It Will Take More Than A Workshop

In an apparent fit of good sense, the CPSC staff has announced a workshop to explore with stakeholders issues presented by its proposal to require that importers of electonicfilingcabinetproducts under its jurisdiction file electronic certificates of compliance with CPB prior to importation.  This electronic filing requirement was only one of many controversial proposals found in the agency’s notice of proposed rulemaking to amend 16 CFR 1110 dealing with certifications of compliance.  The agency received many comments to the NPR, almost all of them very critical of the proposed amendments.

Here are the specifics as announced by the agency.  The workshop will be held on September 18 at the agency headquarters in Bethesda, MD.  Those who wish to present needed to notify the agency by August 8, so the dogs and the ponies have already been chosen.  If you wish to attend in person, as opposed to viewing the webcast, you must notify the agency before September 5.  However, if you wish to file written comments, you may do so before October 31.

It is pretty clear, both from the number and tenor of the comments received and from the announcement of the workshop itself, that the agency is really struggling with the details of implementing an electronic filing system.  No doubt part of the struggle comes from the fact that the agency is trying to do way too much in the proposal.

For example, the current pilot-scale RAM (risk assessment methodology) program allows the CPSC to analyze CBP import data to identify high risk cargo for inspection.  The agency seeks to expand this pilot program and apply the RAM analysis to all imports under its jurisdiction and sees electronic filing as essential to this expansion.  Perhaps a more gradual roll-out would be a more rational approach.  As another example, the NPR seeks to support the President’s Executive Order 13659 calling for the modernization and simplification of the trade processing infrastructure, but again, the details of the NPR add complexity rather than simplicity.  Many comments made the point that CPB processes do not align with the NPR requirements and will not for some time, if at all.  And there is still no explanation why common carriers are being required to take on the legal burden of filing certificates when they have no way of policing their accuracy.

The staff recognizes that the proposal presents both practical and logistical problems and asks for suggestions and solutions for solving those problems.  My advice to those participating is to honor this request.  While the agency staff is very good at many things, here they are operating in waters where they are not expert.  Unfortunately, the staff also listed a number of issues that are off the table for discussion during the workshop.  Many of those items touch on the topic of electronic filing so, by walling off the topic in this narrow way, the staff may not get the value they need from this exercise.  (Of course this is the same approach that was taken in the recent workshop on phthalates determinations.)

It is pretty apparent that it is going to take more than just a workshop for the agency to come up with a sensible proposal that works efficiently within the bigger trade processing picture.  It is unfortunate that the collaboration that use to exist between stakeholders and the agency has been so weakened over the past several years, because honest dialog between trusted partners is what is needed to solve the many problems in the NPR.  An ongoing effort, organized by a trusted third party with trade expertise, could perhaps work through the many issues raised by the comments so that what comes out of the process is–to paraphrase Mick Jagger—not necessarily what the agency wants but what the agency needs.

 

 

When Reality Creeps Into Paradise

For fly fishermen, paradise has to be defined as casting for salmon in the pristine rivers and “loughs” of Ireland.  As a novice angler, I got a taste of paradise this past week fishingwhen I tried my hand “dapping” for salmon in a beautiful but utterly remote area of Connemara in western Ireland. (The salmon were quite safe while I was in the river.) At a totally-off-the-beaten-track fishing lodge, I meet an American couple who were also seeking a quiet corner of paradise.  As we talked, they told me they had sold their business and were taking a bit of time to decompress.  That is when reality came creeping in.

