China Competition CPSIA Manufacturing Politics Regulation Retail Small Business

CPSIA thoughts from a manufacturer/retailer: Cut that line

Don't wanna leave!
Creative Commons License photo credit: kyz

This morning I received a private comment from a reader. He gave me permission to repost it here.

Hello Mark

In Europe they have a “no lead policy” based on roHS (Lead Free). All the US components I buy are roHS compliant so that they may be sold in Europe.

I can also sell in Europe by simply documenting my purchases. I can not afford to sell in to the children’s market any longer in the USA as testing costs would exceed the Gross revenue of our children’s products. As of Feb 10th we will no longer make little backpacks for kids.

This is like a dream come true for China and Walmart. In about six months all the kids will be wearing green clothes with little red stars. The toys will have the same color scheme of course the selection might be a bit mundane.

Dave Sisson CEO
Jandd Mountaineering Inc

Hopefully, the pressure that all of you are putting on your Congressional reps and Senators is helping behind the scenes. Likewise, our calls to the CPSC. This situation is sickening and the timing simply couldn’t be worse.

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Smoke, mirrors or an honest effort to fix the CPSIA?

Creative Commons License photo credit: L. Lew

Last week after I left for a winter camping trip with the Scouts, a letter to CPSC Chair Nord came flying out of the House from Waxman, Rush, Pryor and Rockefeller. I just got to the letter this evening, and it’s worthy of comment. 

You can read the Waxman-Rush letter to Chair Nord here.

Many of the proposals in the letter sound like they are listening, such as their suggestion that the commission approves component testing and that the CPSC’s commissioners get off their duffs and make some firm policy decisions. Having the general counsel issue non-binding statements with words like “may” when it comes to certain types of testing isn’t helping anyone comply with the law.

No one really wants exemptions and component testing is a good happy medium for many smaller vendors, but there are plenty of other decisions to be made, both by the CPSC and by Congress. Once Tuesday’s lovefest ends, it’ll be time to get down to real business – like fixing this law or temporarily rescinding it until it can be fixed so that it provides the safety needed without crushing small business. 

As Kathleen Fasanella suggests, “small business”  is in the eye of the beholder. That 500 employee small business designation by the Small Business Administration has long been a joke.

What I wouldn’t suggest is that this letter is an all-clear after the tornado. The pressure on Congress and the CPSC must remain if they are to take action that is of use to kids’ safety AND to small business.

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Sweatshirts and t-shirts: Wondering who the CPSIA will put out of business.

Long-gone heyday
Creative Commons License photo credit: Bitterroot

I wonder whose business might be impacted by the CPSIA. 

I wonder about the nice lady whose son was in my troop years back. She embroiders and sells Columbia Falls Wildcat sweatshirts, tshirts, letter jackets and such – including items for little kids. Fortunately for her, the majority of her business isn’t for kids 12 and under, so she’ll probably be ok. BUT, she may have to replace that revenue stream. 

I wonder who she buys those kids’ sweatshirts and tshirts from. Maybe a wholesale tshirt and sweatshirt vendor in Minneapolis. 

I wonder how much of that Minnesotan’s business comes from folks who silkscreen, embroider or otherwise augment those items and then resell them.

I wonder how many of their employees will find new jobs as a result. 

I wonder how their buying power will change. 

I wonder if all of those silkscreeners, embroiderers and such are wholesaling their items to someone and if so, I wonder if those retailers have found another source of those items. 

I wonder about all the small retailers who have tens and hundreds of thousands of dollars invested in now-non-compliant inventory and see that date in February looming.  Not having a CPSIA tag means non-compliant, regardless of content.

I wonder if, after Feb 10 – when no one can legally buy those items – what they’ll do with all that stuff.

I wonder if they’ll sell them anyway and dare the Consumer Product Safety Commission to find, catch and prosecute them.

I wonder if a $12.95 tshirt sale is worth a $100,000 fine. 

I wonder how many attorneys will make it big because of this legislation. 

I wonder how many local tourist shops will have to start buying their tshirts from big out-of-town importers and manufacturers instead of locals.

I wonder what those locals will do for a living if that happens.

I wonder what their bankers will do if the mortgage those locals have goes south.

I wonder if all those Chinese sweatshops have testing vendors lined up. They’ll be happy to make those sweatshirts, tshirts, baby booties, bibs and hand-painted sippy cups to replace the items that used to come from unique local vendors. I mean, come on…there’s nothing more special than a Glacier Park baby bib with a cute little baby moose sewn on it, especially if it was made in Shanghai by some poor schlep making 12 cents a day. 

