1200 G Street NW · Suite 200 · Washington, DC 20005 t. 202.459.0354 · e. info@toyassociation.org

October 30, 2018

Edward Gresser
Chair, Trade Policy Staff Committee
Office of the United States Trade Representative
600 17th Street, NW
Washington, DC 20508

Re: Request for Comments to Compile the National Trade Estimate Report on Foreign Trade Barriers (Docket No. USTR-2018-0029)

These comments are provided on behalf of The Toy Association, its members and the U.S. toy industry in response to the Office of the U.S. Trade Representative’s solicitation of public comments for the agency’s preparation of its annual National Trade Estimate Report on Foreign Trade Barriers (NTE). The toy sector is a global industry with international markets and export opportunities for U.S. companies growing significantly. Thus, promoting international trade and reducing regulatory barriers to trade are top priorities for The Toy Association.

By way of background, The Toy Association has a membership of more than 950 businesses – from inventors and designers to toy manufacturers and importers, retailers and testing labs – who are all involved in creating and bringing toys and games to children. Our members produce and sell approximately 90% of the three billion toys sold in the United States each year; the annual U.S. toy market is $25 billion. Since the 1930s, The Toy Association has been a leader in the development of toy safety standards, and toy safety has long been the top priority for the association and its members.

U.S. toymakers have a long history of leadership in global toy safety initiatives. The Toy Association and several U.S. toy company experts created the first comprehensive toy safety standard nearly four decades ago. Congress and the President recognized this industry leadership by adopting the ASTM F963 U.S. toy safety standard as a mandatory consumer product rule under the Consumer Product Safety Improvement Act (CPSIA) of 2008. This standard is frequently used as a model – or adopted outright – by other countries that are developing or improving their own safety measures.

While The Toy Association recognizes and supports foreign governments’ sovereign right to ensure public health and safety, we strongly believe that alignment of toy safety standards and conformity assessment requirements is the most effective and efficient way to achieve this objective. Greater alignment reduces the costs of compliance – including production, administrative and testing costs – which helps to keep product prices low for consumers, without negatively impacting safety. Alignment of standards and conformity assessment requirements assures open markets among nations, maximizing product availability and choice. Most importantly, alignment enhances product safety: greater coordination, simplification and understanding of science and risk-based standards provide for consistency in the interpretation and comparison of results, closer cooperation and enforcement across borders, and the reduced potential for confusion and mistakes.

Unfortunately, we have seen a troubling use by some countries of technical trade barriers as a means of restricting imports. Some of these requirements have only a tenuous connection to safety, and others, while well-intentioned, are unduly onerous.

Below is a more detailed discussion of several existing and proposed international toy standards and conformity assessment requirements that are of significant concern to the U.S. toy industry. These requirements are inconsistent with the countries’ obligations under the World Trade Organization (WTO) Agreement on Technical Barriers to Trade (TBT) because they create “unnecessary obstacles to international trade” and they are “more strict than necessary,” while providing little or no added health or safety benefit. We appreciate this opportunity provided by USTR to provide comments for consideration of inclusion in the annual NTE Report.

Brazil

Ordinance 563 Requirements for Conformity Evaluation

The U.S. toy industry engaged with INMETRO on proposed Ordinances 489 and 310 since initially introduced in 2014. The Toy Association and member companies provided extensive comments detailing concerns with the proposed Ordinances including lack of clarity, contradictions with the MERCOSUR toy standard NM300 and overly burdensome requirements. Significantly, proposed Ordinance 489 included a requirement that all toys be categorized and certified using a “family registration” system.

The final regulation, Ordinance 563 (which combined the requirements from proposed 310 and 489) was adopted in the beginning of 2017 and is scheduled to go into effect at the end of December 2018. Since finalized, The Toy Association continued to engage with INMETRO to address remaining concerns (detailed below).

On October 30, 2018, INMETRO notified the WTO of proposed revisions to Ordinance 563 (proposed
“Complimentary Ordinance 563”) just two months before the imminent effective date of the still-in-place finalized Ordinance 563. We have not yet been able to fully review PROPOSED Complimentary Ordinance 563 but will provide comments to both the U.S. Government and INMETRO when available. Until the Complimentary Ordinance is finalized, however, our concerns with Ordinance 563 remain.

