Saturday, December 6, 2008

National Bankruptcy Day and its Implication for Small Businesses...

So this is kinda crazy, how something you've never even heard of snowballs into this thing that completely will affect your business in a pretty major way (all you fellow crafters, would be designers and lurking competitors, this blog entry really pertains to you, so pay attention).

For me, I saw CPSIA "stuff" on the internet, but I really didn't pay's about lead, and phthalates, blah, blah, blah...

Then (the totally awesome) Kathleen Fasenella made a comment to me on the fashion incubator forum, simple enough, it said "Re: toys, are you following the CPSIA news?"

Then I got an email from Amy Shearer from Journal Modiste.  Suddenly this darn thing is everywhere!  What is it?  Here's Amy's email and it sums things up nicely:

In 2007, large toy manufacturers who outsource their production violated the public's trust. They were selling toys with dangerously high lead content, toys with unsafe small part, toys with improperly secured and easily swallowed small magnets, and toys made from chemicals that made kids sick. 

The United States Congress rightly recognized that the Consumer Products Safety Commission (CPSC) lacked the authority and staffing to prevent dangerous toys from being imported into the US. So, they passed the Consumer Product Safety Improvement Act (CPSIA) in August, 2008.  Among other things, the CPSIA bans lead and phthalates in toys, mandates third-party testing and certification for all toys and requires toy makers to permanently label each toy with a date and batch number. 

While we all applauded efforts by the federal government to tighten the safety standards for toys, we all got much more than we bargained for.  The law that was passed extends to all products directed to children 12 years of age and younger, and includes such things as clothing & toys and much more, with very few exceptions or exemptions.  That wouldn't be so bad, but there are a few requirements that, if left as is, will force most small businesses (and many medium & large sized businesses) out of business....including retailers, and work at home moms. 

How this affects retailers and manufactures:

1. Existing Inventory:  The law states that any affected product that does not meet the new standard (with the exception of phthalates) cannot be sold from the shelves after February 10th 2009.  The problem is that the law includes many new items that have not been under a previous regulation, and have not been tested.  To test these items now, on the retail or wholesale level is prohibitively expensive, and/or simply not possible.  So it is very difficult to confirm compliance (although most items in most companies would be compliant), and at the same time, penalties for selling anything that doesn't meet the standard are very stiff.  The options for anyone with inventory are not pleasant.

2. 3rd Party Testing by SKU: The law will require 3rd party testing in the future for each sku (or style).  The large pair of jeans have to be tested separately from the medium size of jeans...even though all materials are the same.  This makes testing prohibitively (impossibly) expensive.  There are other ways to form a testing regimen and be just as satisfied with the results.

3. Markings: All products manufactured after August 12th, 2009 must have markings on the package and permanent markings on the product indicating where, by whom, and when the product was made. Large corporations can afford purchasing multiple dies to do this.  Small companies cannot.  European companies with limited sales to the USA likewise cannot.

4. Complexity: The law is extremely complex.  Needlessly so.  It is requiring companies to hire lawyers just to get a grasp of what is required of them.  Also, the requirement of including certificates of compliance of each product shipped, with each product is overly burdensome.  Electronic certificates has been approved, and will help, but even then there is a substantial cost to the additional administration---which does very little, if anything, to improve the safety of our toys.

5. Frequency of Testing:  We are still trying to get a clear grasp of this.  However, it is very possible that each batch must be tested/certified.  This is fine for large companies running 10,000 or 100,000 pieces per batch.  For small manufacturers, with small runs, it multiplies the enormous cost from point #2, even higher.

What this means is small, innovative companies that typically make niche products, will be forced out of business, or forced to narrow their product range and sell to the mass market.  Product availability and selection will diminish.  We will be primarily left with imported plastic toys from China.  Yes, quite ironic isn't it.

The Subcommittee on Commerce, Trade and Consumer Protection was SUPPOSED to hold an oversight hearing to examine the implementation of the CPSIA on Wednesday, December 10th, but it has been cancelled.

What else can you do?  Pass this on in your blogs, your parent groups, your local community lists, among your friends.  There is much misinformation in the market, and it is up to us to warn consumers and colleagues of the pending disappearance of the natural & specialty toys we have come to rely on in the recent years.  Sign petitions, and pass the link on to friends.

This is a critical time to raise our voices and be heard.  Please do not say it can wait until next week, or after Christmas.  

