Archive for the 'Part 1110 (Certificates)' Category

Shopping the Global E-Mall

While holiday shopping memories may have faded to a blur, holiday gift returns and shopping for bargains are very much a part of the January ritual.  That is why a Wall Street Journal article that showed up right at the end of the year has stayed in my mind.

The article, by Dennis Berman, examines the growing phenomenon of e-commerce sales directly between Chinese manufacturers and global consumers. Berman’s piece provides a fascinating peek at China’s ability to merchandize goods–ranging from electronics to household products to wedding dresses–directly to consumers anywhere in the world using the web, global transportation networks and consumers’ increasing comfort level with and demand for products that transcend national boundaries.

For those of us who are concerned about consumer safety, the implications of this change in consumer buying patterns are obvious.  And, as a former safety regulator, I am troubled by the U.S. Government’s awkward and clumsy approach to the issue.  The Consumer Product Safety Commission has outstanding a proposed rule to address the safety of imported goods but that proposal actually adds costs, burdens and bureaucracy to the import process while adding little if any added safety. While the proposal creates detailed new rules for manufacturers who import products for sale in the U.S. through traditional distribution methods such as retail stores, it treats foreign manufacturers who sell directly to U.S. consumers almost as an afterthought.

Here is some background.  Since 2008, the law has required that importers of consumer products certify that their products meet U.S. safety standards, including testing requirements. Those certificates must be available for inspection by the CPSC upon demand.  In addition, the agency established a program that targets shipments for inspection based on a risk assessment methodology that includes criteria (such as type of product, identity of shipper, and location of shipper) which, in the agency’s judgment, have proven to be indicative of high-risk shipments.  This program has been supplemented with aggressive work with the Chinese government to address the serious safety issues that were identified in the last decade.

The agency now proposes changes to this system but the changes focus almost exclusively on importers who bring product into the U.S. for sale through traditional distribution channels.  The agency seeks to establish a system under which every certificate of an imported product must be filed electronically with Customs at least 24 hours before the product is presented for entry into the United States.  The proposed regulation also expands the data requirements of the certificates, and imposes on common carriers, such as Federal Express and UPS, the requirement to file (and be responsible for the accuracy of) certificates when they act as importers of record for their clients. The agency also proposes to build the capability to “look” at every shipment entering the U.S. and would fund the increased staff that this will take by imposing a fee on importers.  I have discussed these issues in the past.

While this proposal certainly increases the regulatory reach of the CPSC, I am not certain that it actually increases the safety of the marketplace. I question the effectiveness—and the fairness–of imposing on UPS the job of policing the safety practices of the global supply chain.  I do not understand why billions of certificates for perfectly safe products need to be retained under penalty of law for years when much of the same information is required to be retained under other CPSC regulations.  I do not understand why expensive new computer and administrative systems have to be established by importers to file these certificates with Customs when it is unlikely that the vast majority of certificates will ever be looked at by the CPSC.  I do not understand why the agency wishes to upset a system that seems to be working—except to scratch the itch to push its regulatory boundaries (and, perhaps, its budget as well).

But none of these measures address what happens when a foreign manufacturer sells a product directly to a U.S. consumer.   While the proposed rule recognizes that, in this case, the U.S. consumer is technically the importer of the product, it would be impossible to impose a requirement on the individual consumer to certify the safety of the product that is being purchased.  Therefore, the regulation solves the problem by putting onto the foreign manufacturer the legal requirement to certify that the product it is selling meets all U.S. safety standards before shipping it to the U.S. consumer.

How this requirement can be enforced, especially against a company that may have no presence in the U.S, is conveniently left unaddressed.  But the arm of the U.S. government is neither long enough nor strong enough to reach so far.  As an enforcement device, this requirement seems to be an illusion.

The regulation fails to adequately address many of the issues that are implicitly raised in Berman’s article.  First, and right out front, is the question of personal choice and responsibility:  if I knowing chose to purchase a product from China, do I assume the risk for any safety defects that may exist?

The nimble quality of the e-commerce marketplace means that little inventory is stored, that product is sourced from suppliers as needed and send to consumers around the world.  That is the economic reality.  Unfortunately the regulatory reality has not kept pace with that economic reality.  And, in large part, that is the fault of regulators.

Here is an example.  Assume that Europe and the United States have similar but not identical safety standards for the same product (a very real-world assumption).  If the Chinese company gets an order for an identical individual product from both an American and a European consumer, is it likely that the Chinese factory will do two separate tests and certify that the same product being shipped to the European and American consumers satisfy the two regulatory requirements?  What if the order came from Mexico? Or Australia? Can they realistically be expected to know, and certify to, the differing requirements around the world?  At what point will the Chinese factory just ship the product out without thinking about safety?  If safety standards were aligned, would there not be more market incentive to design products that meet those standards? Perhaps so. Yet, practical and realistic efforts to harmonize safety standards have not been encouraged by U.S. regulators.

These companies are selling products to consumers in countries all over the world—countries with differing safety standards and legal requirements. Rather than imposing a legal requirement that cannot be enforced, would it not make more sense to try to reach consensus with other stakeholders, including the Chinese, about what should be required?  The CPSC has made good strides in working with the Chinese Government but these efforts can be greatly enhanced—to the benefit not only of U.S. consumers but also of Chinese consumers as well.  Minimal standards for commonly recognized hazards such as exposure to heavy metals, flammability of fabrics, and choking hazards to children could be established and these standards would find their way into the products that are shipped around the world. Then we could build on that progress.

If a global e-commerce marketplace is our reality, then we need to rethink how our country’s safety regulations fit within that reality.  So far the CPSC has not shown itself at being very adept at thinking globally.