This couple had for many years imported toys which they sold in retail stores they owned in the middle and western part of the country. They also designed toys which were manufactured to their specifications in China and other parts of Asia for sale in their stores. With my gentle prodding, they told me that they took pride in being in compliance with all safety regulations and had never had a safety-related problem with any toy they designed or sold. They told me how much they loved their business and the joy their products brought to their customers.
When I asked them why they decided to sell their business, they said that they got out because of Proposition 65 and the CPSIA.  I was very surprised that they specifically mentioned those two laws so I pressed them further. They said testing and regulatory compliance costs had impacted the viability of the business.  This was exacerbated by marketplace confusion with complex regulations that were impossible to comply with with any certainty. They made a decision that they could not–and would not–deal with the potential compliance liability that the U.S. regulations had imposed.
I suppose that some will say that this couple was merely the unfortunate victim of a system designed to make the marketplace safer for all.  To those, I have to point out that the CPSC, in its testing and related regulations, made no attempt to find a balance between imposing regulations that address defined and documented risks as opposed to every conceivable risk, no matter how remote or undocumented, and, thus,  allow those businesses that sell safe products to flourish.  As evidence, just read the regulatory flexibility analysis that the agency economists did prior to promulgation of the testing rule which predicted that the regulation would result in market dislocations. Nevertheless, and not surprisingly, a majority of commissioners soundly ignored that predication. The testing regulation went much broader than the law required or that safety could justify. How does such a result benefit consumers?
I have not been shy in criticizing the inept efforts of the agency to identify and implement ways to reduce the burden of unnecessary testing.  The agency persists in nibbling around the edges of the problem rather than addressing the real problem  which is that the underlying regulations were written too broadly. Perhaps if the agency delays long enough, the casualties will have been taken and there will be no one left standing to complain about regulations that impose undue costs and burdens on American consumers.  But as most fishermen know, the reality is that if you cast too wide a net, you may end up killing more than you catch.

The Baby and the Bathwater

Former long-time CPSCer and agency executive director Patsy Semple used to regularly remind the staff  to “not throw the baby out with the bathwater.”  In other words, do not, through excessive zeal, eliminate the good while working to eliminate the bad. baby-bathwater

Patsy’s admonishment came to mind when, earlier this week, I read an excellent article by Lee Bishop, a very well-respected practitioner, in the Product Safety Letter.  Here is a link to the article.

Using CPSC published statistics, Lee notes that the number of voluntary Section 15(b) reports (required when a company has reason to believe a substantial product hazard may exist) resulting in a recall has dropped dramatically in 2013 compared to earlier years.  Because these reports are what usually triggers a recall, it is no surprise that the number of recalls has also gone down. Lee catalogues recent agency policy changes that, taken together, have resulted in a more punitive posture on the part of the CPSC. As a result, rather than following the agency advice of “when in doubt, report,” more companies are being cautious about reporting to the agency for fear that a marginal safety issue may be turned by the agency into a big enforcement headache.  Lee concludes that the statistics suggest “more companies appear willing to take the risk of a penalty for late or non-reporting for marginal safety issues over the second-guessing and punitive treatment that are now routine for companies that turn themselves in and volunteer to conduct recalls.”

As one seasoned CPSC staffer told me at a recent event, the focus of the agency is more on finding violations and seeking penalties than on trying to work with product sellers to solve safety problems. This is a short-sighted approach that ignores the fact that product safety can best be achieved when regulators and product sellers work collaboratively to address problems.  It is time for the agency to start paying more attention to the baby and less to the bathwater.

 

Testing Assumptions

This week I had the pleasure of speaking to the leadership and staff of the American Association for Laboratory Accreditation.  The association accredits third party testing laboratories to a wide range of standards including, but not limited to those issued by the CPSC.  My presentation was an opportunity to discuss how the agency has implemented the CPSIA with a special focus on the agency’s testing requirements.  However, this was also an opportunity to have a free-wheeling conversation about the role that testing and testing laboratories play, and should play, in product safety.

I asked these experts whether third party testing of children’s products was the most effective way in all cases to assure regulatory compliance.  Interestingly, these representative of the testing laboratories agreed that while third party testing is the most expensive compliance tool, it is not always the most effective tool.  They pointed to the EPA’s green appliance regulations as an example of an effective regulatory regime that does not mandate third party testing. They pointed to NIST’s accreditation of first, second and third party testing laboratories to make the point that it is possible to oversee the integrity of in-house testing.

I pointed to the rule to require warning labels on slings—cloth infant carriers—that the agency plans to proposed next week, asking whether sending slings to a third party testing laboratory to “test” whether the label was correct was an efficient use of resources.  While the audible answer was “probably not”, judging by the body language of the folks in the room, the real answer was “are you kidding me?!”

I asked these experts about whether testing variability occurs among different labs or within the same lab.  The answer I got was “Of course it exists.  Everyone knows that.”  Apparently, everyone but the CPSC. This is an issue I tried to get the agency to address when I was a Commissioner but agency leadership was steadfast in refusing to even see lab variability as an issue.

