CPSIA: the countable costs

by Walter Olson on March 23, 2009

In some ways the most distinctive costs of the Consumer Product Safety Improvement Act are the human-scale kind that are hard to measure — the handicrafters’ livelihoods blasted, the families unable to find sturdy winter clothes at the Goodwill, the kids who can’t get their dirtbikes serviced, the threats to vintage children’s books and to small-run items for special-needs kids. poorwidowfrombabylon2But there are also a number of measurable, tangible economic costs that might capture lawmakers’ attention, and which affect larger, more sophisticated actors as well as the small producers, dealers and families that have found it so difficult to make their voice heard in Washington.

  • A survey by the Toy Industries of America says the law has already cost toy businesses more than $2 billion [Playthings, Toy News]. As readers will recall, the minibike/powersports industry projects that the ban on its youth products will cost $1 billion by year’s end. That’s $3 billion right there, representing only two of the many industries hit by the act; it doesn’t include (for example) apparel, resale (two apparel-making groups report $700 million in stranded inventory, costs to Goodwill and Salvation Army may exceed $270 million), books, school and party supplies, sporting goods, furniture, and so forth.
  • The stock price of well-known kids’-apparel retailer Gymboree slid by 40 percent overnight early this month “on news that it took massive inventory write-offs in the most recent quarter and suffered sharp margin declines and sales losses, all as a result of the CPSIA”. At a conference call with investors, Gymboree chairman/CEO Matt McCauley noted that phthalates are found “in many screenprints”, which makes their ban an important issue for apparel. Remember the court’s last-minute ruling that the phthalates ban would have to be retroactive to existing inventory, even though the CPSC had given guidance to manufacturers that only post-Feb. 10 production would be affected? Attorney Aaron Colangelo of the Natural Resources Defense Council, who had litigated that case successfully, was quite dismissive about the difficulties of compliance at the time. Well, according to McCauley, that one decision rendered 1.7 million units of inventory at his chain unsalable. “As many of you know, we operate on a nine to 12-month product cycle,” he told the investors. But of course few on Capitol Hill seem to have thought it amiss for new rules to be imposed within a period of a few months, or, as with the court reversal, a few days.
  • Auction Bytes: “On March 14, 2009, Amazon.com will remove approximately 2,500 products from the Toys and Baby categories in order to comply with the Consumer Product Safety Improvement Act of 2008 (CPSIA). The company said it had not received certification of CPSIA compliance from the manufacturers of those products. Amazon will cancel all seller offers against the ASINs, and their detail pages will be removed from the site.” (company’s statement). For readers who are new to the subject, that does not imply that any of the 2,500 items pose any serious risk, nor does it imply that any particular item would fail to pass the new thresholds with flying colors. oldwomantossedup2In many instances it indicates only that the makers have not gotten their ducks in a row to obtain GCCs, possibly because they’re unfamiliar with the process, or can’t afford the tests, or plan to get out of the business soon.
  • Note that as in the Amazon case, the much-publicized stay of CPSC enforcement for a year applying to most newly manufactured goods doesn’t in practice protect small makers from seeing their product lines squeezed out of major channels of commerce if they fail to launch a compliance program (no matter how unlikely it is that their knitted booties or wooden puzzles contain lead). To cover themselves from legal attack, deep-pocket retailers demand GCCs (general certificates of compliance). Last month, apparel-maker mentor Kathleen Fasanella wrote: “Most (okay, all) of the retailers I’ve spoken to, are still requiring GCCs [despite the stay]. Furthermore, they are enforcing the August standard of 300ppm.”
  • Plum Privy has been compiling estimated costs of the law from news reports, with the tally already exceeding $4 billion. Persons in affected lines of work may want to check in at that site to offer additional information or refinements.
  • Understatement of the year? Writing in Apparel mag, lawyers with Mintz Levin call the law “extremely burdensome and bewildering“.

{ 3 comments }

1 Greg 03.24.09 at 9:34 am

None of these costs matter. The only thing that matters is the vanity of the Senators and Representatives who can’t bear to admit that, maybe, they made a mistake. So all of you who are losing your businesses, or jobs, or thousands or millions of dollars’ worth of inventory, you just have to suck it up so that some creep in Congress doesn’t have to lose face.

I guess this is the change we can believe in.

2 Vivian Zabel 03.24.09 at 4:43 pm

I know when I contacted one member of Congress, the junior representative, about my displeasure with the CPSIA, she sent me a letter so proud that she had supported the law and still did. She never addresses the problems I mentioned nor address the fact that I found her wrong.

When I called her office in Washington, needless to say, I was not happy. Not that expressing my horror at her lack of sense did any good.

3 Tristan Benz 03.24.09 at 11:52 pm

Thank you for continuing this unique coverage; for pointing out the incredibly diverse range of negative impact CPSIA has caused in America. It is not limited to the woes of those of us in the children’s industry (big or small). I liken CPSIA to a tsunami that is still on its way in – the rest of society will only realize what we already know (having been hit first), once the wave hits them and recedes.

CPSIA impacts every parent out there – every family – every child. I have started posting my notes to customers on one of my blogs for Maiden America – I am hoping it helps people (beyond our customers) “connect” with this experience and realize that CPSIA has effectively torn their choices / rights / authority away from them.

I’m sorry but, when you have to tell a customer you cannot even GIVE them a spare part for something as basic as a hair barrette (and you’re giving them ideas as to how to creatively find a solution when you have a bin full of perfectly good parts and could send one for the price of a stamp!), you realize you really are NOT living in AMERICA anymore. Nope – you’re living like those in other countries – in places where people have no choice but to Jimmy-rig and fix just about everything, because they’re not allowed access to things we [used to] take for granted – “everyday” basic replacement parts or other alternatives.

This whole affair really is an episode of the “Twilight Zone.”

Great post.

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