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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.

 

 

Crunch Time at the CPSC

We all know about crunch time—when it becomes apparent that projects are getting backed up and everyone is going to have to work like dogs to try to get the work done. Well, as summer fades and autumn beckons from around the corner, it’s crunch time at the CPSC. While no one can be certain (because deadlines can get pushed in any bureaucracy), based on our FY13 Operating Plan and the Mid-year Update, here are some of the issues I anticipate will soon be hitting our desks for decisions:

  • Final Rule on rare earth magnets;
  • Notice of Proposed Rulemaking on the CPSC staff’s role in voluntary standards committees;
  • Notice of Proposed Rulemaking on voluntary recalls;
  • Notice of Proposed Rulemaking for § 1101 with changes related to §6(b) of the Consumer Product Safety Act (CPSA) about public disclosure of information obtained under CPSA;
  • Final Rule for § 1110 Certificates of Conformity; and
  • Operating Plan for Fiscal Year 2014 (which begins October 1st).

We will have busy times ahead with important regulatory issues. Get ready to comment, participate, and track where appropriate.

Certificates of Compliance: Speak Up!

Remember CPSC’s certificates of compliance? In 16 C.F.R. part 1110? Of course you do! If you’re reading this blog, that is, you should, because I wrote about the draft update the Commission approved in May and described a number of shortcomings that I saw in the draft and the process leading up to its adoption (including the draft’s excess breadth, the refusal of some of my colleagues to ask pertinent questions of the public, the needless expansion of paperwork requirements, and a few other issues). But I voted for the package because I believe our 1110 rule needs updating, and we needed get the public’s views on how best to do that.

Now we’re coming up on the end of the comment period. The public’s comments are due next Monday, July 29, 2013. If you have something to share with us, now’s the time to speak up. You can file your comments here.

Game, Set, Match

The words continue to fly at CPSC. My colleagues issued a statement responding to mine from a few weeks ago on the proposed updates to our rule on certificates of compliance. They disagree with parts of my analysis and accuse me of playing politics with the rest. While I still would like our new sport of statement tennis abandoned, I cannot let such personal attacks go unanswered, so I responded.

My colleagues question my motives for opposing their approach under 2008’s Consumer Product Safety Improvement Act. My motives are what they have always been—I seek public deliberation that leads to prudent regulation that enhances consumer safety. That my colleagues have reacted to my engagement in the debate with such mischaracterization is unfortunate; we owe it to the consumers we protect and the companies we regulate to debate the merits of policies, not each other’s motives.

1110: Now It’s Your Turn

Last week, we talked about the shortcomings of the Commission’s proposed amendment to its Part 1110 rule on product certifications—hidden costs, confusion on bans and testing exemptions, recordkeeping disharmony, and questions not asked. Today, I issued my formal statement on the vote, which delves more deeply into the history of our first attempt at this rule and what we should have done this go-round.

That being said, I supported the broad outlines of this package. One key reason I voted to move ahead? I believe it’s high time we asked the public what to do about certificates. So now it’s your turn to let us know how we could improve this rule. Talk to me here, but more importantly, talk to the all of us at the Commission by submitting comments here.

1110 Series: Recordkeeping Harmony or Agony?

I’ve been talking about some of the shortcomings of the Commission’s proposed update to our rule on certificates of compliance, Part 1110. I’ve looked at our unwillingness to present all the costs, our inability to provide clarity on certifying to bans, and our refusal to engage the public on how to handle testing exemptions. Today, my concern is with my colleagues’ break with our staff on recordkeeping for the certificates.

The 1110 rule requires manufacturers and importers to include certificates with their products attesting to the products’ tested compliance with all applicable CPSC safety standards. These can be Children’s Product Certificates or General Certificates of Conformity, depending on the product. Most CPC requirements are already covered in Parts 1107 and 1109, leaving GCCs to 1110. As proposed, this revision contains a one-size-fits-all requirement to keep GCCs for five years. On its own, this might not be a problem; we have to set a mark, and five years might be as good as three or seven. But we cannot look at this rule on its own, as my colleagues are unfortunately doing, because doing so creates unnecessary confusion.

This rule rests on the testing rules, and those rest on safety standards. These other rules frequently contain their own recordkeeping provisions. Our rule on flammability standards for mattresses, for example, requires manufacturers to test prototypes and then keep the records for as long as the product is on the market, plus three years. Those test records, then, could be discarded after four years or hang around for decades. Even within one product, the requirements that already exist vary with circumstance, and that variation exists throughout our regulatory arena.

Recognizing the differences in the standards’ requirements and my colleagues’ preferences for keeping records for longer, I proposed a compromise tying the retention requirement for GCCs to their underlying standards, defaulting to five years for any certificate based on a standard with no recordkeeping mandate. My colleagues did not agree, and insisted on a universal five-year mandate. Since CPCs all have a five-year minimum, they argued, imposing the same requirement for GCCs would “harmonize” our certificate rules.

“Harmonizing” requires that the notes be in the same key. Imposing one regulatory scheme’s parameters on another simply for the virtue of nominal similarity while ignoring their underlying differences is as unsound as “harmonizing” your children’s closets by giving them all the same size pants, no matter their ages. Yes, they’re in harmony, but someone’s going to wind up with a bad fit.

In this instance, the more valuable harmonization would have been matching the certificate’s retention time to that of the rule that creates the standard and the test on which that certificate is based. I was pleased my colleagues were at least willing to include a request for the public to comment on the recordkeeping retirement, and I hope they read those comments with open minds.


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