Archive for August, 2012

Consider the Costs

Conversations about the proper size and role of government are always important but are especially so during a presidential election. One of the primary topics this year is regulation:  What are its successes? What are its failures? How do we measure both and what can we learn from both? Is cost part of the equation?

Of course, I believe we have to consider cost, and I wrote as much in a Letter to the Editor in the New York Times this week.

Too Far From the Flagpole?

The CPSC has continually ignored and otherwise shrugged off direction from the White House regarding good regulatory policy.  The questions I have: Are we standing so far from the flagpole that we cannot hear the bugle?  Or are we just marching to a different drummer?  Either way, IF the White House were really serious about regulatory reform, then the CPSC’s continual disregard of Presidential executive orders should be of concern.  That is a big IF—could it be that they are not serious?

Today, I wrote an op-ed about the CPSC’s repeated failures to take seriously the President’s regulatory reform directives.  As a result we are shirking our responsibility to write rules that minimize the burden on the economy and marketplace and, consequently, consumers pay the price. You can read the piece online at the Washington Times.

Rule Review: Do It Right

Last week, the Commission voted against conducting a substantive review of our existing rules. I joined with my colleague Commissioner Northup in offering an alternative to the proposed plan, one that sought to focus on excessively burdensome and unnecessary rules. Our colleagues opposed such a meaningful review—their opposition was not in the spirit of President Obama’s executive order on retrospective review. It is disappointing that my colleagues voted to keep the scope of our rule review narrow, and focus on such “housekeeping” items as the toy caps rule and the animal testing policy.

Our alternative rule review plan contained many of the recommendations I’ve called for in earlier posts as well as in testimony before Congressional committees. You can see some of these suggestions here and here.

Cooking up Small Plates

Cooking a meal for four is not the same as cooking a meal for 20.  More time and effort goes into the meal for 20 while a meal for four is much more manageable.  In addition, the level of attention to each dish changes as their numbers grow. This relationship applies to the issue of small production runs compared to large production runs. As I have stated before, small runs of 10,000 items do not pose the same safety and quality risks as a run of 1 million items. 

Now let’s suppose we had two chefs cooking in separate restaurants. One happens to be a little financially better off than the other. If both make the same dish, is the quality of their dishes determined by their income status? I think not. Similarly, manufacturers producing small runs should not be penalized just because of their revenue stream. Staff agreed with this in our initial notice of proposed rulemaking for testing and certification on April 1, 2010 by including a low-volume exemption in their draft package. However, the majority deliberately and with little explanation removed the exemption from the final rule. Third-party testing costs clearly impact a small run of products.

Many raised concerns how the removal of the original low-volume exemption negatively impacts various companies.

“Like small-batch manufacturers, the cost of third party testing is becoming an increasingly higher proportion of our revenue.  We believe that many of these costs are unnecessary because we have greater capabilities as a low-volume manufacturer to implement quality control processes such as 100% inspection.”  – Orbit Baby, Inc.

“Regardless of whether a manufacturer is large or small, requiring an expensive third party testing process . . . takes away a large chunk of the small revenue received from this small product batch, and goes against the spirit of the exemption not to mention the spirit of American ingenuity. Requiring third party testing on such small production batches will severely hinder a large company’s ability to test new markets and create new and innovative products that could advance America’s technology and global competitiveness.” – AAFA

“[T]he amortization of these costs results in price increases that cannot be borne by the manufacturer, the importer, nor the consumer.” – The Handmade Toy Alliance

[T]he testing costs for an initial production run [of decorated glassware] would be approximately $940, not including costs associated with shipping samples . . . the returns from small production runs . . . could be greatly reduced or eliminated by the costs of complying with third party testing requirements.” – Libbey, Inc

These comments shed light on how our rulemaking imposes costs that become extraordinary if your business is small—with no corresponding gains in safety. If a small-batch manufacturer and a low-volume manufacturer are both producing the same quantity, why exempt one and not the other?  What makes one production run riskier than the other? 

I eagerly await receiving staff recommendations and hope that the staff stands by their original assessment and asks the Commission to amend the testing rule to include the exemption for low-volume manufacturers. 

 

Taking a Look Under the Hood

Today the House Subcommittee on Commerce, Manufacturing and Trade held a hearing to look at how the CPSC is carrying out its mandate.  What we didn’t say was more interesting than what we did say. You see, the Subcommittee is especially interested in our efforts to implement last year’s CPSIA reform bill, H.R. 2715. Since we have not done much in that regard, we did not have much to tell them.

Here’s a copy of the statement I filed with the Subcommittee, and you can watch the hearing here.


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