What else can you do?  If you are a crafter join the Handmade Toy Alliance, join the online community cpsia-central and become informed & involved.  Contact the media, discuss this in forums and in your own online communities.  It isn't just our businesses that are at risk, it is the very nature of the toys & products our children & grandchildren will have access to in the future.

Please pass this on!

The WAHM Solutions site summed everything up this way:

A partial list of affected businesses starts you thinking about who else these potential closures will impact. If a significant number of the following businesses go under because of these burdensome rules, we will also see related and supporting businesses suffer. Think about how many web designers, copywriters, suppliers, shippers, and other businesses will lose business if all of the little guys and gals go under.
Essentially, anything handmade or one of a kind will become impossible to produce legally. Many other products will just be too expensive to test and will have to go away. Some products that will probably be too costly for individuals to produce under the existing interpretation of the lead rules:
Children’s hair accessories
Baby blankets
Stuffed animals
Felt pretend food
Wooden toys
Knitted or crocheted baby clothes
Boutique dresses
Handmade christening gowns
Flower girl dresses
Adaptive products for special needs kids (often made in very small or one of a kind batches)
Homeschooling books and materials
Kids craft kits - imagine tracking each popsicle stick to its origin and testing it!
Handbound books and journals 
Doll clothes
Do a search on Etsy or eBay to get an idea of how many tiny businesses are going to go belly up if this law is applied in this way. Don’t wait to speak out! If it does not affect you today, it may in ways you do not expect tomorrow.

Another website for information is

Did you catch the name of that site- National Bankruptcy Day?  This is serious.  How will affect Hero On My Arm?  We won't be able to make anything that's intended for use by children under 12, or could possibly be used by them (teddy bears, burp cloths, etc.)  It's really not the end of the world for us, will it change our product line?  Yes.  Will it drive us out of business?  No.

But that's not the case for thousands of other WAHMs and small businesses.  Merry Christmas from the United States Congress, thank you very much.  If you are reading this, take 10 minutes and call or write to your representative.  Here is an excerpt taken from the WAHM solutions blog on speaking to your congressman:

The following information is intended for phone or personal contact, but applies to emails as well. The same information applies even if you are speaking to an aide instead of the member.
A good place to start is by THANKING them for trying to keep kids safe. In the end, that is what this rule is supposed to do. We are not at war with them, we want them to see our side of things and how this law is having potentially devastating side effects. They were trying to keep lead paint away from kids. We have had a problem with lead paint on toys, they solved it, we thank them. “Here is how it is hurting the little guys.”
Keep your comments as brief as possible, but make sure you get your points across. You can also tell them that you are going to email a follow-up so they can have all of your information at hand for review. Don’t let them get away with saying they are busy now and will read later, just let them know you value their time and want to make it easy for them to reference your points.
While different industries are asking for different things, the following are some key points that apply to most small businesses. Feel free to add your own thoughts as you speak.
For most products testing of materials instead of finished products would save millions of dollars in testing fees and make the law less burdonsome on the small business owner.
Explain that as it stands, this part of the law will put thousands of small businesses out of business - hurting our economy and causing even more loan defaults.
Point out that requiring testing of finished products makes it impossible to legally sell handmade products for children. This removes consumer choice as well as devastating businesses that specialize in handmade items.
Explain how offering consumer choices is going to be incredibly expensive - having to test every product over and over even when the materials are the same and only details such as size or fabric print change will make it too expensive for small businesses to carry a broad variety of products.
Explain that you believe there are alternatives that are workable solutions and still protect kids.
Explain that this rule favors those who sell in mass quantity and hurts smaller, more varied businesses. Walmart is going to come out a winner due to the massive amount they sell. Grandma is going to be a felon if she sells baby items at craft fairs.
Let them know that you will be following up after the next hearing to talk further. Let them know that the law is going to hurt YOU as a consumer as well as any businesses you may have.
Offer some alternatives to help them out. No Congressperson is going to want to stand up and say, “Let’s make toys unsafe again!” If you offer them some workable ideas, you will make a lot more progress. Some alternatives that have been suggested:
Exempt products made from materials that are very unlikely to contain lead - fabric, paper, wood, etc.
Exempt categories of items such as books, textiles, or handmade items made in the USA and Canada.
Exempt products that are low risk that are made entirely in compliant countries such as Europe, Canada and the US.
Be sure to thank them for their time.

Sorry everyone, I know this post was long, but it is very important.  Forgive me to cutting and pasting so much, its just everyone else said it better than I could have.


No comments: