WASHINGTON ALERT   INDA
October 27, 2010
   

CSPC ISSUES FINAL RULE ON DEFINITION OF CHILDREN'S PRODUCTS

After months of considering public input and internal debate, the U.S. Consumer Product Safety Commission Oct. 14 published a final interpretative rule clarifying the definition of “children’s products” under the Consumer Product Safety Improvement Act of 2008 (CPSIA).

Under the CPSIA, children’s products (i.e. those intended for kids 12 and under) are subject to lead testing, product labeling and third-party compliance requirements. Widespread industry uncertainty about which products are implicated, however, led the Commission in April to release a proposal providing, “additional guidance on the factors that must be considered when evaluating what is a children's product,” and a revised version reflecting that in August. The commissioners delayed voting on the rule three times due to disagreements over its language, which the panel’s two Republicans argued would merely muddy the waters rather than bring clarity. It ultimately passed on Sept. 29 by a 3-2 vote after a motion by Commissioner Anne Northup to move the effective date to Feb. 15, 2011, was defeated. It went into effect on Oct. 14.

Specifically, the new rule expands upon the four existing statutory factors that help determine whether an item is a children’s product: 1) any manufacturer statements/labels describing the product’s intended use; 2) the product’s packaging, display, promotion, or advertising, 3) whether it is “commonly recognized” as being intended for children 12 and under; and 4) CPSC’s Age Determination Guidelines.

CPSC also provides direction on how it will interpret these factors, noting that certain features, like if a product is decorated or embellished with childish themes, or if it is marketed or sized for those 12 and younger, will be given particular weight. Yet, even though the rule includes specific examples about how to handle things like furnishings, CDs and DVDs, books, sports equipment and diapers, CPSC concedes that most determinations will need to be made on a case-by-case basis.
This was one of the key reasons that Commissioner Nancy Nord voted against the rule. “During our discussions about this rule, over and over again, five commissioners, steeped in the details of the statute and knowledgeable about the operations of the agency, could not reach agreement on whether or not particular products were children’s products,” Nord said in a Sept. 29 statement.

“Instead, over and over again, the rule merely states that the Commission will apply the four factors, rather than saying how the factors will be applied in particular situations. Given that reasonable people have differences of opinion on what is a children’s product, how is a manufacturer to have any confidence that a decision made in good faith at the beginning of the manufacturing process will not be overturned down the road by the supposedly crystal clear 20/20 hindsight of the agency.”
As one law firm notes, although the CPSC rule is “interpretive” and in theory not binding, it’s anticipated that CPSC staff will follow the rule. For that reason, companies need to carefully consider the CPSC guidance as they make decisions about whether something is a children’s product.

SMALL BUSINESS BILL PASSES CONGRESS

This September Congress managed to pass and President Obama signed The Small Business Jobs and Credit Act of 2010 (P.L. No. 111-240). The bill, which had languished for months due to partisan squabbling over its inclusion of a $30 billion fund for banks to lend to small businesses, also contains some $12 billion in popular business tax incentives.

For example, it extends for one additional year the temporary 50 percent “bonus depreciation” included in the American Recovery and Reinvestment Act of 2009. This will allow companies to immediately write-off, in the first year, 50 percent of the cost of depreciable property purchased and placed in service anytime in 2010.

The measure also contains an extension and expansion of Section 179 expensing, increasing for 2010 and 2011 the amount of investments that businesses would be eligible to immediately deduct to $500,000, with a phase-out threshold at $2 million. Without the bill, the expensing limit would have been $250,000 this year, and only $25,000 the next year.

It also includes several other economic incentives including provisions to simplify cell phone deductions, breaks for entrepreneurial start-ups and more. Its passage was applauded by business groups, with the National Association of Manufacturers specifically cheering the bonus depreciation provision. “Jobs will be saved and jobs created with this investment incentive, as there are customers who want to buy and sellers who want to sell new equipment,” NAM tax director Monica McGuire said September 24. “The positive ripple effect of this new law will be immediate.”
 

SENATE DEMOCRATS FAIL TO ADVANCE OFF-SHORING BILL

U.S. companies with overseas operations breathed a sigh of relief when Senate Democrats this September failed to move an anti-outsourcing bill that would have eliminated much-needed corporate international tax breaks.

