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Major Rule, Major Costs

Published October 18, 2011 Children's Products , Congress , Consumer Product Safety , CPSC , CPSIA , Lead , Small Business , Testing 1 Comment

For those of you who aren’t experts in the field of administrative law, when an agency issues a significant new rule, it has to do what’s called a Regulatory Flexibility Act analysis, also known as “Reg Flex”. That’s not Calisthenics for Commissioners (though that’s not a bad idea). It’s a report that examines the impact a new rule will have on the economy, and specifically on small businesses.

The Reg Flex analysis for the testing rule we will vote on tomorrow looked at the costs of this rule, especially on small businesses.  Here is some of what our staff is telling us:

  •  This rule “will have a significant impact on all firms” making children’s products.  For example, the staff estimates that for large firms, increased testing costs will be approximately 1.2% of revenues.  For small firms, testing costs as a percent of revenues could be expected to increase to a staggering 11.7%. 
  •  The rule will have this financial impact on all manufacturers and importers of children’s products.  While we do not have a good handle on precisely how many firms this may be, it will be in the hundreds of thousands of firms.
  •  The testing rule “could be a barrier that inhibits new firms from entering . . . the market.”
  •  Impacted companies may “forgo or delay implementing improvement to products’ design or manufacturing processes in order to avoid the costs of third party testing.”
  •  Firms may be able to mitigate “the adverse impacts if they are able to raise their prices to cover their costs.”
  •  “The impact is expected to be disproportionate on small and low-volume manufacturers.”

At a recent briefing on this rule, one of my colleagues suggested that we already have done everything we can to reduce the costs of this rule.  What I believe he was saying is that we have done everything three Commissioners are willing to do to reduce the rule’s cost.  There are a number of things we could actually do to bring down the testing costs imposed by this rule.  Some of those things are even suggested in the Reg Flex analysis.  And we could still have a robust testing rule to address safety concerns. 

We know that this rule will burden our economy.  Our staff says so.  Because Congress was concerned about the high costs of testing, it recently told us to seek out ways to reduce the testing costs in this rule.  Therefore, before issuing this rule, we should do as Congress asked and look at ways to reduce the costs of testing consistent with assuring compliance with our safety standards. 

Unfortunately, politics often trumps good policy here at the CPSC, so tomorrow we will issue a final testing rule and then look for ways to reduce costs of the rule we are issuing.  Talk about putting the cart before the horse!  And this approach certainly raises the question of how sincere the effort to reduce costs will be. 

While we all agree on the goal of child product safety, I am convinced we can achieve that without incurring the staggering costs identified by our staff.

Solid Floor or Trap Door

Published October 17, 2011 Certification , Children's Products , Component Testing , Consumer Product Safety , CPSC , CPSIA , Lead , Small Business , Testing Leave a Comment

Government shouldn’t be in the trap door business. The idea is to let people know what the law is, so that we have the moral ground to penalize violations. I’m worried the CPSC’s looming testing and certification rule has at least one giant trap door built in, and it creates opportunities for abuse. 

Along with initial and material change testing by an independent third party testing lab, this rule tells manufacturers to third-party test each product periodically for as long as it’s sold. What worries me is how we’ve structured the periodic testing.

Our rule tells manufacturers to third-party test at least once a year, or once every two years if they have production testing, or once every three years if they have their own lab certified by ISO. That sounds simple enough, but we’ve left a trap door.

Those intervals are ceilings, but the rule doesn’t have a floor. Manufacturers may have to test much more often than what is outlined above, but we’re going to put all the risk on them for making the right judgment call. What the rule actually says is that products need to be tested often enough to give a “high degree of assurance” of compliance, and then it gives ten factors – all of them judgment calls – we think manufacturers should consider.

This creates a situation where a well-intentioned manufacturer could set an interval it thinks is appropriate based on our factors. Then, when we step in to investigate an issue, we get to decide on our own with the benefit of 20/20 hindsight if that was good enough, with no limits on our discretion.

The obvious uncertainty that means for manufacturers is bad enough, but, worse, it’s an avenue for abuse. When a manufacturer – again, trying to do things the right way – is negotiating with us the remedies for a problem, including monetary penalties, we could stack on extra “violations” for its failure to read our minds accurately on the testing interval.

My colleagues have told me my fears aren’t real, and there’s no way we would use our rule like this. If that’s the case, why write it this way at all? Why not just make it clear: If you don’t do production testing and don’t have an ISO-certified lab and you third-party test at least once a year, you’re fine; if not, you’re in violation of this aspect of the rule. Period. No mind reading. No guessing games. No trap doors. Just a clear rule and clear enforcement, the way it’s supposed to be.