Concerns about Certification Requirements:

• Many products other than toys were already subject to Brazil’s certification mandate that includes a “family registration system.” However, toy manufacturers typically produce a much greater number of products, at lower price points, and with a much higher rate of turnover on a seasonal basis. The combination of these factors results in disproportionately severe costs and burdens on the toy industry resulting from the new family registration certification requirement.
• The Ordinance also maintains the requirement that toy companies label packaging with a Conformity Identification Tag, that includes a product family-specific registration number obtained through the new Object Registration system, after the toy has been tested and certified by an official certifying party (OCP). This requirement not only results in significant inefficiencies in the supply chain, but forces importers to retool their entire supply chain so that the product can be tested then sit in the warehouse and wait for INMETRO to provide a registration number prior to import.
• The process mandates that a company first submit lengthy documentation including a detailed description of the traceability procedure adopted by the supplier for the product and a descriptive toy memorial which includes extensive information including a list of raw materials used for the manufacturing of the toy. These requirements amount to not only an extensive administrative burden but also mean that companies must disclose business confidential and proprietary information.

Concerns about the Standards:

• As a general note, NM 300 has not been updated in several years. The current standard is aligned to a now-outdated version of ISO 8124. We request INMETRO work with the other MERCOSUR countries to update NM300 to align the toy safety standard with the most recent version of ISO 8124.
• The following provisions are contradictory with or redundant to the referenced toy standard, NM 300:
• 5.3.18.2 – If the tip of the projectile protection detaches, the projectile cannot be released by the release mechanism and cannot be considered a small part. (NM 300 – 1 4.18.2 is contradictory in that the requirement is applied only to stored energy projectiles)
• 5.3.87 – Projectile toys shall bear instructions for use to draw attention to the danger of reaching the eyes and use other projectiles than the recommended or supplied by the manufacturer (NM 300-1 only requires cautionary language for certain projectiles)
• Some provisions are too broadly applied, are inconsistent with international norms and/or would result in banning safe toys:
• 5.3.49 – Cords and elastics on toys shall have a minimum thickness of 1.5 mm (Ordinance 310 initially applied the standard to toys intended for children up to 18 months. This requirement applies to all toys across age grades including, for example, kites)
• 5.9.1.10 – The words WARNING, CAUTION and WARNING, included in the markings, operating instructions and safety rules must be in capital letters and contain 5 mm minimum height, except where otherwise indicated. (Only 2 mm minimum height would be required to achieve goal of being visible without excessive packaging costs)
• Annex D 6 – The indication of the age range of toys intended for children up to 3 years should be in months. Example: + 24m. (No other internationally recognized toy safety standard requires age grading be labeled in months. Additionally, all other international age grading requirements use the “+” after the age (e.g. “3+” or “4+” vs. Ordinance 563’s “+3” or “+4”). Requiring a company to relabel products specifically for the Brazilian market would result in significant costs that would be needlessly applied as current international age grading labels are widely understood by consumers)

Egypt

Decree 43

On January 16, 2016, the Ministry of Trade and Industry published Decree 43 amending Decree 992. The regulation went into effect on March 16, two months after publication, providing industry little time to comment on the proposed regulations. Despite significant concerns expressed by multiple industries, the Egyptian government implemented the regulation as proposed. The decree establishes a cumbersome process requiring all manufacturing plants and trademark owners to register in the General Organization for Export and Import Control (GOEIC) registry, with an onerous list of documentation and certification requirements associated with those processes.

Manufacturing plants seeking to register with GOEIC must provide: (1) an application by the producer’s legal representative or agent; (2) the legal identity of the producer and the license issued for the manufacturing plant; (3) the products produced and their trademarks; (4) the trademarks of the products and the trademarked products produced under license from their owners; and (5) an ILAC/IAF certificate that the producer maintains a quality control system.

Trademark owners seeking to register must provide: (1) an application by the trademark owner’s legal representative or agent; (2) a certificate stating the registration of the trademark and trademarked goods produced; (3) a certificate identifying the distribution centers entitled to supply the trademarked goods; and (4) an ILAC/IAF certificate that the producer maintains a quality control system.

These registration requirements for manufacturers and trademark owners in Decree 43 are burdensome and do not contribute meaningfully to the trademark verification process. To make matters worse, all required documents must be approved and certified by the Chamber of Commerce and documented by the Egyptian embassy or consulate in the country of export and accompanied by a certified translation in Arabic.

Recognizing that companies have a vested interest in protecting their trademarks from infringement, in pursuing trademark enforcement, trademark owners and the companies that license the trademarks should be viewed as partners in enforcement and information sharing. However, the system imposed by Decree 43 attempts to accomplish this objective through highly inefficient means. The trademark owner is required to submit the list of products produced under their trademark and a list of distribution centers allowed to supply the products. Many toy companies have very dynamic licensing agreements for a wide range of products that change frequently, and the number of trademarks that would require registration could easily and quickly reach the thousands. It additionally appears that the trademark owner would have to reapply for registration every time the license agreement changes in a way that would impact products imported into Egypt.

This system has resulted in extensive delays and major cost increases for U.S. companies selling in Egypt.

Eurasian Economic Union

Draft Amendment No. 2 to the Technical Regulation of the Customs Union on Safety of Toys (CU TR 008/2011)

The Eurasian Economic Union introduced Draft Amendment No. 2 to the Technical Regulation of the Customs Union on Safety of Toys (CU TR 008/2011) that would put in place an arbitrary system to ban toys that may cause psychological or behavioral harm to children. The basis of the regulation is unmerited as there is no scientific evidence to support a determination that a toy is detrimental to a child’s psychological well-being. Furthermore, as proposed, the regulation violates the WTO TBT Agreement as it does not advance children’s safety, is not based on science and does not address any actual risk of harm.

The proposal appears to mandate that toys can only be placed on the market when they meet psychological and educational safety requirements as determined through an evaluation of experts. This pre-market “psychological and educational safety evaluation” is unprecedented; to our knowledge, no other market anywhere in the world has such a requirement for any product. As there is no scientific basis for a determination that toys have anything other than a positive effect on children’s psychological and social development, we are greatly concerned that the regulation does not provide any details on how this pre-market evaluation would operate, how a toy could pass or fail the evaluation, and how such experts would be selected to make such a determination on the educational and psychological safety of a toy.

Since its introduction, the proposed amendment has largely been championed by Kazakhstan and been amended to target dolls with unnatural characteristics. Regardless of this narrow tailoring, any regulation that would attempt to ban specific toys on these grounds would be arbitrarily and subjectively applied.

Technical Regulation of the Customs Union TP TC 008/2011 “on Safety of Toys” (CU TR)

The Technical Regulation of the Customs Union TP TC 008/2011 “on Safety of Toys” (CU TR) applies to toys sold in Russia, Belarus and Kazakhstan. While it is based on the European Toy Safety Directive (Directive 2009/48/EC), there are some significant differences between the Technical Regulation and the Toy Safety Directive as well as significant differences between the standards that result in technical barriers to trade without providing additional protection to consumer health and safety.

To comply with CU TR, toys must be tested in testing facilities and certified in certification facilities that are accredited in one of the Member States of the Customs Union and that are registered in the Unified Register of testing and certification bodies of the Customs Union. Only recognizing Customs Union testing facilities and certification places U.S. toy companies importing into the Customs Union at an inherent disadvantage. It also results in duplicative testing causing a substantial financial and administrative burden and increasing the time to market, all without increasing safety.