Had it advanced, the Creating American Jobs and Ending Offshoring Act (S. 3816) would have offered a two-year payroll tax holiday to companies that move jobs back to the U.S. and barred companies from taking a tax deduction for the cost of moving operations to an overseas start-up. Perhaps most alarming to U.S. multinationals, S. 3816 would have virtually eliminated “deferral,” which allows companies to delay paying taxes on earnings of their foreign subsidiaries until those earnings are paid to the U.S. parent (repatriated).

Sound familiar? It should, because the White House, which supported S. 3816, has called for slashing deferral, the foreign tax credit and other U.S. multinational tax breaks in both its FY 2009 and 2010 budget proposals.

Many in the business community say these proposals are misguided because they penalize the very same companies that employ more than 22 million Americans, and account for nearly half of U.S. exports. The real problem, they argue, is the corporate tax rate, which at 35 percent, is the second highest in the world next to Japan, and creates a perverse incentive for U.S. companies to shift operations overseas in order to remain competitive.

In the end, Senate Democrats failed to secure the 60 votes needed to prevent a filibuster on the bill when Sen. Joe Lieberman (CT) and four Democrats – Sens. Max Baucus (MT), Ben Nelson (NE), Jon Tester (MT), Mark Warner (VA) – voted against invoking cloture. Given their defection, and Democrats’ anticipated losses, it appears unlikely they will have the political capital to move a similar initiative in the near future.
 

HOUSE PASSES CHINA CURRENCY BILL

The House Sept. 29 passed by a vote of 348-79 the Currency Reform for Fair Trade Act (H.R. 2378), which would allow the U.S. to seek trade sanctions against China and other nations for manipulating their currency to gain trade advantages.

The bill looks to address U.S. manufacturer concerns that China’s currency is undervalued by as much as 40 percent against the dollar, which makes Chinese products cheaper and more competitive in the U.S. and has cost millions of domestic manufacturing jobs, supporters argue. H.R. 2378 establishes a four-part test to determine if a currency is substantially undervalued and authorizes the imposition of countervailing import duties against specific foreign products subsidized by a deliberately undervalued currency. Currently, Washington does not consider currency manipulation as a government subsidy for which it can impose trade sanctions.

Although the bill received a large number of Republican votes, many accused Democrats of pandering before mid-term elections, and questioned the effectiveness of the approach, arguing it could spark a trade war and would make U.S. goods more expensive for consumers.

Senate Democrats have said they will consider their version of the controversial bill during the lame-duck session of Congress in November. The White House has not taken a firm position on the currency legislation, but trade experts believe the administration will use its passage as a way to pressure Beijing to accelerate its appreciation efforts.
 

CBP OFFICIALLY WITHDRAWS PROPOSED CHANGE TO THE FIRST SALE RULE

U.S. Customs and Border Protection (CBP) Sept. 29 officially withdrew its plan to change the “first sale rule” for customs valuation. CBP in 2008 had proposed revoking the first sale rule, which allows U.S. importers to value imported merchandise and assess related duties using the “first sale” in a series of transactions, and replacing it with a “last sale” methodology.

The proposal met with strong resistance from numerous industry groups, including INDA, who argued that revocation would compromise industry business models due to increased duties, fees and taxes. Congress intervened, and included language in the 2008 farm bill forbidding CBP from making any changes before Jan. 1, 2011.

To preempt any future repeal attempts, INDA joined with industry groups again this March in sending a letter to Congress expressing opposition to any change of the longstanding customs valuation methodology.

In July CBP had notified the trade community that it would withdraw the change it had first proposed in January 2008, and did so by a notice in the September 29 Federal Register.
(View the notice)

LACEY ACT COALITION MEETING

INDA joined a number of industry groups Sept. 20 in meeting with U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) officials to learn more about recently proposed definitions for exemptions from import declaration requirements included in the Lacey Act.

As readers are sure to recall, the 2008 farm bill expanded Lacey Act protections to a broader range of plant species to make it unlawful to trade wood products or other plants taken in violation of the relevant laws of either the United States or a foreign country. As amended, the Lacey Act makes it illegal to import certain plants and plant products without an import declaration. Enforcement of the declaration requirement is being phased-in by APHIS.

On Aug. 4, APHIS proposed and requested public input on definitions for the terms “common cultivar" and “common food crop” that are excluded from Lacey Act import declaration requirements. The comment period closed Oct. 4, with industry groups expressing concerns about ambiguities in the proposed definitions and calling upon officials to develop a specific list of products to be included under these descriptions.