I wonder if there are enough thankless low-paying jobs at the local box store to employ these artisans and the others impacted by the closing of those artisans’ businesses. 

I wonder which Congressional rep and Senator has the most homemade kids product manufacturers in their district.

I wonder if those reps and Senators’ phones have melted. Or if they ring at all.

I wonder… who is the largest retailer of handmade products in the US?

I wonder who is the largest supplier of raw material to the handmade kids product industry? 

I wonder what these two businesses will be doing in March.

I wonder about the impact on and ebay, which is aching enough as it is.

I wonder if cloth diaper services have to test their diapers. 

I wonder how many stores that sell beads and other crafty little things like that will have “no kids under 12 allowed” signs on the doors next year. 

I wonder if all those little “make your own bear/pottery/etc” stores are ready for this. 

I wonder if you’ll be impacted. 

I wonder if you’ll call your Congressional Rep and Senators. 

I wonder if you’ll tell someone about the CPSIA. 

I wonder.

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Fuel Surcharges: Another reason to buy local

My CFO friend does that sort of financial wizardry for a large international importer.

Last weekend, she told me she had been informed by her shipping vendors that the fuel surcharge on seagoing containers was going up at least 30%, to about $1200 for a large container.

That got me to thinking about a number of issues, so I started digging around.

The Westbound Transpacific Stabilization Agreement (WTSA) covers oceangoing freight in the Pacific in and out of the Oakland area. They recently announced a $600 per container increase, which is a brief resting place before Oct 1’s full “floating” charges take effect.

Up in Canada, the news is the same. The Canada Transpacific Stabilization Agreement (doesn’t that sound benign?) recently set their fuel surcharge at $1,260 for a 45 foot container.

There is similar news elsewhere in the industry.

A 45 foot container holds 3000 cubic feet of “stuff” (that’s 86 cubic meters for my overseas readers).

Let’s look at the impact of these fees on imported goods that your store might be selling or consuming.

Let’s say you have a 40″ big screen HDTV. Figure the box to be 2 feet thick, 4 feet tall and 5 feet long (all wild guesses). That’s 40 cubic feet, or about 75 TVs per container.

It might be more or less, but my box size guesstimate will probably be made up for by the space used by pallets and the like. The math isn’t the point.

If 75 televisions have to split that $1,260 fee, then each TV will go up about $20. Or should.

What will the increase be when it gets to you, the retailer? Do the math before you sign that contract.

If you sell imported cars, figure 4 cars per 40 foot container. That adds $315 per car to your cost, if you’re lucky.

It isn’t just ocean-going freight.

You need to be looking at this elsewhere. A simple example: Does a $1 Fedex or UPS fuel surcharge make sense on a 10 ounce overnight envelope? Call your Fedex/UPS sales rep and see what kind of flexibility they offer, if you do the kind of volume that would make this substantial to you.

My CFO friend tells me to expect some things to rise 30%, even though the fee increases don’t appear to reflect that size of increase in the cost of your goods. October’s increase will push you again.

It’s easy to watch this sort of news on CNN or MSNBC and think it doesn’t impact you – but it does. I suggest paying closer attention to it, particularly if you do a lot of international shipping. Maybe that’s another reason why Ian doesn’t buy Chinese.

On Monday, we’ll hit a lot closer to home on these fuel surcharges. And I might even make you mad.

In the meantime, take a long hard look at the kind of value you’re delivering now. Consider whether those increasing international shipping charges might just be better spent elsewhere – like on locally produced goods.

China Competition Marketing

Can’t compete with China? You just aren’t trying.


Man, I just love the savory aroma of heavy metals with my seafood.

Last Sunday night, I bought some shrimp at our local market for my youngest son (aka the “Master Chef”, a play on his chef aspirations mixed with Halo’s Master Chief as seen above). He was planning a fondue for my wife’s birthday, and the shrimp was one of the things he wanted to serve for dipping.

In the cold case at the meat/fish counter, 4 different kinds of shrimp and shrimp like critters, described as follows:

“41-50 shrimp, farmed, China. $4.98/lb”

“41-50 shrimp, wild, USA. $7.98/lb”

“large (size forgotten) prawns, Wild, Vietnam, $7.98”

“large (size forgotten) fresh water prawns, Bangladesh, $7.98”

Farmed. I wonder what that means…

In your mind’s eye, visions appear full of happy made-for-TV cows, smiling free-range chickens and cute little shrimps all co-existing, well-fed, not having to hide from the critter who is the next rung up on the food chain (except for us), and so on.