There are specific differences between the CU TR and the related standards and other international regulations and standards that result in trade barriers for companies trying to sell in the Customs Union countries. Some examples include:

• CU TR prohibits the use of any surface paints on toys contacting the mouth of the child and the painting of rattles, which deviates from international standards that ensure the safety of toys by regulating the chemicals used in surface paints. There is no scientific justification to eliminate the use of surface paint on toys. This is a significant trade barrier as many safe toys use surface paint.
• The regulation prohibits the use of the following materials in toys for children under 3 years of age: fur, leather, glass, porcelain, raised rubber, cardboard and paper, stuffing pellets measuring 3mm or less without an inner case, and fillings for toys such as rattles, whose size increases by more than 5% under humid conditions. International toy safety requirements do not regulate these materials per se, they instead look at whether these materials pose a physical, mechanical and/or chemical risk to children.
• Toys sold within the Customs Union must contain an additional conformity marking demonstrating that the toy is compliant with CU TR. The additional label can be confusing to consumers who may see a certification mark in one market but not another and erroneously conclude that this has a bearing on the product’s comparative safety. Toys sold in the United States, for example, must comply with very strict product safety standards but do not require any certification markings on the product.
• Article 4 states that “in printed board games, the text and images must be distinct and hard on the main background. Scuffing on paper and cardboard is not allowed.” It is unclear how a standard on “scuffing” has any correlation to protecting a child’s safety.
• Article 4 has limits for vibration, which is not addressed in any other international toy safety requirements. These limits raise uncertainties regarding testing and compliance.
• Annex 2 contains restrictions on the odor of toys, which is, again, a unique requirement not seen in any other toy safety regulations around the world. The standard raises uncertainties regarding testing and compliance.

India

Amendment in Policy Condition No. 2 to Chapter 95 of ITC (HS), 2017 – Schedule – 1 (Import Policy)

On September 1st, 2017, without any prior notice, India’s Ministry of Commerce and Industry announced a measure, “Amendment in Policy Condition No. 2 to Chapter 95 of ITC (HS), 2017 – Schedule – 1 (Import Policy).” The new requirement, which went into effect immediately, mandates that all toy imports must be tested to demonstrate compliance to the newly updated Indian toy safety standard IS 9873 and IS 1566, using a conformity assessment facility accredited by the National Accreditation Board for Testing and Certification
(NABL), India. All these facilities are located within India, and all applications by laboratories located outside India have to date been denied or the Indian government has not responded to the applications despite receiving them a year and a half ago. Previously, testing could be performed by any ILAC-accredited lab and testing to any of the applicable ISO, ASTM or EN international toy safety standard was an available option to toy companies selling in India.

The immediate effective date resulted in significant costs, delays and, in some cases, some U.S. toy companies pulling out of the Indian market entirely. At the date of enactment, there were no testing labs accredited making compliance for importers entirely impossible. The toy industry has numerous products as per the latest trend, and a quick turnover of product designs. Faster testing time of a wide range of products is therefore necessary. Although several local labs have now received accreditation, the mandatory requirement of testing only in country to the IS standard increases cost, delays time to market and creates complexities of supply chain into the Indian market. Also, to be noted is the discriminatory nature of this policy which does not currently mandatorily require domestic manufacturers to test to any toy safety standard and only applies to imports.

By creating a restrictive environment for compliant toy companies, children in India are thus denied access to globally available, and safe, toys. The impact creates a space for grey market toys contrary to the government’s intended efforts to curb counterfeit/fake and unsafe toys from entering the country.

Another concern pertains to requiring companies to conduct additional compliance testing to IS 9873, which would be duplicative and unnecessary for products already tested to one of the international toy standards (ISO 8124, ASTM F963 or EN 71). IS 9873 is significantly aligned to the international toy safety standard ISO 8124. While we appreciate that IS 9873 is aligned with the international standards, requiring companies to retest to demonstrate compliance with a near identical standard does not improve toy safety though it does increase compliance costs and serve to deter imports.

We also hear that the Indian government is working on a new overarching toy safety conformity assessment policy which would apply to both manufacturers and importers. It is critical that this new policy allows for international certifications such ASTM (US) and EN 71(EU) to also be recognized for toy imports. We also urge the government to develop a simplified conformity assessment system to test for product safety which aligns with global standards and processes. This would enable Indian children to access and experience world class play products and reduce the size of the grey, unregulated market.