Hope you have a Subscription to the Federal Register

Published September 28, 2011 Comment Request , Consumer Product Safety , CPSC 1 Comment

Things went according to the majority’s predetermined plan this morning when the CPSC voted to reinterpret the definition of “unblockable drain,” reversing an earlier interpretation and costing states and municipalities significant sums to either reengineer perfectly safe swimming pools or lock the gates. In a small nod to process, the majority did agree to accept comments from the public. But they did not want to hear comments on the wisdom of the reinterpretation, but only on when should we start enforcing the change.  As I said during the meeting this morning, it’s like saying “we’re going to guillotine you, now tell us what day would be convenient.” 

I would urge everyone who is impacted by this action to take the commission up on its offer.  I hope you will comment and I hope you do not limit yourselves to discussing the effective date.  Policymakers need to hear from those who are impacted by what they decide. 

And, by the way, if you are looking for a press release that explains what the Commission did this morning, don’t bother.  Rather than announce our action to the public like we regularly do, some selected few will get an email about this from our press office and everyone else will have to read about it in the Federal Register. 

Read my statement on this vote here.

What Does CPSC Stand for These Days?

Published September 27, 2011 Certification , Congress , Consumer Product Safety , CPSC , CPSIA , Small Business , Testing 3 Comments

The CPSC seems to be floundering around in the deep end of the pool without a lifeguard to save it.  What was intended to be a quick, “under-the-radar” vote to flip-flop on a rule dealing with swimming pool drains now has turned into a big mess. 

Common sense and good administrative practice say that when you reverse course, you should find out who will be impacted by your action before you do it.  This is even truer when there is no impetus for the reversal and no rallying cry or public discussion prompting you to act.

In this case, many states and local jurisdictions have relied on the guidance we gave them 18 months ago and therefore we should have determined how a rule reversal would impact them.  Since the agency refused to ask for that information, I did, and I have been getting a number of troubling letters that detail the adverse safety impacts and the financial and regulatory burdens we will be placing on those jurisdictions by this action.  These letters make clear that, had we bothered to ask the public for their thoughts in the first place, they would have had plenty to tell us. Now we have gotten a letter from the Chairmen of the two Congressional Committees who oversee our activities asking why we are taking this action without even asking for public comment. 

This is not the only instance where the Commission is rushing to regulate before the effects of potential changes are understood.  We will soon be voting on the testing and certification rule.  Our own regulatory analysis tells us that this rule will be enormously expensive.  Recently, Congress told us to better consider the costs of testing, especially to small businesses.  In response, the majority plans to push out a final rule with a vague promise to perhaps amend it before it becomes final final, after we get input from the public on ways to reduce testing costs and burdens.  So, without getting the cost information Congress told us to get, we’re going to put the rule out, then maybe change it after people have already started relying on it, thus increasing the cost even further.

Rushing out rules without concern for the consequences is becoming standard operating procedure for this agency. Between our blind rush on the testing rule and our belly-flop of a hush-hush reversal on pools, with the enormous sums of other people’s money we’ll be wasting in both actions, CPSC might soon have to stand for Consistent Producer of Sunk Costs.

Willful Disregard for Public Experts

Published September 23, 2011 Consumer Product Safety , CPSC 1 Comment

Lovers of due process should tune into the CPSC webcast next Wednesday, September 28, to see arbitrary agency action at its finest.  We will have several matters before us where the majority of commissioners plan to blow away any pretense of fair and open process.  In the first instance, the agency will be making an about-face on a rule dealing with swimming pool drains without even bothering to put the question out for public comment.  (For the specifics of this issue see my blog post) In the second instance, we will be briefed on finalizing one of the biggest and most expensive rules in the history of this agency, effectively ignoring congressional direction to seek comment and tailor the rule to better reduce costs. This is really a lousy way to regulate. 

With respect to the swimming pool drain matter, 18 months ago we put in place, by a 3 to 2 vote, a rule interpreting the new pool safety law.  Since that time all fifty states have been working hard to implement our rule.  However, next week we will reverse our rule because one commissioner who voted in the majority has changed his mind on what the law requires. The result may be to make irrelevant much of the hard work those states have been doing.  When I asked if the agency had new data or a new legal interpretation to justify reconsideration of this matter I was told, “No.”  When I asked for a staff briefing of the commission on this matter, I was told, “No.”  When I asked that we contact the states asking for input on whether the proposed new course of action made sense, I was told, “No.” 

Despite the agency’s refusal to get data, I reached out to several state health officials.  I was shocked by what I was told.  First, there is strong dismay that a reversal is being considered.  Second, this reversal will have serious financial implications for the states that relied on our current interpretation.  Third—and most importantly—this reversal will have serious adverse safety implications.  Here is some of what I was told:

  • Illinois:  Our current interpretation is “reasonable, practicable[,] and meet[s] the intent of the law . . . we were put through the wringer to meet the requirements of the new law and now you want to upset the apple cart.”  The reversal “absolutely has safety implications” and “this will make the situation less safe.” 
  • Minnesota:  Approximately 1,000 pools in the state will be impacted.  The secondary back-up system does not have the proven reliability and does not prevent evisceration incidents that have been cited as justifying the change. 
  • Nebraska:  The state relied on our current interpretation; a reversal would impact several hundred pools and would have financial impacts especially for rural communities.  Reversing our policy does not advance safety. 

Other states have given me similar comments. As I receive the emails and letters from the states I am sharing them with my colleagues.  The fact that I, as an individual commissioner, had to do this outreach rather than the agency asking for comment from the public is inexcusable. 

But apart from the process, what is worse is that we are actively ignoring the experts in the states who have direct responsibility for assuring pool safety.  I would sooner rely on their arguments than those of colleagues who have no expertise and who, as we have seen, can always change their minds.

Jumping off the High Dive, Blindfolded

Published September 19, 2011 Consumer Product Safety , CPSC , Risk Analysis 2 Comments

Would you jump into a swimming pool without looking just because a colleague told you to do it? Wouldn’t you want a little more information?

Well, that’s exactly what the Commission is about to do as it votes again on the question of what constitutes an unblockable pool drain. This vote will really be a pre-determined decision to flip-flop CPSC policy based on nothing more than a single Commissioner’s change of mind.

The Virginia Graeme Baker Pool & Spa Safety Act requires that pools either have unblockable drains or have back-up systems that will shut down the suction in the pool when those systems sense that a drain is blocked. Approximately 18 months ago, after public input, we interpreted the law to mean that a drain with a properly installed unblockable drain cover constituted an unblockable drain, so that a back-up system was not required. This interpretation was based on advice from our lawyers and technical staff. It also had the effect of preventing drowning from happening rather than addressing the problem after a person ran into trouble. The vote was 3 to 2, with Commissioner Adler joining Commissioner Northup and me in approving the interpretive rule. Since then, he has changed his mind.

Though Commissioner Adler has the right to apply his own opinion to our statutes as he votes (even changing his mind 18 months after a vote), prudence says practical realities should always inform our policy decisions. Among other things, we should consider how many people relied on what we told them 18 months ago and the impact of that reliance. I myself am open to opting for a new course if the record and arguments before us make the case. A majority of the Commissioners apparently believe we don’t need to consider any record, arguments, or practical realities, just vote.

Commissioner Adler says he is “a big fan of information,” but we will have none. He has said he is “dead set against” including that information in the conversation. He tells us it isn’t necessary, and the Chairman agrees. Sadly, they’re right since the outcome of this vote is predetermined and now we are only going through the motions. Having actual data and information would be necessary for a genuine exchange of ideas followed by a vote that relied on that exchange.

Three Commissioners are again stonewalling, saying I will have to agree or disagree with Commissioner Adler’s change of mind in a vacuum. Would a Request for Public Comment be such a bad approach here when the agency is reversing a policy developed after public input and relied upon by the public? Our staff is instructed not to ask the public now to comment on this issue. In fact, at a recent meeting, I was told it was “out of turn” for me even to ask why we wouldn’t have any of that vital information.

We’re told that’s because we already “know what we’re going to know,” and the majority has ensured that statement is true by making sure we don’t accidentally learn anything else. All we will have is Commissioner Adler’s changed mind. Sounds like regulating in willful ignorance. Shame on the Commission.

Radio Interview on Over Regulating Government

Published September 15, 2011 Certification , Congress , Consumer Product Safety , CPSC , CPSIA , Jobs , Small Business , Testing Leave a Comment

Last week I talked with Hugh Hewitt, a nationally syndicated radio show host, about government regulation run amok. Hugh asked me if I thought the CPSC’s new regulations were straining an already struggling economy. I wholeheartedly agreed, and discussed (again) how the agency is not doing the required leg work before issuing rules. I will continue to work to change the poorly-thought-through rules now being implemented at the Commission. Click on the link below to listen to my interview with Hugh.

Hugh Hewitt Interview 9-13-11

Is The CPSC Taking Regulatory Reform Seriously?

