Regulating through the Front Door

Last week, the Hill newspaper published my article supporting a regulatory reform bill, S. 2006, recently introduced by arrows clip art Senator Portman and a bipartisan group of Senators.  Among other things, the bill sets out Congressional expectations for balancing the costs and benefits of rulemaking and directs agencies to adopt the least burdensome rule that addresses the issue in the proceeding.  As I stated in my article, “Regulating is not, and should not be, easy.  Requiring agencies to do the needed up-front hard work before issuing rules, as these reform bills direct, will result in better rules.”

Critics have pointed to these kinds of requirements as regulatory roadblocks—mere ploys designed to slow down the process.  I see them not as roadblocks but as speed bumps–useful tools to assure that the agency gets it right when it regulates. And unless the agency is actually required both to do the work, and then to regulate based on the results of that work, the temptation is to look at these requirements as “check-the-box” exercises that must be done on the way to a rule, often with a predetermined result.

I do have one concern about potential unintended consequences from reform of the rulemaking process.  To the extent that agencies perceive it to be harder to issue rules going forward, they may look for other ways to achieve desired results, thereby circumventing the protections and procedures of the reform bills.  I saw this operating first hand at the CPSC where “backdoor rulemaking” is not only accepted but embraced. Backdoor rulemaking involves taking enforcement or other action on a category- wide or product- class basis to achieve results that one would normally expect to achieve through rulemaking.  So if a product with a particular attribute is deemed to be substantial product hazard and recalled, then that action may, de facto, set the bar for all other products with similar attributes.  Transparency and due process are out the door.

Regulators regulate—that is what they do.  But category-wide enforcement should not be used as a subterfuge to avoid the regulatory process.  As these reform bills advance, Congress will need to be alert to this concern.

CPSC Veteran Closes One Chapter, Opens Another

Last week veteran staffer Marc Schoem announced he is leaving the agency to become the Executive Director of the International Consumer Product Health and Safety Organization (ICPHSO).  Marc has been at the CPSC almost from the beginning and served in many capacities, but really made his mark in the Office of Compliance.  While we all know that no one is irreplaceable, it is hard to imagine the CPSC without Marc Schoem.

I have often disagreed with the direction the political leadership has steered the agency.  Yet I have also seen how the dedicated career staff works hard every day to keep the agency on course in spite of the changing political forces that buffet it. Marc exemplifies the best in federal service.  He served as a mentor to young compliance officers and provided important leadership to the office.  His common sense and practical approach to problem solving was very helpful to me when I served as a CPSC commissioner.  And his vision and hard work as a board member helped ICPHSO become the important organization it is today.  While Marc will be missed at CPSC, he will continue to play an important role in advancing consumer safety.

If the Public Doesn’t Buy it, Keep Selling it Anyway

Today, the CPSC is reannouncing a recall because the original announcement garnered such a low response rate—under one percent.  Today’s action and the original recall – done in May, 2014—illustrate how the agency overuses and misuses the recall system.

Here’s the background.  In May, 2014, the agency announced a recall of portable adult bed handles used to assist getting in and out of bed.  According to the agency release, the bed handles could shift and create a gap with the mattress; three individuals in adult care facilities became entrapped and died in the gap between the mattress and the handle.  The agency is concerned about 113,000 bed handles manufactured between 1994 and 2007.  The remedy that the agency proposed is for those who have the bed handles to contact the company to get a set of straps (and 3 pages of instructions) to use to hold the handles in place.  And, yes, did I mention that they also get a sticker to put on the handle to remind them to use the straps?