We talked about the feasibility of laboratories discounting prices to small businesses who are suffering mightily under the burden of CPSC-required testing.  Commissioner Adler has suggested that laboratories do that since the testing requirements of the law and the CPSC regulations have provided laboratories with such a business windfall.  The conclusion of these experts was that this is not a workable option for a wide variety of reasons.

However, we did talk at some length about the role testing laboratories could play in assuring that testing resources are directed at those products that pose the greatest risk and are not wasted on unnecessary testing.  I challenged the industry to participate constructively in suggesting ways to reduce testing burdens beyond the rather unimaginative actions now being taken by the CPSC. While the industry may experience some short-terms gains by a system that requires excessive and burdensome third party testing, everyone, including testing laboratories, benefits from a system that deploys resources efficiently and reduces the costs that product sellers (and consumers) pay to assure safety in the marketplace.

 

Illusory Process = Diminished Results

The CPSC staff is now collecting and cogitating on information about how phthalates—substances added as plasticizers to make plastics soft and pliable—are used to manufacture children’s toys and child care articles.  This activity is part of the agency’s effort (perhaps its only effort?) to minimize the burdens of third party testing, as required by Congress in P.L. 112-28.  If the agency can conclude that certain substances do not and cannot contain illegal phthalates, then it can determine that products made up of those substances do not need to be tested for phthalates.

The problem is that the way the agency is going about its inquiry is almost guaranteed to result in very little relief.  And since phthalates testing is very costly, an illusory process that is structured to minimize any relief available does not reduce the testing burden Congress was trying to achieve, much less what responsible regulators should insist on.  The problem with the phthalates inquiry is that the agency is requiring that stakeholders not only show that phthalates are not now being used in the manufacturing process, but also to show that it is impossible that they will be so used any time in the future, in any place in the world.  In other words no matter how much real world data one supplies, it cannot proof the negative as is being asked by the CPSC staff.  Although we all know the moon is not made of green cheese, who can say what will happen in the future.

The outcome of this inquiry is pretty clear.  Certain predictable substances, such as natural wood and fibers, will eventually receive exclusions from testing (after how many years of costly and unnecessary testing?).  The bulk of products that do not use phthalates but whose makers cannot now predict the future in the absolute terms required by the agency will not get relief.  The agency will claim this as an accomplishment and close up shop on any real burden reduction.

I do not understand why the agency has taken the approach it has.  A real and honest effort to understand where phthalates are used, where they are not and then address its compliance efforts at where they are used and its burden reduction efforts at where they are not would result in significant relief.  Rather than ask stakeholders to prove a negative, they should ask stakeholders to help them understand where the agency should be looking for phthalates.

The response, no doubt, is that a collaborative approach does not guarantee that phthalates will not be added by some unscrupulous manufacturer at some point in the future.  However testing relief does not relieve anyone of complying with the underlying phthalates prohibition.  And the agency has plenty of tools to address that eventually if it were to occur.  Because the phthalates prohibition must be complied with regardless of testing, the agency cannot say that its current constrained approach is required to be consistent with assuring compliance with the existing law.  Denying testing relief to the vast majority of manufacturers who do not use phthalates because of some imagined future scenario which the agency can address should it occur does not carry out the spirit of the law Congress passed.

Fielding Differences

BUT BY WHAT MEANS?

It has been said that no two people ever read the same book.  Our perspectives and reactions are all influenced and informed by the points of view we bring to a particular issue.  This is especially true of commissioners at the CPSC who bring a wealth of experiences to the agency and whose outlooks are influenced by those experiences.

My former colleague and good friend, former Commissioner Anne Northup, and I did not always initially agree on various issues that we were confronted with.  But because of mutual respect for the other’s point of view, we were usually able to find common ground on most issues.  Even when we differed in approach or outcome, those differences provided opportunity for healthy debate and persuasion, which is the point of regulatory commissions.

One example of this was the commission’s approach to regulating small powerful magnets.  Former Commissioner Northup and I approached the issue from very different perspectives.  Commissioner Northup voted to bring an administrative action to force a recall of Buckyballs, the brand name of the most popular magnets sold as an adult desk toy.  Like all commissioners (myself included) she was very concerned about the number of injuries to children who swallowed the small magnetic balls.  She saw this as a product that was attractive to children and so, should be regulated as a toy.