Gee, farmed doesn’t sound that bad, and hey, it’s a lot cheaper.

  • Unless you’ve read about artificially colored “Atlantic” farmed salmon. Note: Wild Alaska salmon need no such artificial coloring, they bring a red that you can’t fake. Plus they’re actually good for you, unlike the farmed stuff.
  • Unless you’ve read about Chinese shrimp farming, such as this NY Times article.
  • Unless you’ve seen reports of slave labor coming out of China, India, Mexico and probably southern California.

You get the picture.

If you are the local vendor of wild USA seafood, or non-Botoxed meat (etc) and you are struggling to compete with Wal-Mart priced seafood and meat from places that are sending tainted food, toys and other goods onto the global market, isn’t it rather obvious what you need to do?

You might compare your clientele’s vision of farms (photo of smiling Green Acres-esque farmer, crops in hand) with the vision describe by the NY Times article above. And of course, a photo from the article, and from the farm that produces your food.

A quote or two from the articles never hurts, just in case shoppers don’t have time to read the whole article. Like this one from the NYT article:

In recent years, the European Union and Japan have imposed temporary bans on Chinese seafood because of illegal drug residues. The United States blocked imports of several types of fish this year after inspectors detected traces of illegal drugs linked to cancer (emphasis mine).

Fuqing (pronounced foo-CHING) is at the top of the list this year for refused shipments of seafood from China, with 43 rejections through November, according to records kept by the United States Food and Drug Administration. All of those rejections involved the use of illegal veterinary drugs (emphasis mine).

Of course, you might have to include an article or two about the efficiency of the USDA and FDA food inspection programs. They’re mind numbingly easy to find. If they found 43 problems, they may have missed 430. And 1 of them might be sitting on your plate.

Yes, I bought the wild USA shrimp, despite the roughly 60% higher price (3 bucks difference, was it really even a choice?). If I want to give my wife heavy metals for her birthday, jewelry is a better choice.

This isn’t limited to seafood, of course. Coffee, lawn mowers, toys, clothes, religious goods, dry cleaning, cell phones, steaks, golf clubs, you name it.

Remind your clients why your products and services are better and why the other vendor’s might even be dangerous.

Give me one good reason why you aren’t ruthless about exposing these issues to your clients. It *will* resonate with some of them, and they will respond by buying a higher quality product that doesn’t leave them wondering what they’re doing to themselves and their family.

If nothing else, take a look at how Ian does exactly what I’m speaking of in the blog that accompanies his Catholic goods store. If the concerns he blogs about coincide with his Catholic beliefs, they are also likely a concern to his Catholic clients, and thus it’s very smart positioning job for his business vs. his competition.

Before you go spouting “xenophobia“, it might help to know the definition of the word:

Xenophobia is a fear or contempt of foreigners or strangers and people. It comes from the Greek words ξένοÏ? (xenos), meaning “foreigner,” “stranger,” and Ï?Ï?βοÏ? (phobos), meaning “fear.” The term is typically used to describe fear or dislike of foreigners or in general of people different from one’s self.

I don’t care if your product source is North Carolina, China, Jupiter or Lower Manhattan. I’m simply suggesting that you ask your customer to consider whether or not a question about your goods / services is important to them: “Does your current vendor’s product source poison your food, mistreat their people?” (fill this in with the appropriate issue, they will vary widely)

If the answer is yes, then ask them to consider buying from you instead (assuming of course that your products and services don’t have those flaws). In fact, you don’t even have to ask. Just make the information available.

If your prospect doesn’t care about those kinds of things, they will likely pay the cheaper price and buy elsewhere. If they are that price sensitive, they aren’t going to be loyal anyhow. Let em go and focus on the good clients who appreciate the quality goods and services you offer.

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Strike a chord with your clientele, & educate them.

Pizza, the recurring topic, recurs again today – though it does have some company.

Why would anyone put this on their pizza store website?

Sorry. We’re not everyone’s pizza.

Our dough is made from scratch. We hand mill and season each and every batch of sauce. We shred the best rennet-free cheese available. Then we hand-toss an artisan style thin-crust to perfection. Why? It’s our passion.

Whether it’s our salads, foccacia sandwiches, hand-formed half-pound burgers, or our entrees, we choose the best ingredients available to provide our friends, neighbors, and families with the quality they deserve. Why? It’s about relationships and community.