The agency has taken a business-as-usual, cookie-cutter approach to a problem that needs more creative thinking to solve.  The home health care and adult care industries have traditionally not been ones that have had to deal with the CPSC. And while greater availability of products in the general marketplace makes for greater responsibility on the part of providers, safety regulators also have a role to play in reaching out to those it newly seeks to regulate.  Efforts to craft a safety standard for this product have now been over two years in the making, so writing a standard apparently is not necessarily an easy undertaking.  In the meantime efforts to encourage an industry safety campaign to educate caregivers—perhaps even giving out safety straps where needed–could go a long way to addressing the risks the agency has identified. But up to now the agency has been absent on that front. [Commission Adler and I will be on a program before the home health care industry next month addressing some of these issues.]  My point is that such an educational program would reach more caregivers in a more effective way than the 2014 press release and today’s reannouncement.  Yet, the CPSC is wedded to the notion that only a recall and press release will suffice, in spite of evidence to the contrary.

The recall is trying to reach products that are quite old.  The newest bed handles subject to the recall have been in the market for at least eight years and who knows how many are still being used.  The remedy that is proposed also appears to be somewhat hard to accomplish and that may also explain why so few people have responded. The statute states that a recall remedy shall be a “repair”, a “replacement”, or a “refund”; it does not say a “re-jiggering.”  Yet, that is what this feels like.

The CPSC has overused the recall device to the point that even when the agency yells, often people don’t listen.  It has underused its ability to take on safety campaigns, either solely or in cooperation with other allies who could help it leverage its resources and broaden its reach.  That is too bad.

Summer Reading

August is here, Congress is leaving town and it is time to settle in by the pool for a good read.  Let me recommend a few Woman-Reading-By-The-Poolthings.  For those looking for something light and frivolous, I recommend the CPSC’s proposed direct final rule instructing that only those toys made from the trunks of trees (Just the trunks?  Really?) will be exempt from pre-sale testing for heavy metals.

However, for a more thoughtful perspective not only on this rule but also on the overly-constrained approach a majority of Commissioners have adopted to trying to provide relief from its overly burdensome testing rules, I recommend Commissioner Mohorovic’s statement accompanying this rule.  He has rightly pointed out that the Commission has framed its work on burden reduction in such a way that real, meaningful results—that reduce costs without compromising safety—will be almost unachievable.  As the Commissioner states, where testing costs add a safety value then those costs are worthwhile, but where testing is required for the point of testing, as is the case under the CPSC’s current approach, then valuable safety resources are being squandered.

To further round out your CPSC reading list, be sure to check out the CPSC Commissioners’ blogs.  You can find them on the agency web site. I was so pleased to see that the Commissioners now are able to post blogs on the web site. This was not true back in 2009 when I started “Conversations with Consumers.”  To write and post a blog I had to go outside the agency and set it up privately.  Check out the Commissioners’ blogs from time to time to get a sense of what issues are of special interest to the leaders of the agency.

Defining “Wooden-Headedness”

In The March of Folly, historian Barbara Tuchman writes:

Wooden-headedness, the source of self-deception, is a factor that plays a remarkable large role in government.  It consists of assessing a situation in terms of preconceived fixed notions while ignoring or rejecting any contrary signs.  It is acting according to wish while not allowing oneself to be deflected by the facts.

Late last week the CPSC Commissioners voted to write Ms. Tuchman’s definition of “wooden-headedness”  into the Code Le_avventure_di_Pinocchio-pag046of Federal Regulations by issuing a direct final rule to give long-awaited “relief” from the burden imposed by its third party testing rules as directed by Congress way back in 2011[1].

The Commission has been promising relief from its burdensome testing requirements but has been doing everything it can to avoid doing anything since 2011 when Congress first directed it to take action.  Now after four years of study and promises to Congress (even as recently as last month), the Commission has found [INSERT LOUD DRUM ROLL HERE] that toys made from unfinished and untreated wood from the trunks of trees do not have to be tested for the presence of seven heavy metals regulated by the toy standard.

