From: Rick Woldenberg
Sent: Wednesday, November 26, 2008 12:34 PM
To: Mary Toro (MToro@cpsc.gov); Nancy Nord (email@example.com); Joe Martyak (firstname.lastname@example.org); ‘email@example.com’; ‘firstname.lastname@example.org’; ‘Judith.email@example.com’; ‘Cathy.firstname.lastname@example.org’; ‘Christian.email@example.com’; ‘Brian.firstname.lastname@example.org’; ‘Shannon.email@example.com’; ‘Brian_hendricks@hutchison.senate.gov’; ‘firstname.lastname@example.org’
Subject: Cost of Testing
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.
Learning Resources, Inc.
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.
- 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.
- 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.
- 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.
Have you seen Rick Woldenberg’s speech at the CPSC conference on November 6? More interesting than you’d imagine, he brings up additional points regarding subassemblies in kitting, how commodities -sans lot numbers- are proposed to be tested and a whole lot more. While a larger enterprise, he cogently makes the case for even the smallest of producers stating that these regulations will eliminate specialty products sold to the blind and deaf among others. One thing I hadn’t considered; science kits for use in schools will cease to be saleable as currently known, many components of which the sources cannot be traced (consider a commodity like aluminum foil or the common paper clip) can’t be included within them. Considering the current state of science education in the U.S., this cannot be good news.
By the way, Rick Woldenberg is the person credited to have originated the phrase “National Bankruptcy Day” in relation to February 10, 2009.
You can also watch proceedings from the CPSC Public Meeting on Lead from Thursday, November 6, 2008
Videos from the meeting:
This is feel-good legislation among Congress that passed 424 to 1.
While we applaud the actions of Congress and the CPSC to provide greater protection for our children, the process and implementation of the rules and regulations are simply untenable putting more of us out of business at a time the economy can least weather it.
This page will be updated with suggested activities for concerned consumers and businesses.