STATE ATTORNEYS GENERAL AND THE RESPONSE TO THE 2007 RECALLS OF CHILDREN’S TOYS David Tutor February 5, 2009 INTRODUCTION In 2007, millions of toys were recalled because they contained small but powerful magnets that could perforate a child’s intestines when swallowed, as well as a dangerous amount of lead paint on exterior surfaces. These recalls of children’s products were both preceded and succeeded by additional recalls of everything from toy charms to pet food to car tires. The majority of these products were designed in the United States, manufactured overseas, and returned to the domestic market where they appeared largely untested on shelves in major retail outlets. In many cases, it took reports of deaths or serious injuries to spur major recalls. The Consumer Product Safety Commission (CPSC), the agency charged with protecting the American public from the risks of dangerous products, appeared to be abdicating its responsibility. Years of slashed funding and deregulatory ideology had rendered the agency essentially reactive-- its primary function shifted to monitoring for signs of injury or death that might prompt a recall and assisting companies publicize their press releases once a recall had been initiated. In the absence of strong federal regulation, state Attorneys General began to fill in the voids of the current system and were able to achieve some major successes in the consumer products realm. However, prior to the Consumer Product Safety Improvement Act of 2008 (CPSA), state Attorneys General were often limited to confronting dangerous products to the extent that they were present in their state, despite their presence on shelves across the country. Part I of this note discusses the problems of dangerous toys and the difficulty of addressing the problem at the source of origin, as well as the subsequent 2007 recalls. Part II addresses the powers of state Attorneys General in the children’s products arena, and the actions they took, alone and in concert, to try to protect the citizens of their states. Part III looks to the new 2 provision in the CPSA that empowers state Attorneys General to seek injunctions under federal law, and considers whether this provision will substantively add to the power of state Attorneys General to enforce federal law. I argue that though this Act does not go far enough, it represents an important first step in empowering state Attorneys General to enforce federal law in the broad and difficult challenge of detecting dangerous children’s products, as well as in cultivating cooperative state-federal enforcement. PART I: THE PROVENANCE OF DANGEROUS TOYS AND THE YEAR OF THE RECALL The United States imports a great variety of consumer products from overseas, many from developing countries. 1 Toys, games, and jewelry directed at children, much of which originates in China, make up a considerable amount of total imports. 2 Unfortunately, not all of these children’s products meet U.S. safety standards. Imports constitute over eighty-five percent of recalled products. 3 The detection of dangerous products coming into the U.S. from overseas poses a tremendous challenge in light of the sheer impossibility of inspecting all products before they are available for sale. 4 Defective toys do not, of course, solely originate in China or other 1 See The Office of Trade and Industry Information, TradeStats Express, at http://tse.export.gov/ for analysis of U.S. trade partnerships. 2 See U.S. Census Bureau and U.S. Bureau of Economic Analysis, U.S. International Trade in Good and Services, October 2008, available at http://www.census.gov/foreign-trade/Press Release/current_press_release/ft900.pdf . In total, the U.S. imported $29,909,000,000 worth of “toys, games and sporting goods” from January, 2008 to October, 2008. Id. at 13. This represents a substantial increase from the $28,528,000,000 imported during the corresponding period in 2007, although one can speculate that the economic troubles that emerged in October and November of 2008 will mean that fewer of these goods will actually be consumed. It would be premature to presume that the economic troubles would lead to fewer imports from China. Indeed, the strengthening dollar and ongoing economic turmoil may make importing goods from China even more attractive than it previously was. 3 U.S. Consumer Product Safety Commission, 2009 Performance Budget Request, at 14 (February 2008), available at http://www.cpsc.gov/cpscpub/pubs/reports/2009plan.pdf [hereinafter CPSC Budget Request]. 4 In 2007 the U.S. imported more that $2 trillion worth of products. They entered the U.S. through more than 300 points of entry, and were transmitted by approximately 825,000 importers. Interagency Working Group on Import Safety, Import Safety---Action Plan Update, Introductory Letter to President 3 foreign countries. Indeed, the majority of toys destined for the U.S. market are designed in the U.S., but manufactured abroad. 