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Cleaning the Attic

Last week during its meeting, the CPSC amended its operating plan to direct agency staff to prepare a plan for retrospective review of its regulations to assure that rules that need to be updated, streamlined, changed or repealed receive such action.  The Commission’s action deserves both notice and praise.

Four years ago, President Obama, in Executive Order 13610, asked independent agencies like the CPSC to undertake such a review of its rules.  In response, in 2012, the agency came up with a plan that fell far short of the President’s objective of building a regulatory culture that included, as a central tenant, a meaningful regulatory look back.  At the time, I expressed my concern that this 2012 plan was a fig leaf pretending to count for something larger.  So why is what the Commission adopted last week different from that adopted in 2012?

First, in the 2015 plan, the Commission recognizes the need to formalize and institutionalize retrospective review and imbue the process with appropriate staff resources to assure a meaningful and independent process.  Second, the Commission also recognizes important factors that qualify rules for review, including not only the rule’s utility in saving lives and reducing injuries but also how it contributes to cumulative burdens, imposes unnecessary international differences and imposes economic and paperwork burdens on those regulated that could be alleviated.  Finally, the plan asks staff to consider ways to appropriately plan for retrospective review when regulations are being initially drafted.  If such a review is anticipated when the rule is first adopted, then it is likely that the rule will actually be reviewed and the needed data will be available to facilitate such a process.

The Administrative Conference of the United States, which looks at issues inherent in the regulatory process, has recognized the value of a robust retrospective review process and has made valuable recommendations for best practices for such reviews.  As ACUS points out:

Without a high-level commitment, any regulatory lookback initiative runs the risk of devolving into an exercise of pro forma compliance.  This might not be an inevitable outcome, however.  If the relevant agency officials, including both those conducting retrospective reviews and those drafting new rules, come to view regulation as an ongoing process whereby agency officials recognize the uncertainty inherent in the policymaking exercise and continually reexamine their regulations in light of new information and evolving circumstances, a durable commitment can emerge. Regulatory review should not only be a backward-looking exercise; rather, it should be present from the beginning as part of an on-going culture of evaluation and iterative improvement.  Planning for reevaluation and regulatory improvement (including defining how success will be measured and how the data necessary for this measurement will be collected) should be considered an integral part of the development process for appropriate rules.

When the agency developed its 2012 plan, it was like a less-than-enthusiastic effort to clean the attic in an old house.  Lots of dust was raised but little substance was accomplished.  That is why I objected to it.  The current Commissioners have given the green light to a different outcome. The CPSC staff drafting the review plan should consider using the ACUS recommendations as the foundation for a review effort that will mark the CPSC as a leader in drafting safety regulations that are well-founded, practical and have long-term vibrancy and relevance.

Note to CPSC: You Really Dropped a Stitch Here!

I am a knitter.  Knitting teaches patience and is a great way to pass time on an airplane.  While traveling, I missed a recent CPSC recall and am thankful to my friendclip-art-knitting-981445 Lenore Skenazy, the author of the blog Free Range Kids, for bringing to my attention important information about a silent killer—yarn.  Since she said it better than I could, the following is from her blog post:

Gracious me! This brand of yarn can unravel! Have you ever heard of such a thing? It’s just too scary! How irresponsible can a yarn maker be? No wonder the Consumer Product Safety Commission just issued this dire warning:

Name of Product: Bernat Tizzy Yarn

Hazard: In finished knit or crochet items, the yarn can unravel or snag and form a loop, posing an entanglement hazard to young children.

Incidents/Injuries: Bernat has received two reports of children becoming entangled from unraveling or snagging yarn blankets. No injuries have been reported.

Remedy: Consumers should immediately stop using the yarn or finished yarn projects, keep them out of the reach of young children, and contact Bernat for a full refund.

Remember! Children are only safe near items that can never unravel or make a loop. Kindly avoid all necklaces, ponytails, jumbo rubber bands, snakes, shoelaces, licorice whips, octopi, thread, phone cords, scarves, kites, jump ropes, taffy (long form), fishing line, string cheese, and, of course, marionettes. – L.

What is the agency thinking?  While unraveling yarn may be a quality problem (for the company to address with unhappy customers), turning a quality problem into a safety issue takes the agency way outside its mandate.

In an earlier post I addressed my concern that silly recalls can serve to make consumers stop listening.  This certainly qualifies as a silly recall. Consumer safety is not advanced by such a result.  However, if the agency persists in pushing its mandate so that product quality problems are viewed as safety issues warranting a recall, what unravels is any predictable definition of a safety hazard and then safety becomes what the agency says it is at any given time. Now that is a snag folks should be worried about.

