Earlier this year we were all up in arms about lead contamination in toys and other children's products coming from China. Time for more regulation? You got it! CPSIA was passed 424-1 in the House and 89-3 in the Senate. Incredible support, bi-partisan… it's got to be good, right? Well…
I'm not going to dispute the need for regulation, but let's think once again about unintended consequences of poorly-written regulation. Poorly-written, but passing by 424-1…
An old blogger friend of mine, Kathleen Fasanella over at Fashion Incubator, just told me how this piece of regulation could force hundreds of companies, and not just small companies, into bankruptcy when it goes into effect on February 10th. In fact, there's a whole website called National Bankruptcy Day that is trying to bring attention to the issue. Many of the issues surrounding this regulation will make us lean guys roll our eyes. Some quick facts:
- Lead levels must be reduced to 600ppm within 180 days of when the Act is enacted on February 10th, then down to 300ppm in a year and 100ppm in three years. This is not really a problem with the vast majority of products, which typically have about 6ppm.
- This is not just toys, it is any type of product that could come into contact with kids… so clothing, car seats, you name it.
- Problem #1: certification testing must be done by a lab on a "certified list". This list isn't exactly long, and their are hundreds of thousands of products. Guess what is happening to those labs: the waiting list for lab work extends out months and the cost per lab workup has gone from $200 to as much as $6000… per sample.
- Problem #2: testing must be done at the product level, not the component level. So a common component used in multiple types of products must be tested multiple times. What does this mean? Each SKU must be tested separately, even if they are virtually identical. One pair of jeans and a slightly different pair of jeans, both using the exact same raw denim, must be tested separately. See the video below, where a manufacturer of science kits has 40,000 SKU's… and is looking at a $20 million dollar cost for initial certification testing. This is why many products, and companies, will simply cease to be sold.
- Problem #3: testing must be done by the final manufacturer, and supplier certification cannot be used. So if a company supplies the same denim to a variety of manufacturers, then each final manufacturer must test and certify their product… which has the exact same raw material. Companies are allowed to use supplier certification for attributes such as flammability, but not lead.
- Problem #4: ongoing final product testing, which is different than the initial product certification test, must be done by batch. Guess what will happen: batch sizes will increase and the companies that leverage speed and small batch sizes will have to give up that competitive advantage.
- Problem #5: even large manufacturers use bank lines of credit to handle long lead inventory purchases through cash generation after payment. Banks can only issue credit to "legal" activities (obviously), so on February 10th many types of products will cease being legal and credit will dry up.
To be honest, I had never heard of the problems with this regulation. I guess there's too much going on with everyone and their mother lining up for their piece of the bailout gravy train. But think about what could happen fairly soon after February 10th; Kathleen had a long list of companies, including some top brands, that are planning to simply stop selling kids products.
I'm sure changes will be made, but probably not until after considerable damage has been done. And since it will be yet another piece of regulation… well, we know how that will probably go.
For some great insight into how this regulation will affect a major manufacturer of learning products such as science kits, check out this 7 minute video:
Sounds exactly like the “end of life” requirements for products in the auto industry. One giant problem trying to solve a minor problem.
Assumption: The end user is bothered that the final product does not cause harm to the child. And would be willing to pay a premium for a safe product. And since all manufacturers would need to comply, the cost increase for all would should be approximate the same.
Question 1 of 2: As a revered lean six sigma guru, what would your strategy be to lower the cost for compliance, if you were one of the companies affected.
Question 2 of 2: Or how would lean six sigma have addressed the regulation issue differently.
On a different note: Guru words comes from sanskrit gu and ru. Gu means darkness / ignorance and ru means light / knowledge.
Thank you for writing about this. Our government has created a ticking time bomb set to explode on February 10th. People need to know about this.
It was actually 407-0, with 25 not voting in the house. In the senate it was 79-13, with 8 not voting. Just wanted to correct a mistake that has popped up in numerous areas.
Thank you for writing about this. I am a small “from my home” crafter that will be affected by this. My efforts to comply will consist of severely limiting the options I offer, and likely raising prices to attempt to cover testing. Failing that, I will have to shut down
Kathleen Fasanella says
Thanks for the clarification Matt! I’ll correct it as I come to those entries.
Andrew Reich says
There is no reason that one should be afraid of the CPSIA legislation the way this post exclaims. CPSIA (HR 4040) is a step towards safer products and better sourcing and it is not difficult to comply with if you understand it. I would like to see you cite the exact parts of the CPSIA that support your above claims…
Jason Grijzen says
Recently the company I work for has had requests to look into the materials we use in production in regards to their registration with REACH. I had not heard of REACH before these requests were made and I was quite surprised with what I found out. What I got back from contacting a company that deals with registering companies outside of the EU was that europe is trying to create a master list of harmful chemicals that includes their usage in products sold in europe. However as we were not a primary producer of the materials we use (I work with carbon composites) the registration duties fell back on the company that was making the raw materials. (in this case the makers of the resin) This makes it advantageous for producers of raw goods to register their product as it makes their products more attractive to companies wanting to do business in the EU. I’m not certain of the level of auditing required to ensure that the goods used aren’t counterfit. So there may be a chance that bad product could slip through the cracks. But trying to inspect every product at the final stage of production is just insane. When is enough enough?
Kathleen Fasanella says
Andrew, this isn’t helpful. If you knew enough to say “it is not difficult to comply with if you understand it” then no one would need comply with your request to cite chapter and verse, the CPSIA rules and regulations. Since it is not difficult and your understanding surpasses that of ours -we, who’ve been working on this 18 hours a day for the past six weeks- then why don’t you tell us what we’re missing? This is a perfect opportunity to demonstrate your competence and so, gain public esteem and potential business through the demonstration of your analysis that we’ve obviously missed.
This matter deserves the effort of intellectual rigor; no one is served through issuing challenges when it’s likely due diligence has not been manifest. Show off, show us what we’re missing. We’ll happily hire you to present solutions.
Eric H says
CPSIA (HR 4040) is a step towards safer products and better sourcing and it is not difficult to comply with if you understand it. [emphasis added]
This alone demonstrates that you need to do some research. Your sourcing has nothing to do with it. Period. If you are hand making toys from the eyelids of virgin skeljars which happen to come from a planet which is completely devoid of both lead and the components of phthalate, you still have to provide a General Certificate of Compliance (GCC) from a certified lab to prove your claims. Your sourcing is completely irrelevant to the need to test, the need to provide the GCC on demand, and the possible need to post a bond against possible future recalls.
I would like to see you cite the exact parts of the CPSIA that support your above claims…
There is a reason why they are called “unintended consequences.” There is no “Section 153: All Businesses Must Go Bankrupt on February 10, 2009” because that is a consequence of the law, not a part of it.
As a mother of a 4-year old I seek out Made-In-America natural artisan products. As of Feb 9th, the safe alternative to mass produced, made in China garbage will virtually no longer exist. Rather ironic that legislation intended to stop unsafe toys will kill all alternative products, many products that came into existence for people not wanting to shop at Wal-Mart or other big box stores. Oh, and this isn’t just toys, but clothing, furniture, books, educational science kits, and so on and so on. When will parents take responsiblity for watching their kids?!?
Andrew Reich says
Your responses to my comment just came to my attention. In regard to my comment that this is a step towards “better sourcing”…on the importing side of the discussion, such regulation will push importers to work with more responsible manufacturers, and themselves be likely to inspect and test products for safety issues such as lead paint. In regard to the act being easy to comply with if you understand it – I don’t doubt your intense research and knowledge on the subject. Compliance also can and will be expensive for certain importers. However, there are companies out there (such as mine) who have staff on hand to handle compliance of this sort, and work closely with the testing laboratories that enable us to make this happen. Employing such a company is solution for a small to medium size importer who can not be bothered to read and understand part of the CPSIA individually, and is regularly importing toys from China.