My approach was different.  I was concerned by the fact that the product seller had gone to extraordinary lengths to market the product as an adult product.  I was unsatisfied with the commission’s view that it is appropriate to ban a product that is being safety used by its intended audience when unintended users are being harmed through misuse of the product.  I was concerned that the administrative action the commission undertook was tantamount to backdoor rulemaking and that if the commission wished to regulate this product it should do so directly.  Finally, I objected to the agency’s approach to contact retailers informally asking them to pull the product (thereby destroying its market without any kind of due process) rather than go to court to seek an injunction against the sale of the product during the pendency of the lawsuit (as the law allows).  Former Commission Northup shared this last concern.

Former Commissioner Northup recently wrote an opinion article that describes her reactions to the recent settlement of the CPSC’s administrative suit against Buckyballs.  Her article is worth reading.  Like me, she is most disappointed that the agency staff, presumably with the acquiescence of the Chairman, expanded the scope of the lawsuit to include one of the company’s principals as a party in his personal capacity.  This unprecedented action was never put to a vote and, hence, was not done by agreement of the commission.

While Anne and I did not agree on the merits of whether this case should have been started, we do agree that it soon badly went off the tracks.  And I cannot find anything but agreement when she concludes that “collaboration with manufacturers and retailers is a faster and fairer way to protect the public…”  Unfortunately, this is a lesson that I do not think the agency has yet learned.

 

Betting on the CPSC–never a sure bet

Earlier this week the Senate Commerce Committee had a marathon confirmation hearing with several subcabinet nominees from various federal agencies.  The hearing included in this disparate group Commissioner Robert Adler who has been nominated for a second seven year term on the CPSC.  Because of the number of nominees before the Committee and votes on the Senate floor, the hearing was rather truncated without much probing of Commissioner Adler’s views on issues before the CPSC.

Nevertheless, Senator Thune, the senior Republican on the Committee, did ask Commissioner Adler to explain the agency’s delay in implementing PL 112-28, which directed the agency to work to reduce the costs of third party testing.  Senator Thune made similar inquiries with the two earlier nominees, demonstrating that he has concerns with the manner that the agency is implementing the law.

Commissioner Adler’s response to Senator Thune was both interesting and disturbing for at least two reasons.  First, Commissioner Adler said that because of the way the law is written, it is “not easy to come up with” constructive ways to reduce burdens.  Huh?!  The public has presented many suggestions over the years as has the agency staff.  What is not easy is to get the Commission to devote the staff resources to get the job done.  This is a problem of the Commission’s own making and clearly the Commission does not want to clean up after itself—to do so would implicate several of the rules the agency put in place without regard to the burdens them impose.  The Congress told the CPSC that if it needed additional authorities to get the job done, then it was to come back to Congress with a request for tool to do the job.  No such report has been sent.  In other words, it is too hard to do the job, but the agency will not ask for what it needs to do the job.  In the meantime, scare resources are being spent on testing that does not advance safety.

Second, to demonstrate his commitment to carrying out Congressional direction, Commission Adler pointed to the one proceeding the agency has ongoing to address burden reduction.  This proceeding is to come up with “determinations” that certain products do not and cannot contain phthalates and various heavy metals.  This determinations proceeding, first suggested in 2011, finds precedent in similar action the agency took in 2009 to determine certain materials did not contain lead and so did not require testing.  However, the lead determinations took the agency a matter of months to put in place not the years that the current proceeding is eating up.

Commission Adler also stated that the determinations will solve the problem saying that the “small businesses I have talked to want expanded determinations” as if this is all they want.  Of course, if you are a small business making toys out of natural wood, you do not want to have to test for phthalates and heavy metals when you know they are not present.  That is pretty obvious. However, there are many other small businesses who look to the federal government not to put in place regulations that impose costs without added safety benefits; who want the federal government to consider laws in other jurisdictions and minimize repetitive testing; and who want to be able to have manufacturing processes that are flexible enough to meet market demands without having to stop to do third party testing when this does not add to safety but does impact their bottom line and their ability to expand and create jobs.

If confirmed, Commissioner Adler will be in office until 2021.  I was thinking about starting a pool on whether the agency will actually complete meaningful action to reduce testing burdens before his new term expires.  But given the agency’s pace and progress so far, betting on the agency to act is not a sure bet.


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