CPSIA, Denial and Retailer’s Liability

Posted by Kathleen Fasanella on Dec 23, 2008 at 3:26 pm / CPSIA, Sales and Marketing / Trackback

Preamble: I appreciate the patience of my readers who are not affected by the CPSIA crisis. I intend to get back to regular posting …tomorrow! I have a special treat planned for you just in time for the holidays. Tomorrow I’ll be posting a tutorial on a single welt pocket.

Retailers are becoming aware of their potential liability in this CPSIA mess so this entry is intended for them. Actually, just small retailers because the large operations have their own legal departments to manage it. I can’t go back and summarize the Consumer Product Safety Improvement Act but I’ll provide the links at close. Let’s deal with the potential problems you have regarding inventory and what to do about it. By way of example, one retailer mistakenly informed colleagues saying:

My suppliers of wholesale children’s organic cotton clothing say this new legislation does not apply to textile based products or clothing such as tee shirts and diapers so you don’t need to worry about it.

There’s a couple of things going on here, mostly denial and misinformation all around. When vendors misinform their buyers it bothers me because I see this as an issue of integrity. It is a matter of integrity to suspend your own self interest and answer questions truthfully. If you’re not sure of the truth, you can’t put someone in peril based on your opinion or what feels fair. It is a matter of integrity to know the issues. This is a trust relationship; people are counting on you.

Retailers must know there is a huge liability involved with taking a vendor at their word. There’s a fine of $100,000 and potential prison time of five years per incident. As a retailer, you are liable if you sell or distribute (give away) non compliant product. As such, retailers must ask themselves if they are willing to risk a potential six figure fine and jail time on a vendor’s (understandably self-serving) assurances. If it were my liability, I wouldn’t take anyone’s word for it. A vendor isn’t going to pay a fine or do the jail time for a retailer who’s found to be selling their non-compliant goods. This law is injurious to retailers, not just manufacturers because there will be shortages with difficulty buying products to stock the shelves.

Just as amongst us, there’s a lot of rumors flying around among retailers. There is no central list of items affected by the legislation so you won’t find one no matter how long you look. Within our niche, it’s said that “plain” clothing, 100% certified organic items, nylon bracelets, baby blankets, swaddles, diapers and baby slings aren’t included. This is false. This rumor is going around because someone scanned the law to the only section where textiles are mentioned specifically but they misinterpreted the context. This section of the law only says these items are not durable goods. Anyone who’s taken Economics 101 knows textile products aren’t durable goods; a durable good is a refrigerator. That these items not a durable good does not mean they’re not required to be tested. They are.

At the meeting I attended in Washington DC, the CPSC General Counsel Cheryl Falvey told us point blank that all textile products intended for the use of children aged 12 and under required testing. Organic clothing and baby slings were specifically mentioned as being included. The problem is a lot of people are in denial. Saying products are exempt doesn’t cost a vendor anything to say. Or rather, a vendor has a lot to lose if their buyers believe it. This is why I say it’s an issue of integrity.

My advice to retailers is that unless your vendors will sign a legal contract stating that they will accept the return of their products if these prove to be unsaleable after August 16th and give you your money back, I wouldn’t buy more product. The problem is though, that being in denial and presumably having failed to make contingency plans, they’ll probably go broke so you won’t get your money back. Either way, the vendor isn’t going to pay your fine or do the jail time for you if they haven’t complied so I wouldn’t risk it. Another retailer said:

Recently we’ve been approached by many suppliers of baby products and they are all offering very good discounts. We are all getting creative with discounts and incentives to attract more business, but I also wonder if some of these vendors are trying to get rid of their untested inventory before the new regulations take effect in February.

If it is likely you’re holding any children’s products in inventory that do not comply on 2/10/09, you have very few choices, neither of them palatable for either party.

  1. Ask the vendor to supply you with GCCs for the SKUs you’re holding.

  2. Return the product to the vendor for testing.
  3. Have a sale to move all product by February 10, 2009.
  4. Ask your vendor for a discount to help move inventory before the deadline. No they won’t be happy but sharing the burden of a liquidation sale is preferable for both parties.
  5. If they cannot supply GCCs or are unwilling to test, you will either have to return the product to the vendor and steel yourself for a discussion of a refund or eat the loss for any inventory you’re holding after the deadlines.
  6. Lastly, you can have your inventory tested with an XRF gun. This will allow you to continue to sell these products until August at which time they will fall under the more stringent third party testing rule.