The Commission’s action last week is justified by a contractor’s study which is itself a study in the precautionary principle run amuck.  The contractor was tasked with doing a literature search looking at the same natural materials (untreated wood, fibers such as wool, linen, cotton or silk, bamboo and beeswax among other things) which the Commission exempted from testing for lead back in 2009.  Yet only for trunk wood was the contractor able to report sufficient data to show no presence of the suspect heavy metals in concentrations that violated the toy standard.  For most of the other materials there was insufficient evidence reported to show the absence of violative concentrations of the heavy metals. The contractor, however, did find that a report that wool from sheep dipped in arsenical pesticides (which are no longer used) had high concentrations of arsenic as did wool from sheep grazing next to a gold smelting mine.  In other words, if the contractor, in doing its literature search, found a study documenting a problem, then the material was disqualified.  If the contractor could not find a study documenting a problem, the material was also disqualified on the basis of insufficient information.

Back in 2009, the agency staff was able to make rather more expansive determinations quite quickly and efficiently, without expensive contractor studies, and to my knowledge, public health and safety has not been threatened by this action.  The current agency action seeks to take the smallest, most ineffectual step possible and then point to a constrained reading of the statute and an inconclusive contractor study to justify inaction.

Congress told the agency to take action to reduce testing burdens or report back if statutory impediments required Congressional action.  The agency has done neither.  Instead, the Commission, on several recent occasions, has promised Congress that action on test burden reduction will be forthcoming.  One hopes that limiting testing exemptions to toys made from tree trunks is not what the Commissioners had in mind when those statements were made.  It is hard to believe that Congress will find this a satisfactory response either.

So if you use bamboo or perhaps linen or beeswax in crafting your toy, you are out of luck because there is no evidence these materials are unsafe.  For those small businesses out there who might make a toy from a tree limb or decorate the toy with bark or twigs, you are also out of luck!  And if you are looking for clarity, too bad.  As one of my friends in the small business community said when she heard about this, “Is a branch 12 inches in diameter a trunk? Do I need to ask the lumber yard if the wood came from a trunk? Will they even know? Will I need to have proof the wood came from a trunk?  It just comes across as comical.  Is there value in this determination?  I suppose, but for many it is just too little, way too late. Four years late to be exact.”

The fact is that public health is not impacted by toys that include components of natural materials—the agency’s experience with lead has shown that.  Indeed, the natural materials exemption is a very narrow one and hardly opens the flood gates to testing avoidance. One must ask why the agency is so adverse to finding a workable solution to reducing testing burdens.  Wooden-headedness brings about wooden thinking.

[1] Direct final rules are reserved for those rules that are noncontroversial, and usually deal with routine, narrow or non-substantive matters. They go into effect unless someone objects.  In this case the rule, and the testing relief it proffers, could not be more narrow.

Off On New Adventures!

Some might find it a surprising way to celebrate the start of the Independence Day weekend by announcing a new job.  Nevertheless, I wanted readers to know that after leaving the CPSC 18 months ago, I have decided to come out of “retirement” and have become affiliated with Olsson, Frank, Weeda, Terman & Matz, a Washington law firm with a regulatory, public policy and litigation practice. Since the firm includes not only exceptional lawyers and policy advisors, but also scientists, doctors and other technical professionals, it brings a special kind of creativity to problem solving that is unmatched in Washington. It is this creativity and “spunk” that convinced me OFW was the right place for me.

Since leaving CPSC, I have spent my time writing, speaking and working on interesting projects of my choosing dealing with regulatory policy and safety issues.  While I intend to continue these interests, my affiliation with OFW will bring another dimension to these activities.

I also intend to continue writing this blog.  Its purpose is to educate and to provide commentary—sometimes complementary and often critical—about what is happening at the agency from my unique perspective.  I try not to pull punches and my affiliation with OFW will not change that.

Measure Twice; Cut Once

A couple of years ago, I did an addition to my house.  Everyone who has done this knows the steps.  I sat down with an


architect to discuss exactly what I wanted to accomplish with the project.   A rough design was done and then refined in a set of blueprints that was put out for bid.  Since my budget was limited, the plans had to be readjusted to fit both my needs and my resources before they could be finalized.  Only then did we go to the relevant regulatory bodies to seek the required permits and approvals to do the project.