Indonesia

Indonesia National Standard and Technical Specification for Toys (SNI Regulation 24/M-IND/PER/4/2013)

Indonesia’s Decree of Ministry of Industry (MoI) on Mandatory Implementation of Indonesia National Standard and Technical Specification for Toys (SNI Regulation 24/M-IND/PER/4/2013 or “SNI Regulation”) that went into effect in April 2014 has been, and will continue to be, a major barrier to trade for the U.S. toy industry.

The Toy Association and the U.S. government have been consistently engaged with MoI since first submitting comments to the WTO TBT Committee regarding this measure in September 2012, and The Toy Association appreciates the U.S. government’s continued persistence on the matter. As detailed in those comments, areas of major concern include, inter alia: undue restrictions on which laboratories will be authorized to conduct toy testing; uniquely frequent and discriminatory product testing requirements; restrictive certification and marking requirements; onerous documentation requirements; restrictive factory audit requirements; and unreasonable and/or vague restrictions on certain substances.

In September 2018, the Indonesian government enacted a ministerial order (still to be released to the public) enabling importers and manufacturers to choose from the current conformity assessment process and a new proposed system which allows for a four-year certification based on factory of origin audits. While this is a good development, the implementing guidelines are yet to be developed and published. The implementing guidelines should consider the international industry’s proposed recommendations for this new revised two option system to have actual impact on the industry and reduce time to market into Indonesia. Indonesian children currently access US and other global toy products with at least a 12 week delay due to the complexity of testing every shipment to conform to the SNI standard.

Since the implementation of the SNI regulation, the issues have continued forcing MoI to initiate meetings to gather formal input. Issues with the regulation include:

• Initially, only Indonesian laboratories that are both KAN accredited and are an “LSPro” or affiliated with same can test product under this regulation. This created unacceptable delays in testing due to both restricted capacity and the difficulty of sampling product in countries of manufacture other than Indonesia. As more foreign-labs have developed agreements with the LSPros, this has eased somewhat.
• In addition, the initial testing regime was both unnecessarily onerous and clearly discriminatory in that imported toys were required to be tested at every import shipment, while domestic suppliers were tested only every six months. As mentioned above, MoI has recently proposed a revision of the SNI regulation which allows importers to continue with this process (termed “Scheme 1N”), or elect a new “Scheme 5” which allows test reports to be accepted for a year, but requires testing at an approved lab and adds a factory audit by either MoI or LSPro personnel, adding additional complexity but potentially allowing some relief. We await implementing guidelines to determine full effect of the changes.
• Covered products landing in Indonesia must have an SNI certificate and be labeled with the SNI mark, although the proposed revision seems to allow importers electing Scheme 5 to label at their facility in Indonesia. As above, to obtain the certificate and mark, the product must be sampled and tested to the Indonesian national toy standard (a modification of ISO 8124, with additional azo dye, phthalate, and formaldehyde limits) by an Indonesian lab accredited by KAN and being or having an MOU in place with a so-called “LSPro” lab.
• It is also important to note that no other country requires toys to be tested more frequently than once a year except when changes are being made in the products.
• The Indonesian toy standard includes a formaldehyde limit at 20ppm which was derived from a Japanese infant clothing standard. Applied to toys, this requirement is significantly lower than international norms and to require toys comply with the same infant clothing standard, does not take risk into account (infant clothing has prolonged exposure against a baby’s skin while toys do not). Also, 20ppm is very close to detection limits making it very difficult to test to that level.

Conclusion

The toy industry is committed to working with legislators and regulators in the U.S. and globally to reduce technical barriers to trade, and to achieve the alignment and harmonization of risk-based standards that will provide a new level of confidence that toys from any source can be trusted as safe for use by children. Standards alignment assures open markets between nations to maximize product availability and choice.

Thank you for the opportunity to submit comments for the 2017 NTE Report. If you have any questions or need additional information, please contact Rebecca Mond, Vice President of Federal Government Affairs at rmond@toyassociation.org or 202-459-0352.

Sincerely,

Steve Pasierb
President & CEO
The Toy Association