National Bankruptcy Day

As Holiday shoppers cross items off of their lists, many are unaware that there is legislation just around the corner to help give them confidence in making safe purchases. The Consumer Product Safety Commission has passed legislation known as the Consumer Product Safety Improvement Act (CPSIA).

The CPSIA aims to set what would be the most stringent guidelines worldwide for children’s products containing lead and phthalates (a chemical used in some vinyl products). Due to largely go into effect February 10^th, 2009, anything at all intended for children ages 12 and under must meet these guidelines with certifications of doing so from a CPSC accredited laboratory.

As a father of two, this sounds great! In fact, I was so concerned about lead contamination in toys that I started my own company making unfinished wooden toys. But as a manufacturer who must comply with this law, I’ve learned it’s not as pretty a picture as it might seem.

For starters, anything, and I mean anything, intended for children 12 and under must be tested, at a cost of up to $4,000 with an average of around $500. The difficulty for most small and mid-sized companies, however, is that they will often be the ones responsible for having this testing done, for each item they make, per batch. Let’s take a closer look at what this means.

Why is the manufacturer responsible for testing? Because not everything made by a supplier is actually meant for children until a manufacturer takes that item and transforms it into something a kid would use. For example, let’s say you have a yarn supplier. They sell all sorts of yarn to manufacturers. One manufacturer might make adult items with this yarn, which exclude them from needing any testing under the CPSIA. But any manufacturers who turn that yarn into children’s items are now required to get that yarn tested. Each color, by the way.

So if the manufacturer makes an item that uses 3 colors of that yarn, there will be an average of $1500 in testing. If they make another item with 3 more colors, there’s another $1500. Once they use up the yarn in a particular batch, the next batch also needs to be tested.

Here’s another example. I have a children’s wooden biplane that I make. It uses Western Red Cedar, Red Oak, Poplar, Birch and Maple. Assuming I was able to make 1 plane from the same piece of each wood, I would be looking at $2,500 in testing. The unfinished plane sells for $75. Even if I took out the use of different woods wherever I could, I would still be left with Maple wheels, Birch dowels, 1 type of wood for the thick body and engine, and another type of wood for the wings. Wow- I am now down to only $2000 in testing.

So this leads a lot of people to wonder about suppliers. What if the suppliers offered their standard supplies, as well as pre-tested batches for manufacturers who will use them in children’s products? Well, the bigger question is why should they? They would just be incurring additional expenses that they really don’t need to take on. Whether they test their supplies or not, their sales will be there. And quite possibly, the cost of losing sales from children’s items manufacturers would be less than the cost to perform the testing. After all, not all of their children’s products manufacturers are unable to test, so they would only be losing their small and mid size customers.

And the scope of this legislation is just beyond words. For starters, every type of material must be tested- nothing is exempt. The garment industry is really getting slammed in this. They will be forced to test batches by SKU, rather than by Style Number. What’s the difference? Let’s say you go to buy a pair of jeans, and there’s the Wall o’ Jeans standing there, taller than you. You like a comfy style, so you go to the loose fit jeans and begin looking for your size.

Each one of those sizes is a separate SKU. Whereas the entire “loose fit” style is assigned the same style number. It is possible the different sizes are made from some of the same batches of fabric, but that doesn’t matter under the CPSIA. So where maybe 5 styles should be enough to be tested, the CPSIA requires each and every size within each style be tested. Oh yea- and the buttons and zippers, too.

This legislation is also retroactive for any pre-existing stock as of February 10^th, 2009. That means no more selling your kids old stuff on eBay or Craigslist. No more donating them to charities. As far as I can tell, even Goodwill stores will not be able to sell these items, which is really a shame.

Now, there are some merchants who are preparing for this in a different way than through testing. Some merchants are ready to start labeling and advertising their children’s items are not intended for children 12 and under. Well sorry folks, but people from the CPSC office have specifically clarified that the 12 and under rule is at their interpretation- not your label. So if they determine something you sell is for children 12 and under, bingo- you are obligated to provide the certification number assigned to that item by the lab that tested the batch it came from.

And this now brings us to batches. How do you test batches among commodities? If you get a box of paperclips, there might be paperclips from 3 different manufacturers in 1 box. Testing one of those is no guarantee that the rest are compliant. There are other little nuances that are clearly not thought out, like saying each item must have the lab certification number affixed in some way. Something that is easier to do for large companies that use batches to track their inventory anyway, but I can tell you I buy wood in such low volume that about every other toy I make would be considered a separate batch.

I am fortunate, though. While I do have some minor business expenses, I am not in a position where I take loans out against my inventory, like some companies do. How will they get loans to continue on February 10^th? What bank will be willing to give them money against product that the company can’t afford to test? One example I have seen was a school Science kit provider, who estimated to test 1 of each item they provide would cost them $20 Million off the bat, not including continued testing for new batches.

I understand what the government was trying to accomplish, but this isn’t something to just throw out there and figure out as you go along. My understanding is that each penalty carries a $100,000 felony charge. There is already an overseas German toy maker that has stated they will no longer be shipping toys to sell in the US. And the legislation doesn’t even go into effect for another 2+ months.

If you are like me- if you want to see SOME sort of legislation, but not one that makes businesses nationwide go bankrupt, please take a moment to write your Congressmen, sign this petition and join the group on Facebook:

To contact your Representative:

https://writerep.house.gov/writerep/welcome.shtml

To contact your Senator:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

To contact Nancy Pelosi:

http://speaker.house.gov/contact/

To sign the online petition:

http://www.ipetitions.com/petition/economicimpactsofCPSIA/

To join the Facebook group:

http://www.facebook.com/home.php?#/group.php?gid=38306568596

And if you would like to read more on the CPSIA:

http://www.cpsc.gov/ABOUT/Cpsia/cpsia.html