As I said, none of these options are palatable for anyone, least of all consumers. Consumers just don’t know that their choices and prices have been impacted yet. If you’re interested in pursuing XRF testing -a temporary solution- contact Jennifer Taggert. She’s charging so little ($5 per scan) I can’t imagine how she’s covering her costs. Jennifer is not just a crunchy-granola blogger mom who provides XRF testing services in between her children’s naps. She’s an attorney who can advise you in these matters and if that weren’t enough, she’s also an environmental engineer.

Related entries in order:
New product safety regulations that affect manufacturers
National Bankruptcy Day
Unit vs Component Testing
What must be tested
Confusion run amok
CPSIA and small manufacturers
CPSIA Activism and what you can do
How to move forward, coping with crisis
CPSIA and tracking label requirements

There’s also the forum for one on one assistance.

6 Responses to “CPSIA, Denial and Retailer’s Liability”

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Nichole Menard
December 30th, 2008
9:15 AM

Hi,
Just wondering if there is any word with how this will impact upon Canada. I have a Children’s Boutique that sells clothing, toys and fun baby items. Many of our products come from the U.S. We are also in the process of opening our store to the internet.

Any feedback would be appreciated,
Nichole

Cheryl
January 11th, 2009
2:01 PM

Hi Nichole, this is a US law so you would not be affected in your brick and mortar store since it is located in Canada. Items coming from the US to you (or items made in the US or other countries) should meet or exceed Canadian requirements. For items made in Canada (and sold in Canada)…specifically toys, we already have a similar law in place and have for a few years.

Where you will be affected is with your webstore, any items that you sell to buyers in the USA will have to meet the lead testing guidelines as set out by the US law. You can either comply or choose not to ship to the USA.

Here is a copy of the law is it is in Canada. It’s an easy read.
http://www.who.int/ifcs/documents/forums/forum5/regulations_canada.pdf

I am also Canadian and currently about 25% of my business is with US based clientele. If the law takes affect in the manner in which it is currently written I will simply redirect my focus. It will have an impact on my business but thankfully will not put me out of business. My goals for the 2009 fiscal year were to expand more into the US market, but I will just be eliminating that and focusing more on Canadian retailers.

Lynny
January 15th, 2009
4:11 PM

Thank you for this article. It is by far the best out there, and I applaud Kathleen for all of her efforts to clarify and argue this unfortunate issue for the rest of us.

Sue
January 15th, 2009
10:05 PM

How does this apply to yard sales and thrift stores? How will this be enforced? It seems like a very un-enforceable law, esp in regards to yard sales and thrift stores. MANY of us on tight budgets may not be able to afford necessities b/c this law, as far as I can interpret it.

Catherine
January 24th, 2009
10:25 AM

Hello Kathleen, I have a couple of clients who from time to time I will do pattern and sample for their children collection but never small production. Since reading the CPSIA law I had to send them an email to let them know that I wont be able to work with them until further notice and they were not even aware of what was going on. They do their production I think in LA.

I need your help please. A couple of years ago I started this project, using Recyclable umbrellas to make embroidered Tote and handbags, I also incorporated some umbrellas pieces in jackets and dresses. They are doing very well so far and I am getting order from some stores. Some of the bags, people are telling me that they are using them as a baby bag. The outside of the bags are 100% recyclable umbrellas but the inside lining are either cotton or polyester fabrics. Honestly I am not selling them as baby bags, but people found them very easy to carry and they are using them as is.
I would like to know do I fit under the CPSC as well.

Thank you so very much for all your help by keeping all of us inform on what is going on out there.

Alina
October 28th, 2009
9:29 AM

Thank you so much for your information and visible effort of keeping the focus on truth. I have been following this legislation and it is hard to decipher all the ramifications. Your posts really help to understand the issues or find areas to investigate more.

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