Published September 12, 2011 Certification , Congress , Consumer Product Safety , CPSC , CPSIA , Small Business , Testing Leave a Comment

Last week I discussed both substantive and process issues surrounding the periodic ongoing testing rule the majority shortly plans to ram through the commission.  A majority of the commissioners proactively decided that, since they were not concerned about the costs of the rule, they did not need to do a cost-benefit analysis.  This is true even though agency past practice and directions from the President would suggest that as the appropriate course of conduct. 

Last week I sent a letter to the Administrator of the Office of Information and Regulatory Policy, who is the person designated by the President to assure that the costs of regulations do not outweigh their benefits.  Here is a copy of that letter.  Should I get a reply, I will be happy to share that as well.

Majority’s Plan: Ram it through while we can

Published September 9, 2011 Certification , Children's Products , Component Testing , Congress , Consumer Product Safety , CPSC , CPSIA , Jobs , Lead , Risk Analysis , Small Business , Testing 1 Comment

The past three days in this blog I have discussed my disagreements with the three-member majority on the Commission about the pending testing and certification rule they plan to ram through in October.

  • The proposed rule applies a one-size-fits-all approach to third-party testing that is guaranteed to be a misfit rather than requiring third-party testing where it is the most necessary (i.e., where the risk is highest);
  • The proposal needlessly sets detailed definitions of a “reasonable testing program” in regulatory stone; and
  • The voluntary component part testing rule—which holds the promise of actually lowering costs and for which work was completed some time ago—has been needlessly held back while we work on the testing rule.

I also question the insistence on rushing this flawed product through. H.R. 2715, passed just weeks ago, expressly instructed us to consider the costs of our testing rules and get public feedback on how to mitigate those costs while still ensuring the safety of children’s products.  It would make sense to get that information before we issue the rule, but the three-member majority doesn’t want to do that. I have to ask: If we don’t have time to get it right the first time, when are we going to have time to fix it?

Congress addressed another problem that I had with our proposed testing rule. The CPSIA required companies to submit “random” samples of their products for testing, but didn’t define the term “random.” It would have been good for the Commission to interpret “random” to mean that manufacturers couldn’t rig the game by choosing “golden samples” they knew would comply.

Our proposal, however, did not take that plain-language approach. It read “random” in a much more technical, complicated sense that might have meant lots of money for statisticians but little or no safety benefits beyond those of a common-sense reading.

In H.R. 2715, Congress resolved this dispute. The new law makes clear that Congress intended to prevent the cherry picking of samples by striking the word “random” and replacing it with “representative.” We could have done this by interpretation, but we chose to let others clean up our mess after the fact. Sound familiar?

 So:

  • Congress has expressly informed us that the majority was mistaken on at least one key aspect of the testing rule.
  • The new law re-shapes the landscape to require us to look at ways to reduce costs. 
  • The proposed testing rule has serious flaws that will make it more burdensome than it has to be and less effective than it could be.

Given all this, prudence indicates the path forward. We should take a few moments to re-examine what we’re trying to accomplish and how we’re trying to accomplish it. If we do that openly and sincerely, we will arrive at a better product.

Instead, because three members of the Commission want to do all they can while they still have their majority, they are poised to foist a misguided, misconceived, and likely expensive regulation on an already fragile economy. All with the promise that sometime in the future it could be fixed.  Man up and fix it now.

Ready…Fire…Aim (3)

Published September 8, 2011 Certification , Component Testing , Congress , Consumer Product Safety , CPSC , CPSIA , Small Business , Testing 1 Comment

My last two blogs have discussed shortcomings in the soon-to-be-voted-on testing and certification rule.  A third aspect of this testing and certification rule that concerns me is how it has mired another rule in an arbitrary process: our voluntary component testing rule.

The component testing rule clarifies that testing done by a component part manufacturer can be relied upon by the manufacturer of the final product.  The rule would allow component part manufacturers (like the company that makes the plastic for the teddy bear’s nose) to test and certify those component parts themselves. The final manufacturers of consumer products (here, the teddy bears) could then pass through the compliance maze more quickly by relying entirely on components that were already tested and certified. The goal of the component testing rule is to mitigate the burden of testing by spreading those costs across the supply chain.  It recognizes that, from a safety standpoint, the whole really is just the sum of its parts. And, it effectively pushes safety up the supply chain.

The component testing rule could have been issued months ago.  Indeed, all year long I have been asking the majority why they were holding back this rule and have yet to receive a satisfactory answer.  Apparently, their thinking is that if this is tied to the testing and certification rule, it will make the whole indigestible package more palatable.  They are wrong in thinking this.  And they are wrong, by holding the component parts rule hostage, to regulate with such disregard for how their actions impact those who have to live with them.

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