Jolie Fay, a mother of two living in Portland, Ore., says she started her business because she wanted to make safe children’s products, and to have “more control over what the kids were touching.”
Fay lovingly manufactures jackets and ponchos, with matching doll ponchitos, made of colored fleece and fringed with ribbon and pom-pom trimming. It is a small business, servicing a number of wholesale accounts nationwide, and trading online.
In 2007, with business going well, Fay and her husband decided to expand the business using the profits from the sale of their family home to invest in fabric.
What Fay didn’t know is that while her family was making a responsible decision to invest their life savings into building a future, a far-reaching new law was being crafted by Congress—a law that would require regulations too burdensome for thousands of small business owners like Fay to follow.
Fay now lies awake at night worrying, and wondering whether she can afford to continue her business. She has tried and done everything to comply with the new rules. Delays offered by the regulatory agency have allowed her to continue for now, but everywhere she turns a new roadblock emerges.
A new rate for liability insurance—which exploded what she paid previously by 300 percent—has brought Fay to the breaking point. She will have to shut down her business if things don’t change soon.
“Things are just turned upside down. People are afraid. We don’t have attorneys to guide us through this,” Fay said in a telephone interview.
Pushed by necessity, Fay has become a public policy activist. She joined a grassroots citizens group three years ago, shortly after the new law was passed.
She says that she has been in touch with congressional staff on a near-weekly basis, has written numerous letters to the Bureau of Consumer Protection, blogged about the problem, and testified at congressional hearings.
At issue is a well-intended revamp of the budget and mandates of the Consumer Product Safety Commission (CPSC), a small regulatory agency that fell into decline at the same time the United States experienced an upsurge in trade. Countries in East Asia—particularly China—dramatically increased exports of children’s goods to the United States.
The new consumer safety mandates were preceded by a spate of high-profile children’s product recalls, which brought attention to the agency’s limited reach and prompted Congress to act.
When very popular toys like Thomas & Friends Wooden Railway Toys, imported from China, were found to contain elevated lead levels, and a number of children died due to poorly designed cribs, the public reacted with widespread anger.
After these problems were brought to lawmakers’ attention by consumer groups and the public, “Congress became very much engaged,” said Commissioner Nancy Nord, the acting chairman of the CPSC at the time.
Unintended Consequences
The sweeping new law, the 2008 Consumer Product Safety Improvement Act (CPSIA), was passed nearly unanimously by Congress, and signed by former president George W. Bush.
“At that point, they were so eager to show that they had got their hands around the issue of unsafe imports,” Nord recalled.
The law enabled the CPSC to get tough on imports, and an aggressive use of the agency’s recall powers curbed problems with the worst offenders. However, a number of provisions were included in the act that are frequently referred to as “unintended consequences.”
The law set a schedule for an across-the-board lead-testing requirement by a third party on all products intended for the use of children 12 or under. Applied retroactively, the law began by imposing a 600 ppm limit. In February 2009 the limit was reduced to 300 ppm. On Aug. 14, a limit of 100 ppm will go into effect.
Responsibility for meeting the new requirement is borne by all, including manufacturers, retail shops, and resellers, like thrift stores. All parties must ensure that products they sell have been tested.
The problem is that the tests are extremely expensive. While large companies can absorb the cost on large batch runs, smaller manufacturers must pay exactly the same. For many small and medium-sized businesses, the cost is prohibitive.
Since 2008, the law has depressed the market for used children’s toys, clothing, and baby furniture, since it would be impossible for a thrift store owner to guarantee that items manufactured in the past meet the new requirement.
Booksellers are in the same boat, and manufacturers of children’s bikes and youth ATVs all faced violations for lead in parts they require to build strength into their products.
The small crafting community, largely represented by family businesses and moms like Fay, are facing elimination if they cannot win relief from the lead regulations.
Penalties for violations include felony prison time and fines up to $100,000.
When in doubt, business owners have been forced to simply stop making, or stop carrying, items that could be in question. Many manufacturers of youth ATVs, motorcycles, and snowmobiles stopped building youth lines within the last three years, rather than risk the liability.
Montana Republican Congressman Denny Rehberg got involved in lobbying his fellow lawmakers to support him in winning regulatory relief to ensure that children could continue to have access to safer youth ATVs.
Just prior to the summer recess, Congress acted quickly to enact changes to CPSIA.
It now includes exemptions for ATVs and eliminates the retroactive clause for lead testing, but despite the amendments, thousands of small businesses remain in limbo.
“It still doesn’t feel like a victory,” Fay said.
Grassroots Response
Fay is a member of the Handmade Toy Alliance, a grassroots group organized by Dan Marshall, an owner of an independent retail store that carries small-batch European toys.
When the law passed, Marshall said it became clear that many of his vendors would be going out of business. He has lost a dozen already. So he called them up and they started working to fight the law. The organization now has over 600 members. A website they maintain lists monthly updates of downsized or lost companies as a result of the regulation.
Marshall said that while the new amendments to the law are a good start, the testing requirement and the liability for small businesses still remain.
“We were hoping that small businesses could get an exemption from testing requirements,” said Marshall.
Testing is required for each batch, and for each individual product component. For Fay’s ponchos, she would need to test the entire completed item, as well as the fabric, the buttons, the border, and the product label. Each style, color, and size requires separate testing.
Fay received a quote for $27,000 to test her $30,000 investment in fabric and trim of different colors.
Fay is also concerned about folks like the retired loggers in her state who carve toy trucks and blocks out of wood and sell them at craft fairs. For these men, living on a fixed income, the testing is impossible, she says. All craft fairs are at risk.
An important amendment to the CPSIA requests the agency to conduct public hearings and determine lower-cost alternatives to assist small businesses in meeting the testing requirements.
“This rule-making is our only hope,” Fay said.
CPSC Commissioner Nancy Nord issued a blog post on the Hill’s Congress Blog on Aug. 2, drawing attention to the plight of small businesses, many of them run by women.
“The legislation the Congress just passed gives us the opportunity to regulate more carefully, intelligently, and compassionately; I hope we take it,” she wrote.
Nord said it is “very ironic that many of these businesses started back in 2007 and 2008 because the moms were concerned about the abuses that they had seen from the big billion-dollar companies.”
“That is a great American story, except along here comes the CPSC to shut them down—and that is a very bad ending to the story,” she said.
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