I thought of this process last week while I listened to the CPSC Chairman and Commissioners describe their desire to greatly expand the agency’s import surveillance system at an oversight hearing before the Senate Commerce Committee.   In 2011, in response to Congressional direction, the agency initiated a pilot program to identify imports that violate safety standards.  The current pilot program subjects certain products from certain countries/suppliers to surveillance prior to import under a computer rule set that predicts the possibility of violations. In other words, the computer looks at what is coming in and, using the rule set, flags those products that should be further examined by CPSC personnel.  As a pilot, it has worked well.  The agency now seeks to extend the program to all imports under its jurisdiction.  Such a program will be expensive and the agency has asked Congress for a significantly increased appropriation to build out the program and the authority to impose user fees on importers as a way to fund the program on a continuing basis.

The agency has a great deal of regulatory housekeeping to do before such a system is feasible.  The program will only work if the agency has the statutorily-required certificates of compliance from importers available in an electronic form.  These electronic certificates will provide the basic information to allow both the CPSC and its sister agency, Customs, to make initial judgments about compliance.  In 2013, the agency proposed to update its rules governing the creation and filing of e-certificates (at 16 C.F.R. §1110).  Unfortunately, the agency, in a good example of “wants” exceeding “needs”, proposed a rule that goes well beyond what is required by the statute, and, if finalized, would require importers to redesign reporting systems and impose many new and costly requirements.  I looked at the cost of the proposed system when I was a Commissioner and using agency estimates, determined that it would cost annually over $400 million – that is almost $1/2 billion—for importers to compile the paperwork to document tests and generate the certificates that reflect those tests. That is a lot of money for paper!

This rule has been one of the most controversial in the history of the agency.  Many comments have been filed and most of them have been critical of the proposed rule.  The agency now proposes to establish a pilot program to see if the rule will work.  Unfortunately, rather than establishing a pilot based on the learning found in the comments to the rule, the pilot will look much like the proposed rule.  And because it is so tied to the expanded import surveillance system, this rule remains on the agency’s near-term agenda for completion.

At the hearing last week, several commissioners discussed the agency’s import surveillance activities.  Chairman Kaye argued that seeking authority to expand its import surveillance activities is consistent both with Congressional desires expressed in the CPSIA and with the Presidential direction for closer coordination among agencies that handle imports.  However, the ever-thoughtful Commissioner Beurkle pointed out that the agency has yet to undertake a requirements analysis to identify the capabilities of an expanded system.  Both she and Commissioner Mohorovic expressed grave concerns about the status and substance of the agency’s proposed rule on electronic certificates with Commissioner Mohorovic suggesting that the agency was greatly underestimating the number of certificates that it would have to process. He also argued that the agency has yet to demonstrate how the rule would improve targeting of violators and suggested that a “trusted trader” program should be part of any final program.    Commissioner Beurkle suggested that an “incremental” approach to building out the system was a more prudent one than what the agency proposed.

While the Senate Committee did not dwell on the subject of user fees, there were differences of opinion both on the Committee and among the commissioners.  Again, Chairman Kaye voiced strong support for the notion of user fees to fund import surveillance activities while Commissioner Beurkle expressed concerns about the wisdom and the constitutionality of such a system.

It seems pretty apparent that the agency has much more planning to do before it should get the permits to build out this addition to its regulatory house.  The fact that so much of the planning and preparatory work that needs to proceed such a program is still “under construction” should give policy makers pause.  And the issue of how to fund the program does raise many policy issues.  User fees have a certain attractiveness and have been used before.  But the policy and legal implications of such an option should be more fully explored.  In this regard, last month the George Washington University Regulatory Studies Center published a study looking at the on-budget cost of regulations.  Among other things the study found that “in general, agencies that are at least partially funded by fees on the entities they regulate continue to grow at a faster rate than those that depend on appropriations from general funding” and that “agencies with independent funding authority will have significant increases in their outlays over the two-year 2015-2016 period.”  While this may or may not be a bad or a good result, it is something that should be understood before Congress, the agency and its stakeholders go down this road.

Planning is important.  It appears that the agency needs to work on its blueprint before it jumps into this new undertaking, not matter how important.

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