Posts Tagged 'Certificate'

Measure Twice; Cut Once

A couple of years ago, I did an addition to my house.  Everyone who has done this knows the steps.  I sat down with an

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architect to discuss exactly what I wanted to accomplish with the project.   A rough design was done and then refined in a set of blueprints that was put out for bid.  Since my budget was limited, the plans had to be readjusted to fit both my needs and my resources before they could be finalized.  Only then did we go to the relevant regulatory bodies to seek the required permits and approvals to do the project.

I thought of this process last week while I listened to the CPSC Chairman and Commissioners describe their desire to greatly expand the agency’s import surveillance system at an oversight hearing before the Senate Commerce Committee.   In 2011, in response to Congressional direction, the agency initiated a pilot program to identify imports that violate safety standards.  The current pilot program subjects certain products from certain countries/suppliers to surveillance prior to import under a computer rule set that predicts the possibility of violations. In other words, the computer looks at what is coming in and, using the rule set, flags those products that should be further examined by CPSC personnel.  As a pilot, it has worked well.  The agency now seeks to extend the program to all imports under its jurisdiction.  Such a program will be expensive and the agency has asked Congress for a significantly increased appropriation to build out the program and the authority to impose user fees on importers as a way to fund the program on a continuing basis.

The agency has a great deal of regulatory housekeeping to do before such a system is feasible.  The program will only work if the agency has the statutorily-required certificates of compliance from importers available in an electronic form.  These electronic certificates will provide the basic information to allow both the CPSC and its sister agency, Customs, to make initial judgments about compliance.  In 2013, the agency proposed to update its rules governing the creation and filing of e-certificates (at 16 C.F.R. §1110).  Unfortunately, the agency, in a good example of “wants” exceeding “needs”, proposed a rule that goes well beyond what is required by the statute, and, if finalized, would require importers to redesign reporting systems and impose many new and costly requirements.  I looked at the cost of the proposed system when I was a Commissioner and using agency estimates, determined that it would cost annually over $400 million – that is almost $1/2 billion—for importers to compile the paperwork to document tests and generate the certificates that reflect those tests. That is a lot of money for paper!

This rule has been one of the most controversial in the history of the agency.  Many comments have been filed and most of them have been critical of the proposed rule.  The agency now proposes to establish a pilot program to see if the rule will work.  Unfortunately, rather than establishing a pilot based on the learning found in the comments to the rule, the pilot will look much like the proposed rule.  And because it is so tied to the expanded import surveillance system, this rule remains on the agency’s near-term agenda for completion.

At the hearing last week, several commissioners discussed the agency’s import surveillance activities.  Chairman Kaye argued that seeking authority to expand its import surveillance activities is consistent both with Congressional desires expressed in the CPSIA and with the Presidential direction for closer coordination among agencies that handle imports.  However, the ever-thoughtful Commissioner Beurkle pointed out that the agency has yet to undertake a requirements analysis to identify the capabilities of an expanded system.  Both she and Commissioner Mohorovic expressed grave concerns about the status and substance of the agency’s proposed rule on electronic certificates with Commissioner Mohorovic suggesting that the agency was greatly underestimating the number of certificates that it would have to process. He also argued that the agency has yet to demonstrate how the rule would improve targeting of violators and suggested that a “trusted trader” program should be part of any final program.    Commissioner Beurkle suggested that an “incremental” approach to building out the system was a more prudent one than what the agency proposed.

While the Senate Committee did not dwell on the subject of user fees, there were differences of opinion both on the Committee and among the commissioners.  Again, Chairman Kaye voiced strong support for the notion of user fees to fund import surveillance activities while Commissioner Beurkle expressed concerns about the wisdom and the constitutionality of such a system.

It seems pretty apparent that the agency has much more planning to do before it should get the permits to build out this addition to its regulatory house.  The fact that so much of the planning and preparatory work that needs to proceed such a program is still “under construction” should give policy makers pause.  And the issue of how to fund the program does raise many policy issues.  User fees have a certain attractiveness and have been used before.  But the policy and legal implications of such an option should be more fully explored.  In this regard, last month the George Washington University Regulatory Studies Center published a study looking at the on-budget cost of regulations.  Among other things the study found that “in general, agencies that are at least partially funded by fees on the entities they regulate continue to grow at a faster rate than those that depend on appropriations from general funding” and that “agencies with independent funding authority will have significant increases in their outlays over the two-year 2015-2016 period.”  While this may or may not be a bad or a good result, it is something that should be understood before Congress, the agency and its stakeholders go down this road.

Planning is important.  It appears that the agency needs to work on its blueprint before it jumps into this new undertaking, not matter how important.

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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: “I certify this is not illegal.”

A blanket is not a lawn dart.

Not a lawn dart.

Yesterday, I discussed how the Commission fell short in considering and presenting the costs of our 1110 rule (on certificates of compliance). Today, I examine how we (mis)handled the tricky question of how the certificate rule fits with banned products.

The Consumer Product Safety Improvement Act of 2008 handed us a seemingly strange mandate. We were to require any manufacturer or importer of a consumer product to issue a certificate specifying any “rule, ban, standard, or regulation applicable to the product” and certifying conformity thereto. For rules, standards, and regulations, that makes plain enough sense, but certifying that your product is not banned might seem a little odd. Read too broadly, requiring something to certify that it is not banned could lead to absurd results. Think of requiring baby blankets to certify that they are not lawn darts. Or a hammer needing to certify that it is not general apparel containing asbestos.

Congress left it to us to implement this requirement reasonably. Our proposal almost does so, but, as with the costs, we have buried the lede. Portions of the rule discuss how individual bans interact with the certificate rule, but the rule does not provide any general guidelines to help a company determine if a ban relevant to its products requires certifying, “this is not banned.”

Our staff strived mightily to give some reasonable content to the requirement. They looked through the CPSC’s bans and saw that some appear to ban whole categories of products, while others ban only part of a product category. In particular, if a product was subject to a specific test, it appears easier to identify the products to be tested, and those that could pass the test would have to certify to the ban. (Those that failed would, obviously, be banned.) Some of staff’s helpful language appears in the rule’s preamble, but preambles do not appear in the Code of Federal Regulations, where companies and their counsel will look in years to come. Following staff’s efforts, I proposed amending the draft NPR to include this principle in the rule.

Certificates are required for products which are subject to a ban when the banned characteristics defined by the language of the ban do not define the whole product category within which the banned products fall and the products are not specifically excluded from the ban.

I also wanted to ask, in our request for comment, if our ban certificate language was clear. My colleagues rejected both these ideas, though they did at least agree to ask the public about staff’s assessment as expressed in the preamble.  Where failing to include a required certificate could trigger civil or even criminal penalties, I think we owe a cogent explanation of the rule, and I hope you will tell us what you think of the principle, its application as staff indicated, and whether the principle belongs in the actual rule.

More of my thoughts on the weaknesses of our 1110 proposal tomorrow.


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