folks. If you’re a manufacturer, you can’t win. You just won’t.

No one expects this matter of the stay to rest unchallenged so we may be up and at it sooner rather than later. And that my friends, could be a very good thing.

Vote to influence Obama’s economic policy

CPSIA is saving our schools, one kindergardner at a time

From: Rick Woldenberg
Sent: Wednesday, November 26, 2008 12:34 PM
To: Mary Toro (MToro@cpsc.gov); Nancy Nord (nnord@cpsc.gov); Joe Martyak (jmartyak@cpsc.gov); ‘tmoore@cpsc.gov’; ‘jmullan@cpsc.gov’; ‘Judith.bailey@mail.house.gov’; ‘Cathy.hurwit@mail.house.gov’; ‘Christian.fjeld@mail.house.gov’; ‘Brian.mccullough@mail.house.gov’; ‘Shannon.weinberg@mail.house.gov’; ‘Brian_hendricks@hutchison.senate.gov’; ‘david@commerce.senate.gov’

Subject: Cost of Testing

Mary,

I want to continue our dialogue over the issues presented by the CPSIA. I realize you are swamped with inquiries from many sectors, so I thought I would send this comment in via email.

I have previously raised the serious issue of the high cost of testing under the CPSIA. To be clear, the issue is not about the testing per se, rather it is the cost of the testing to prove compliance with the CPSIA. It is our legal obligation to produce products that comply with the law, of course. Financing proof of that compliance is the problem that confronts industry right now.

The attached lab test is a great example of the dilemma caused by the CPSIA testing requirements. The item in question is a new item called Let’s Tackle Kindergarten. This item is similar to other items in our product line and is quite uncontroversial from a safety standpoint. Because of our experience testing virtually identical items, we know this item is in compliance with the CPSIA on phthalates, lead and its other requirements. Nevertheless, to prove compliance, we will apparently have spend $6,144.06 on myriad tests. The product will be no more or less safe after this expenditure. No child will be safer or better protected. Our company will simply be much poorer.

High testing costs will have a significant effect on our business and businesses like ours. First, the cost of testing has increased about 5x – 20x under the new law. We do not believe these costs can be recovered because under current economic conditions, raising prices is not an option. Thus, the breathtaking increase in cost becomes part of our overhead.

The testing costs cannot be absorbed by small and medium-sized businesses. At typical net profit levels prevailing in the children’s products industry, the $6,144 cost of testing probably exceeds the anticipated total net profit derived from three or more years’ sales of the item. This does NOT take into account the cost of development, the cash expense of buying the inventory or the cost of owning inventory (usually estimated at 2.5% per month). Given that children’s products have finite commercial lives (three years is a good life for a consumer product), the CPSIA test costs might exceed the present value of creating a new item for many, if not most, businesses. So, will this product ever come to market? Not under the CPSIA. The only products left for sale will be mass market items where the scale of their production runs can support this wasteful expense. I believe this “mass market world” is not in the national interest as specialty companies like Learning Resources are an important means by which consumers obtain the products and services they need in our economy.

Notably, the gross cash expense required to finance these tests right now is literally unbearable. The law requires that all of this testing must be completed on all products in our line all at once. Several years of “catch-up” testing must be financed in just a matter of a couple months, bunching up the vast expense into one or two financial statements. Together with other excessive costs suddenly imposed by the CPSIA (for instance, lot traceability infrastructure), the economics of producing children’s items are being distorted into an unrecognizable form. If children’s products companies cannot produce a fair profit, they won’t be able to attract financing or risk capital, and the jobs (and products) will disappear. This problem needs a solution fast, and if we can’t come up with one, no one in Congress or the CPSC should be surprised to see bankruptcies rise inexorably as a result. The price will be paid.

I would appreciate the opportunity to dialogue with you on these rules and other negative incentives under the CPSIA. I am confident that through a partnership with industry, the CPSC can develop a common sense approach to safety rules and enforcement that will reward those companies committed to compliance while discouraging the bad actors who give the children’s products industry a bad name. The time to act is now. My associates in the business community are under intense pressure to pay these exorbitant testing bills – and once the money is shipped to the Chinese testing companies, there will be no getting it back.

Thank you for considering my views on this important topic.

Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.

Watch the CSPC FAQs

From Mike Lee owner of Sarah’s Silks. Item #3 is particularly important for kindred.

I just spoke with Mary Toro, of the CPSC. She gave me quite a bit of specific information regarding our own products and compliance, but also some general information that I think would be useful for other manufacturers.

1. suggested I check CPSC web site FAQ’s on CPSIA on a daily basis at this time as she expects a lot decisions to be posted this week. These are very specific answers to questions such as are shoes and socks subject to Phthalate regulations.
2. discussion on exemption for textiles from phthalate standards. She definitely does not see CPSC granting an exemption for textiles due to the problem of those little plastic footsie things on baby and toddler pajamas which have used phthalates. So perhaps a case could be made for pushing for uncoated textiles.
3. she is expecting a ruling or at least a posting on FAQ on the issue of component testing vs whole product testing in the next few days.

Activists Meet Up!

In the interests of promoting greater unity in the CPSIA fight and being that Fashion-Incubator has had the most active participation with solid information (no mythinformation or rumors), the CPSIA section of the forum has been opened to the public. At last count there are 40 different threads, nearly 700 posts and thousands upon thousands of views. Anyone can read, post, create stickies, announcements etc in this section (all other sections of the forum are closed to the public unless you join).

In participating, act as you would sitting in someone’s living room. Please don’t post “is my [child related] product exempt” because it isn’t. It just isn’t. Likewise, any posts containing rumors, unsubstantiated claims or mythinformation will be removed. I realize it will be difficult and time consuming to read through some of the multi page threads but please make use of the search feature because it is likely your question has been answered. As most of them have been; we’re focusing on activism at this point.

Speaking of activism, there is now an automated method of emailing all of your legislators from one simple window. Scroll down, fill out the form (don’t forget to include your state of residence) and all of your senators and congressmen will receive your message.

Activism: Trade Groups

This page will be updated with news from other organizations working in tandem on these issues.

National Bankruptcy Day

Where kindred will expound and elucidate regarding the CPSC and CPSIA regulations and guidelines. In other words, this is a test entry.