Seeking the Promise in Compromise

In an especially insightful column this past week, political analyst Michael Gerson noted that often policy-making is as much about methods as it isimages about outcomes. The manner in which things get resolved can often leave them unresolved or at least leave them festering.   He, of course, was talking about the dynamics between the President and the Congress and the brewing ideological storm looming on the horizon about to be seeded to the saturation point by aggressive use of executive orders. Yet, as I read his column, I could not help but wonder what would happen if, in one small corner of government, public servants actually worked hard and honestly to seek compromise rather than steamroll through an ideological result because they can.  Of course I was thinking about the CPSC.  Oh, how naïve of me.

After four years when little effort was made to accommodate differing views in order to reach consensus, new leadership and a roster of four out of five commissioners new to the agency offered the potential for real change. And an early effort by Chairman Kaye and Commissioner Mohorovic gave hope to the notion that perhaps that new territory—the elusive middle ground—could be profitably explored.  Kaye and Mohorovic were both asked by Senator Thune during their confirmation hearing for concrete plans to reduce testing costs and burdens currently being imposed by the agency, and the two put their heads together and came up with a joint response to the Senator.  Up to this point, the Commission has done nothing except talk about how hard it is to do anything—neatly forgetting that when it put the testing rules in place that are now driving those costs, its own economists told it that the costs of those rules would be unsustainable for many businesses.  Even when asked by Congress to address these costs, the Commission’s activities have consisted of foot-dragging tactics cloaked in enough bureaucratic jargon to make even the most cynical panjandrum shake his head in wonder.

Chairman Kaye and Commissioner Mohorovic, however, did come up with three specific additional recommendations that, if implemented, actually might reduce the testing burdens now being imposed by the Commission.  Admittedly, what the two proposed is still quite modest—thin gruel but still some nutrition.  Yet I cannot help but think that if each had written an individual letter, those letters would have been quite different—one more expansive and one less so.  The point is that, presumably, the two were able to accommodate their differing views to get to a consensus.   (But since nothing substantive has been done to drive forward the ideas articulated in the letter, it remains to be seen whether they are merely words on paper, like the rest of the agency’s burden reduction efforts, or whether there is anything real behind them.)

My hope in thinking that perhaps a new effort at consensus building was alive and well at the CPSC was dashed a couple of weeks ago when the agency voted to propose a rule to regulate recreational off-road vehicles (ROV’s). The agency and the industry have been working on safety issues associated with ROV’s for many years. These issues are perhaps the most complex that the agency has ever been presented with and, hence, are not easily resolved.  The industry has developed and recently revised a voluntary standard even as the agency staff worked to write a proposed mandatory standard.  When the proposed standard was made public shortly before the Commission was scheduled to vote on whether to issue it for public comment, the industry engineers met with the staff to discuss various technical issues presented by the draft, an effort which staff agreed was productive. Rather than make further attempts to work through these technical issues, three Commissioners chose to vote to issue the notice of proposed rulemaking. The result was a 3 to 2 vote, along party lines, to issue a proposed rule that is probably not the best work product the agency could have put out.  An amendment to delay the vote by 90 days to give the technical experts the opportunity to work through the issues raised was defeated, again along party lines.

If the leadership of the agency was serious about trying to compromise, then agreeing to this amendment would have been a no-brainer.  If issues could have been resolved, or at least clarified, in that 90 day period, then efficiencies would have been gained. If not, then the industry’s hand would have been called.  Either way, no one can make a credible argument that a rulemaking this complex and potentially lengthy would be so delayed as to jeopardize safety.  A controversial issue would have been diffused, the dissenting commissioners would perhaps have a harder time voting against the NPR; complex technical issues may have been clarified with a resulting better proposed rule—all around a win-win.

Finding consensus and reaching a compromise is very hard work.  If you are in the minority, sometimes achieving small wins may not feel as satisfying as keeping to your principles.  Yet small wins can still be wins.  But when you are in the majority, compromise means that you have to be willing to try to reach common ground even your vote count says you do not need to and when the temptation to jump on the steamroller is strong.  As we are seeing, finding the promise in compromise is not an easy thing to do.

Connecting Corporate Counsel

Readers who are in corporate law departments may be interested in a conversation I had recently with the editors of Corporate Counsel Connect, a Thomson Reuters publication focusing on corporate law departments.  The focus of the piece was the development and 30 year history of the Association of Corporate Counsel (ACC), where I served as its first executive director.  You can find the interview in the October issue of Corporate Counsel Connect, here.  In a separate article I discussed with the editors the challenges that corporate counsel face in the current regulatory environment.

Corporate counsel who are not members of ACC may want to check out the resources it offers.

 

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.

 

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.


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