5 This Part further discusses the origins of the problem toys and why regulators in the United States necessarily play a reactive role, where their main goal is to detect defective products as quickly as possible. It further highlights why the primary mechanisms in place to protect domestic consumers of children’s products are ineffective or inadequate, thus leaving a safety enforcement vacuum that has been partially filled by state attorneys general (Part II), and further augmented by the CPSIA (Part III). A. The Origins of Dangerous Toys. This Part focuses on China because they are the largest trading partner of the U.S., and dominate the supply of imported toys.6 Total U.S.-China trade increased to $387 billion in 2007. 7 According to the CPSC, forty percent of all consumer products imported into the United States last year were manufactured in China, totaling $246 billion worth of goods. 8 China’s dominance has been particularly strong in the production of toys: In 2007, China accounted for 89% of toys imported into the U.S. 9 This has been an ongoing trend. From 1997 to 2004, the CPSC noted that the share of all U.S. imports of consumer products from China more than quadrupled. 10 Bush (July 2008), available at http://www.importsafety.gov/report/actionupdate/actionplanupdate.pdf [hereinafter Import Safety Action Plan]. 5 U.S. Department of Commerce, Industry Outlook: Dolls, Toys, Games, and Children’s Vehicles, NAICS Code 33993, (Oct. 2008), available at http://www.ita.doc.gov/td/ocg/outlook08_toys.pdf [hereinafter Commerce, Industry Outlook]. 6 See The Office of Trade and Industry Information, TradeStats Express, at http://tse.export.gov/ . The U.S. imported $321,507,785,000 worth of goods from China in 2007. 7 Wayne M. Morrison, Cong. Research Serv., RL32165, U.S.-China Trade Issues, May 22, 2008, [hereinafter Morrison, Trade Issues]. 8 CPSC Budget Request, supra note 3, at 14. 9 Morrison, Trade Issues, supra note 7, at 9. 10 Id. 4 Chinese-manufactured products of all types have had their share of problems. In sum, 95% of jewelry recalled since 2005 has come from China. 11 More than 40% of recalls conducted by the U.S. Consumer Product Safety Commission, including 79% of toys in 2006, and 98% in 2007 12 involved products from China. 13 In 2007, the “year of the recall,” millions of toys manufactured in China were recalled for design defects as well as the presence of dangerous amounts of lead. 14 1. Economic Factors. --- China’s domination of the supply of toys is partially due to its ability to mass produce cheap consumer products. Chinese manufacturers can significantly undercut the prices offered by their foreign competitors. 15 China’s practice of currency manipulation allows their products to appear relatively cheaper than those from other countries, fuelling export-led growth. 16 In China, unions are practically nonexistent and the poor labor conditions under which these toys are frequently produced have been well documented. 17 Low wages and excessive hours in the production of toys go far in reducing some manufacturers’ costs. 18 Together, cheap labor and currency manipulation, coupled with massive state 11 Eric Lipton & Louise Story, Bid to Root Out Lead Trinkets Falters in U.S., N.Y. Times, Aug. 6, 2007. 12 Lucy P. Allen, et. al., China Product Recalls: What’s at Stake and What’s Next, NERA Working Paper, at 2, Feb. 20, 2008, available at http://www.nera.com/image/PUB_ChinaProductRecalls_2.08_FINAL.pdf . 13 Jyoti Thottam, The Growing Dangers of China Trade, Time Magazine, Jun 28, 2007. 14 Morrison, Trade Issues, supra note 7, at 9. 15 See The Coming China Wars at 2, New York: FT Press, (2007). 16 See Charles B. Rangel, Moving Forward: A New, Bipartisan Trade Policy That Reflects American Values, 45 Harv. J. on Legis. 377, 409 (2008). China was able to accomplish this by devaluing their currency relative to the U.S. dollar, and then intervening in exchange markets to ensure that the value stayed at the level prescribed. Even apart from currency valuation, the cost of manufacturing goods in China is significantly less than it is in the United States. 17 See National Labor Committee, Nightmare on Sesame Street, available at http://www.nlcnet.org/admin/media/document/China/KNEX_2008/SESAME_WEB_071508.pdf . 18 Id. 5 investment in infrastructure and manufacturing has allowed China to come to dominate the toy market in the United States. 19 The level of regulatory enforcement of safety standards in China is significantly less stringent than enforcement in the United States. This is partially due to the diffuseness of productions. The Chinese production system is unique in its reliance on a great number of specialized producers: On average, it takes China seventeen different parties to produce a product that would take three parties to complete in the United States.