As it turns out, APHIS and the other agencies working on Lacey are also struggling to agree on the appropriate scope of these exclusions, an APHIS official told INDA and the other groups during the briefing. He said they have yet to develop a product list and have yet to reach an internal consensus on whether things like bamboo and rayon will qualify for the exemption.

APHIS and the other agencies are currently drafting a statutorily-required report to Congress on the status of the Lacey Act implementation. That report will detail numerous implementation challenges and will recommend either legislative or administrative fixes.
 
(Learn more about the Lacey Act, sign up for updates and more)

EPA PROPOSES TO TIGHTEN OZONE STANDARDS

The National Association of Manufacturers (NAM) is asking business leaders to tell their members in Congress they oppose the Environmental Protection Agency’s plan to issue new, more stringent ozone standards. The proposed new standard, which EPA says it plans to release by the end of October, would tighten the National Ambient Air Quality Standards (NAAQS) for ozone from the current 75 parts per billion (ppb) set in 2008, to a range from 70 ppb to 60 ppb.

NAM and other industry groups have questioned EPA’s decision to tighten the standards, arguing the 2008 standards still need time to take effect and that a new ozone standard will require industrial facilities to install expensive pollution controls resulting in higher energy costs and job losses.
 
(Send a message directly to your legislator)

WISCONSIN LAW TO PROHIBIT LANDFILL DISPOSAL OF ABSORBENT PRODUCTS CONTAINING WASTE OIL

INDA has learned of a new law set to go into effect in Wisconsin that will prohibit the land-filling of virtually all absorbent materials (including wipes) that contain waste oil, effective Jan. 1, 2011.

Although Wisconsin Act 86 was intended to promote the recycling of used motor oil filters by prohibiting their disposal in landfills, a last-minute change to the legislation expanded the landfill prohibition to all “oil absorbent materials,” with a one-gallon exception for materials that contain waste oil resulting from a “nonroutine spill.”

Things went from bad to worse when the Wisconsin Department of Natural Resources (DNR) recently released draft guidance that interprets the “non-routine” spill exception to exclude spills that happen during normal business operations. The DNR also held that the oil and absorbent material together could not exceed one gallon.

The state business association, the Wisconsin Manufacturers & Commerce (WMC), filed comments objecting to the DNR interpretation, arguing that the guidance exceeded legislative intent and required the DNR to undertake a formal rulemaking. To our knowledge, the DNR has yet to respond to the WMC submission.

As it stands, the WMC is planning to work with the Wisconsin legislature to seek opportunities to repeal or amend the new law. These efforts, however, are temporarily on hold due to the impending November elections and the fact that the state legislature is adjourned until Jan. 2011.

INDA's government affairs office has offered to support WMC’s efforts once they do move forward, and will be certain to keep WI-based INDA members informed of opportunities to get involved in related grassroots efforts when the time comes. In the meantime, if you have any questions, feel free to contact INDA’s Director of Government Affairs Jessica Franken at either 703-521-0545 or jfranken@inda.org.

MEDICAL DEVICE WORKSHOP OCTOBER 26, 2010

The Department of Health and Human Services (HHS), the U.S. Food and Drug Administration (FDA), and the University of Virginia (UVA), are sponsoring a Medical Devices Technology Innovation Partnership (MD-TIP) workshop titled "Innovation, Technology Transfer and Scientific Interchange: Leveraging Academic and FDA Collaborations to Resolve Unmet Public Health Needs" on Tuesday October 26, 2010, in Silver Spring, MD.
(For details)
 
In This Issue
CSPC Issues Final Rule on Definition of Children's Products
Small Business Bill Passes Congress
Senate Democrats Fail to Advance Off-Shoring Bill
House Passes China Currency Bill
CBP Officially Withdraws Proposed Change to the First Sale Rule
Lacey Act Coalition Meeting
EPA Proposes to Tighten Ozone Standards
Wisconsin Law to Prohibit Landfill Disposal of Absorbent Products Containing Waste Oil
Medical Device Workshop October 26, 2010


Links

Questions?

Contact
Jessica Franken,
Tel. 703.521.0545,
jfranken@inda.org


Rick Mann,
Tel. 202.434.4229,
mann@khlaw.com

 
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