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The Consumer Product Safetly Improvement Act strives to make children’s products safer, but the legislation’s unintended consequences threaten to bankrupt small businesses

By Kathryn Geurin

Immediately following the presidential election, activist Web site change.org invited the public to submit and vote on ideas for change in America. Last week, the site presented the results of its two-month-long vote to the Obama administration. Among the many hot-button issues presented—including higher education, marriage equality, health care, sustainable energy, and the repeal of the Patriot Act—was a demand that has garnered significantly less attention nationwide, “Save small business from the CPSIA.”

The Consumer Product Safety Improvement Act (H.R. 4040) was introduced in the U.S. House of Representatives in November 2007, following the flood of recalls of imported toys containing dangerous amounts of lead. The complex legislation, which places stringent regulations on the manufacture and sale of children’s products, passed in the House the following month without opposition. On July 31, 2008, the act passed by a landslide 89 to 3 vote in the Senate, and on Aug. 14, then-President George W. Bush signed the CPSIA into law—a nearly unanimous decision to protect children from potentially fatal exposure to lead and phthalates.

But soon after the passage of the seemingly unassailable legislation, an outcry began to build. Many manufacturers and retailers of children’s products, along with book publishers, artisans, concerned parents and consumers, even the American Library Association, have begun to panic about the monumental scope of the CPSIA’s impact. The first stage of the new regulations, goes into effect on Feb. 10. By many in the children’s-products industry, the date has been dubbed “National Bankruptcy Day.”

“This law makes what we do illegal,” Rick Woldenberg, chairman of Learning Resources, a Chicago-based manufacturer and distributor of educational toys and supplies, told attendants of a November panel held by the Consumer Product Safety Commission. “Or if it doesn’t make it illegal, it makes it practically illegal, that means illegal in the practical sense, because I can’t do, economically, what you want me to do.”

The legislation is massive in scope. It provides, among other things, increased funding to the CPSC, the federal agency responsible for regulating and enforcing the safety of all consumer products. It outlines clear labeling and tracking requirements for all products and shipments, and establishes fines and criminal charges for selling noncompliant goods and legal protections for whistleblowers in noncompliant companies. The 63-page act (Public Law 110-314) sets the total lead limits for all products intended for children ages 12 and under at 600 ppm as of Feb. 10; that limit drops to 300 ppm on Aug. 14, and on Aug. 14, 2011, the limit drops to 100 ppm if the CPSC determines it technologically feasible to do so. The CPSIA also bans the use of six types of phthalates, a type of plasticizing agent, in children’s toys and child-care articles.

The torrent of opposition does not stem from the regulations themselves, but from the short implementation timeline, the mandated third-party testing and certification—which can run anywhere from $100 to more than $20,000 per product—and the determination by the CPSIA that the new lead limits apply retroactively to products already on the market.

The legislation deems children’s products that surpass the total lead limit to be “banned hazardous substances.” This language led the CPSC to issue an advisory opinion in November asserting the retroactive application of the regulations.

“I borrow against this inventory,” Woldenberg informed the CPSC at the November panel. “Who’s going to fill out my borrowing base certificate for me on Feb. 10 and make the representations to my bank about the salability of my inventory?” It would cost tens of millions of dollars to bring the stock of his 700,000-square-foot warehouse into compliance, and there aren’t enough certified testing facilities to fulfill the sudden demand. “If, in fact,” he told the CPSC, “the law was intended to be applied retroactively, it must be that Congress wanted all these companies to go bankrupt. Immediately. On Feb. 10. That will be national bankruptcy day.”

While the bulk of existing inventory is compliant with the new regulations, proving its compliance is a nearly impossible task for most companies. Some of the inventory would not be compliant, but likely poses little danger to children. While lead paint is often used simply because it’s cheaper, the CPSIA limits the total lead contend of a product, and lead often is included out of necessity. The heavy metal is malleable, noncorrosive and lubricating. Countless items on the market contain lead, including the valves on bicycle tires and the nibs of ballpoint pens. One company has pulled its microscope light bulbs off the market because a drop of lead solder is used on the base. Lead is hazardous only when ingested, and as many manufacturers have pointed out, middle-school students are unlikely to suck on microscope bulbs.

Exemptions have been made for electronics and inaccessible components, but, like much of the legislation, including the very definition of “children’s products,” the specifics are murky, and it is hard to tell where the line will be drawn on “inaccessible components.” A component is considered accessible if it can be exposed by wear or breakage. Depending on how thoroughly an item is destroyed, breakage can expose just about anything.

According to Carol Pollack-Nelson, a human-factors psychologist specializing in product safety and owner of Independent Safety Consulting in Rockville, Md., while the intent of the CPSIA is very positive, the regulations are too far-reaching. She supports the strengthening of the CPSC, an agency she believes has been floundering for years “without direction or the muscle to fulfill its mission.”

But Nelson, who frequently consults on legal cases involving product recalls, is concerned that the legislation does not take the use of a product into consideration. “It’s never good to underregulate,” says Nelson, “but it’s also never good to overregulate. There are unintended consequences with overregulation, just like there are with underregulation. There will be incredible amounts of waste, molds and products that will need to be destroyed and discarded. It will result in a flood of products into landfills, massive job loss, and it will be wasteful of the resources of the CPSC.” Nelson has presented her opinion to legislators and the CPSC, arguing that they must “make sure the regulations are capturing what they want,” and “that they’re not regulating products that pose no threat.”

The testing and certification requires that finished products be tested, not materials, and that every component of every item must be tested separately. A price quote from a CPSIA-authorized testing facility says that testing Learning Resources’ product Let’s Tackle Kindergarten, a tackle box filled with learning tools—flash cards, shapes, counters and letters—will cost $6,144.

Items made from materials known not to contain lead, or items tested to other comparable standards, must still be tested. A certified organic cotton baby blanket appliquéd with four fabrics must be tested for lead at $75 per component material. Award-winning German toy company Selecta Spielzeug—whose sustainably harvested wood toys are colored with nontoxic paints, sealed with beeswax, and compliant with European testing standards—pulled out of the United States market at the end of 2008, stating that complying with the CPSIA would require them to increase their retail prices by at least 50 percent. Other European companies are expected to follow suit.

A certification exemption has been made for resellers, such as thrift and consignment shops. However, the sale or distribution of noncompliant items is still banned. Resellers are faced with the decision to discontinue the sale of children’s items or risk severe fines and criminal charges. With per-item fines between $5,000 and $100,000, the cost of unknowingly selling a single baby onesie with a noncompliant snap could force resellers out of business.

Even books are not exempt. The Association of American Publishers has provided the CPSC with evidentiary support that books and other printed materials do not place children at risk for lead exposure. However, the commission holds that the CPSIA does, in fact, apply to books. Since materials testing is not sufficiently compliant, a textbook company that prints a spelling book and a math book—on the same paper, on the same press, with the same inks, on the same day—must test both books separately.

The American Library Association released a letter to Congress earlier this month stating that “if the CPSIA is applied to books and paper-based materials, as indicated by the Commission’s General Counsel, public, school and museum libraries will have to remove all their books or ban all children under 12 from visiting. This cannot be what Congress intended.”

Rachel King, manager of the Little Book House in Albany, interrupted her reading about the CPSIA to discuss the implications of the legislation on the children’s book store. She describes the confusion surrounding the CPSIA as “the question of the day.”

“Of course the bottom line is that we want people to be safe, but there is a lot of agitation out there, a lot of conflicting information. The requirements are not thoroughly thought out,” says King, emphasizing that books do not pose a health risk to children. “We’re trying to stay as informed as possible, to keep in touch with our publishers. It’s a little early to know where the chips are going to fall, who is going to survive, and if the law is going to be changed.”

Linda Ambrosino, owner of independent toy stores G. Willikers in Saratoga and the Toy Maker in Stuyvesant Plaza, says she is still unsure of how the CPSIA will affect her businesses economically, or what it means for her current inventory. One of her employees spends her workday following updates on the legislation and checking with distributors on the compliance of their products.

Ambrosino began purchasing again only this week, and is demanding certificates of compliance from her distributors. She may be unsure how the legislation will impact her business, but she is already beginning to see one of the much-anticipated effects: shrinking options for consumers.

“One of my suppliers is a small toy company in Maine. It may not be financially feasible for him to have his toys tested. If he can’t,” says Ambrosino, “I can’t sell them. Even some of the larger companies have cut their catalogues in half. Not because the toys wouldn’t pass the tests, but because they can’t afford to certify them.”

In Ambrosino’s opinion, one of the major problems with the legislation is the abrupt time frame in which manufacturers are being required to entirely redevelop their business models. “It’s great that we have a standardized way of testing, but the toy companies need to be been given longer to comply,” says Ambrosino. “The government changes emission standards in cars so we’re all healthier, but they give car companies five to 10 years to comply.”

She emphasizes the confusion swirling around the legislation: “I wish I had more definitive answers for you, but honestly, I wish I had them for myself.”

The Spinning Seed, recently opened in Troy, is dedicated to offering consumers eco-friendly alternatives to the mass market, including imported, domestic, fair-trade and handmade items. Owner Sandra Sweeney is preparing to face empty shelves where her children’s products used to be. “I don’t want to get rid of my children’s products, it’s a big part of why I opened my store,” says Sweeney. “Children’s products are a huge draw for my clients. They want to know they are getting eco-friendly products. They want domestic. They want organic and handmade.”

Sweeney expects she will be forced to clearance her children’s products at a loss that could amount to as much as $2,000, a huge loss for a fledgling company.

Her purchasing options for children’s products have become extremely limited. “I buy from a California family company that makes plant-based, eco-friendly finger paints,” says Sweeney. “To test the six colors would cost them hundreds of dollars, and they make them from their home. They can’t test it, and I can’t risk selling it, so I’m not going to have it on my shelves.”

According to Sweeney and many other business owners, the CPSIA is hurting small, domestic businesses that pose no safety threat, while large overseas manufacturers are able to shoulder the burden of testing. Only one of Sweeney’s vendors has provided a certificate of compliance. That vendor is the only company she deals with that manufactures overseas and is not fair-trade certified.

“I can’t wait till customers come in asking, ‘Where’s your baby stuff?’ ” Sweeney half-chuckles. “Well, it’s in the landfill. You’ll have to go to Wal-Mart now. I’m sure you can find something from China.”

Low-volume businesses simply cannot ab sorb the cost of testing. As Woldenburg told the CPSC panel, “This legislation assumes that the mass market is the entire economy. I’m here to tell you it’s not.” He advocated that there are entire industries built on providing low volumes of products to small markets, stressing the threat to critical companies that create learning tools for special-needs children.

Manufacturing doesn’t get any more low volume than artisan manufacturers who craft one-of-a-kind items. Not only is testing and certification economically unfeasible when the cost is not spread over a large batch of products; come August, the regulations demand “wet testing,” which destroys the sample item. It will be physically impossible to certify one-of-a-kind goods. The CPSIA threatens to obliterate the handmade-children’s-product industry, making handcrafted toys a relic of the past.

Victoria van der Laan comes from a long line of seamstresses, quilters and embroiderers. The stay-at-home mom created her Albany company, Ex Libris, because she needed a creative outlet. The income from her custom quilts and handmade cloth books is secondary for the family, but it’s income they’ve come to rely on. “It allows both me and my husband to stay home more, to spend more time being parents,” says van der Laan.

“It’s hard to just write it off, to say this act is ridiculous,” she says “It’s based on a really good premise. I don’t want my kids to be exposed to the things they’re trying to avoid. I do think there should be regulations in place. It’s so hard to find that balance.”

Van der Laan read interpretations by four or five different lawyers. Most of them agreed that the law has problems, but that it’s not enforceable at this point. One advised sellers not to take that chance.

“I tried to read the legislation myself,” she says. “I was looking for some sort of exemption for one-of-a-kind items. I couldn’t find anything. But it’s also very confusing. I didn’t understand 99 percent of what I was reading . . . and the lawyers all said different things. How do you know what to trust?”

Van der Laan plans to continue making and selling her books, which she markets primarily through the online artists’ marketplace Etsy.com and at craft fairs from Albany to Brooklyn. “I don’t want to just say, ‘I’m not going to follow this law.’ I just want to see what happens. If it really turns out that my business is illegal, I won’t do it anymore,” says van der Laan.

“But I’m just not sure that that’s what it means yet. I’m going to continue selling my books until I hear that I can’t. That’s my plan—we’ll see what happens”

For Kate Eggleston, owner of the Paper Sparrow in Troy, that is simply not a risk she can take. A sign on the shop door informs customer and consigner that, as of Feb. 10, the Paper Sparrow will no longer carry children’s items. “It was a hard decision to make,” says Eggleston, curled in one of the shop’s generous armchairs. “It goes against everything I believe in. But I just can’t risk it.” The fines for selling noncompliant goods are so outrageous. “Not only would I lose my business, I could lose my home, my car, everything.”

Eggleston opened the shop, which sells only handcrafted items, just shy of a year ago. A rack along her front window brims with handknit baby sweaters, bright cotton pinafores, appliquéd onesies, quilts, bibs and blankets. Racks of shelves hold homemade Play-Doh, recycled crayons, hats, booties, birthday crowns and plush toys. Some of the items are on consignment from local artisans, some Eggleston purchases wholesale from crafters nationwide. Many she makes herself at a sewing machine in the shop window.

“About 50 percent of the business I do is in kids’ stuff,” says Eggleston. “If I can stay afloat, it’s going to be an interesting and bumpy ride.”

“I don’t ever hear from the parents who are thrilled about this. I think if I heard that, it might change things for me,” says Eggleston. She acknowledges that there is an inherent risk in buying handmade. While some handmade toys may become family heirlooms, others may not hold up well to the rough love of children. “But,” she says, “it’s a parent’s right to take that risk.”

