14 September 2007

[US] Industry prepared to deal with product safety regs, importer says

The following is excerpted from the 14 September 2007 edition of “Journal of Commerce”.

Recent recalls of toys from China due to product safety issues are causing some short-term disruptions in the trade, but the industry should adjust to any new safety codes that the governments of the U.S. or China may impose, an importer said Thursday.

The main task right now for the toy industry is to step up its programs for independent testing of toys to ensure they do not contain lead-based paint or small parts that young children can choke on, said Charley Woo, co-founder and chief executive of Megatoys in Los Angeles.

While a company the size of Megatoys will incur added expenses to provide extra testing for dozens of product lines, the long-term impact of these requirements will not represent a major cost item, Woo told a China conference sponsored by Cargo Business News.

Woo said that 20 years ago he did not have the resources to pay for extensive testing of new products. However, as his company grew, he hired a team of inspectors in China to visit factories and make sure products are safe.

Toy import costs already have increased 5 to 10 percent this year, but the increases have nothing to do with product recalls, Woo said. Cost increases have resulted from appreciation of China's currency and a labor shortage in South China, where most of the toys are manufactured. The cost of labor in China's coastal cities continues to increase as the country's export boom enters its seventh year. Rising energy costs and energy shortages in China also have contributed to the increased costs for toys.

The toy recalls in May and again last month will precipitate government action, most likely involving more product testing. Smaller importers that have not yet developed testing programs may suffer, but the more established companies will adjust to any new requirements, Woo said.

Any additional costs will occur early on, but once the new programs are developed, consumers will not see a significant increase in the price of toys, Woo said.

Nor does he believe that the toy industry in South China is in danger. An extensive manufacturing and logistics infrastructure has been developed in South China over the years, and it would be difficult to reproduce it elsewhere.

Toys are not like textiles and apparel, Woo noted. Moving a textile plant from China to Vietnam, for example, involves primarily shipping sewing machines to the new location and training workers there. The toy manufacturing and shipping infrastructure is much more complex and costly….