Simple. To stand out from the me-too franchises that don’t cater to anyone. It’s not that they don’t care (or maybe it is). More likely, it’s that they can’t afford to care like the locally owned shop can. It isn’t a prime directive in their business plan. Domino’s never set out to make the world’s best pizza, they simply wanted to make sure they could deliver some sort of pizza in 30 minutes or less.

Dough made from scratch? How can Pizza Hut trust a franchisee to do that? What franchisee would want to?

Hand-mill and season every batch of sauce? Hand toss crust in 2007??? Franchise owners buy a franchise for one very good reason: A proven system for marketing and operations. Not because they want to make a better pizza.

Shred your own rennet-free cheese? More equipment for the franchisee to buy, more to train people on, more to clean and maintain. That isn’t why a franchisee buys a pizza store. Much less the “Why rennet-free?” thing. Why? Because strict vegetarians want cheese without the meat-based protein used in the production process of most cheese. Catering to the clientèle when no one else will.

Hand-formed burgers, best ingredients. Why spend $20 on a franchise pizza made with the same mystery ingredients as the frozen pies at the grocery store when you can get a gourmet quality pizza with quality, hand-selected ingredients for $22-24? Why eat a frozen mystery meat burger when you can get one that was made from fresh, never-frozen hand-formed burger?

Cardboard mystery meat frozen pizza isn’t enough to make someone feel good about blowing off their diet one evening a week. Delicious gourmet ingredients made with loving care? That’s another story.

It doesn’t matter if you sell pizza, motor oil, religious items, shotguns or coffee.

Striking a chord with his clients is likely one of the reasons (probably a lesser one, I’m guessing) why Ian doesn’t buy Chinese (-made goods, not food). Dan would call Ian’s behavior congruent, because it is consistent with other aspects of the business, much less his life. While I suspect that Aquinas might be happy to sell to anyone who wants their goods, I’d bet they really truly hope to sell to someone who appreciates the extra steps they take to keep their operations consistent with their beliefs – including how they choose wholesale sources of their stock. Ian’s blog goes to the extra step to educate his clients about these things, among other reasons, because it differentiates his business from the competition. The better informed his clients are about issues important to his clients, the more likely they are to shop exclusively at his store.

How do you strike a chord with your clients?

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China, toys, dog food and lead

With all the trouble in the news over the last year regarding quality and contamination issues with Chinese-made products, isn’t it interesting who is silent while China takes repeated hits over their manufacturing of toys, food products, additives, medicines, etc?

  • U.S. manufacturers and their trade groups.
  • Canadian manufacturers and their trade groups.
  • Mexican manufacturers and their trade groups
  • Congress (yeah, there’s been a little saber rattling about hearings “in a few months”, but that’s about it)

And so on.

Why is that?

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Differentiating, educating and hammering

Ian over at Musings from a Catholic Bookstore did a great job of hammering the Chinese last week, in his post “Got to love the Chinese Government“.

Interesting thing was, it was a brilliant way of hammering on the Chinese while differentiating his store and educating his client̬le Рand it all happened in one post.

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What scares a global Fortune 200 CEO?

Recently I had the good fortune to book a global Fortune 200 CEO for a business seminar I was responsible for arranging. It was one of those friend of a friend things, but you use what you got. He happens to have a home here in Montana, as well as in China.

He was speaking to a group of new leaders here in our little valley in Montana, and I asked him to speak about international trade. More and more startups here are doing business with China, importing AND exporting. As such, I wanted them to get some exposure to what he had experienced as the CEO and Chairman of a $2B company.

As someone who owns a home in a city of 24 million and in a rural Montana town of a couple of thousand, and runs businesses in both areas (one huge over there, several not nearly so huge here), I expected some interesting observations.

I asked him what he would tell the school boards in Montana if he could get them to do one thing for the future. More math, more science, more languages.

Finally, I asked him what scared him. I was truly curious what scares the CEO of a $2B company.

He noted the number of engineers graduating from college each year in China vs the number here, and them compared the number of new attorneys in China to the number here. You can guess the disparity.

He mentioned that more students in China take the SAT in ENGLISH every WEEK than students in the US take it per month.

The class was rather silent, and had few questions, so I asked a few things intended to stir the pot.

When I asked if our high schools should start teaching Chinese, he said no and followed with “I think we should start teaching Chinese in preschool.”

Eventually, we (and the group) had a long discussion about innovation, bureaucracy, engineer vs attorney statistics, mistakes to avoid when going into China and so on. Good stuff.