Eggleston concedes that not all parents fully understand the health risks products can pose to their children. Target, she says, was selling a set of Halloween face paints that said, “This product contains lead” on the front of the package. And people were buying it.

But, for Eggleston, the regulation is not necessarily the solution. “People have to stop putting all their trust in the government. . . . You have to think for yourself, think about what goes on in your life, in your city, in your country, and with your children. Do that for yourself. Don’t just expect and trust that everything is going to be OK. We put too little stock in personal responsibility.”

Eggleston fears that the CPSIA will leave small businesses bankrupt, consumers with few options, and children with a lack of high-quality, stimulating toys. “This law gets passed, all of a sudden the small businesses are gone. You’re left with, quote unquote, safe toys made by major manufacturers. But then when kids start getting hurt or sick from those products, what comes next? Are we going to start bubble-wrapping our children?”

It’s impossible, says Eggleston, to regulate away danger. “If you put my 13-month-old niece in front of a toy and my car keys,” she says, “she’s probably going to put the car keys in her mouth. The government can’t protect them from everything, at some point the parents have to be responsible.”

Many of the early proponents of the CPSIA, including Sen. Amy Klobuchar (D-Minn.), one of the original authors of the legislation, stand by the bill. Klobuchar’s office formally stated her support of the bill: “This is historic legislation that will protect the safety of our children. It is long past time to get these toxic toys off our shores and out of our stores. . . . I hope this law will give parents some peace of mind that the toys in their children’s hands are safe.”

The CPSC funneled Metroland’s repeated inquiries through its bureaucratic channels, but ultimately failed to respond. Thousands of business owners have faced the same challenge, attempting to glean clarification from the commission without reply.

While Rep. Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee has urged the CPSC to uphold the CPSIA to its fullest extent, other members of the committee have requested that the committee hold a hearing to consider the implications of the legislation. In their Jan. 21 request to Waxman, Rep. George Radanovich (R-Calif.), and Rep. Joe Barton (R-Texas), stated, “It is becoming clear that without rapid application of some common sense, the new law holds potential to impose vast economic hardship without actually protecting anyone.”

Hundreds of companies and industry associations have written to the CPSC requesting that the legislation be held until a memorandum of understanding has been reached.

Others have urged that the CPSC should create a partnership with industry companies intent on complying with the regulations, to determine the most efficient way to uphold the safety standards.

With less than two weeks remaining before the regulations are implemented, little has been resolved for members of the toy industry.

“I think they drastically underestimated how many people this was going to affect in the long run,” says Eggleston. “Everyone, from Mattel to grandma knitting blankets in her recliner at the end of the day, is being touched by this law.”

kgeurin@metroland.net

Many Etsy sellers are relisting their products at tongue-in-cheek prices to reflect the cost of testing under the Consumer Product Safety Improvement Act. Schenectady seller Marianne Solt of Goose Hill Designs is offering a set of six marbled crayons for $10,084. Each of the chunky crayons is created from four broken Crayola colors. Solt cites the math behind her new pricing: 24 components times $70 equals $1,680 for lead testing, 24 components times $350 equals $8,400 for phthalates testing, plus $4.95, the original cost of the set.

Hundreds of other Etsy sellers are having CPSIA clearance sales, liquidating their inventory before the regulations go into effect.

Heather Flottman, designer and owner of Liliputians, a New York City-based children’s boutique fashion company, solicited a lab quote for her Little Red Riding Hood shirt, a 100-percent cotton shirt appliquéd with seven cotton fabrics and two button eyes. The quote Flottman received itemized the expenses at $625 for lead testing and $400 to $800 for flammability testing, depending on the method of certification. Total: $1,025 to $1,425. The handmade shirt retails for $40. If she produces a similar shirt in a different arrangement of colors, using the same materials throughout, the testing must be repeated for the new product.

Award-winning German toy company Selecta Speilzeug creates wooden toys using sustainably harvested hardwoods, colored with nontoxic paint and sealed with beeswax. All their toys are compliant with high European testing standards. Selecta pulled out of the U.S. market at the end of 2008, after assessing that complying with the CPSIA would require it to increase retail prices by more than 50 percent.

Learning Resources, a Chicago-based manufacturer of educational toys and supplies, received a price quote for compliance testing of its Vega 600 telescope. Total testing cost: $24,050. Annual gross sales average for Vega 600 telescopes: $32,000.

Many manufacturers and retailers have significant stocks of inventory they fear may be considered banned hazardous substances come Feb. 10: The valves on children’s bike tires contain lead levels that may surpass the new limits; the nibs of ball point pens contain lead; microscope light bulbs have already been shown to surpass the CPSIA lead limits. While this inventory complies with the current safety standards, it might become retroactively unsalable under the Consumer Product Safety Commission’s interpretation of the law.

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