by AHFA says costs associated with furniture stability standard are much higher than CPSC estimates
HIGH POINT — The cost of complying with the Consumer Product Safety Commission’s mandatory stability standard would be significantly more than estimates generated by the CPSC, according to the American Home Furnishings Alliance.
That assessment was part of a declaration from Bill Perdue, AHFA vice president of regulatory affairs, in the AHFA’s request to delay the rule’s May 24, 2023 effective date pending a judicial review in the U.S. Court of Appeals for the Fifth Circuit.
The CPSC rule aims to reduce the number of tip-overs of clothing storage units known to injure and kill children. The AHFA also has long supported having a mandatory stability standard, but takes issue with the CPSC’s proposal, including its use of a hangtag system using a one to two scale that indicates that a unit is more or less stable.
In the declaration, Perdue said that, based on discussions with various manufacturers, an unweighted average to comply with the standard would be $47 per unit, or just over $831 million, more than three times CPSC’s estimated compliance cost of $250 million.
The CPSC’s estimate in its final ruling is based on 17.68 million clothing storage units produced in the first year alone. Using a higher figure of 43.6 million units in the CPSC’s initial proposed ruling, the AHFA estimates that the the cost of compliance would be just over $2 billion, or 8.2 times higher than the CPSC’s $250 million estimate.
“The final rule will impose staggering compliance costs on every sector of the furniture industry — manufacturers, distributors and retailers,” the declaration stated, noting that that clothing storage units must be redesigned and modified employing several options outlined in the rule including an interlocking system that only allows one drawer to be opened at a time. “No one option presents a one-size-fits-all solution, not even interlocks. Manufacturers will need to use a combination of options such as interlocks, reducing drawer openings, and counterweight to achieve the minimum stability rate of 1 or greater.”
The declaration goes on to state that due to supply chain constraints that will lengthen the lead time for additional parts needed to rebuild compliant units, the majority of the costs will be incurred in the first few months following the rule’s (Nov. 25) publication date.
While Perdue’s survey only included several member companies across various price points, the CPSC analysis also only considered several models. According to the CPSC analysis, modifications to various units would cost between $9.70 and $17.13, based on labor and materials. This does not include an additional 51 cents for the cost of redesign and testing, which would bring the total costs to between $10.21 and $17.64.
Some case goods experts interviewed by Home News Now also have agreed that the CPSC’s estimated compliance costs are way too low based on their estimates, which also include the cost of new packaging and shipping that accounts for weight added to various case pieces to help boost their stability. They also say the additional weight required on individual case pieces would likely result in more fatalities in tip-over incidents
Further, Perdue’s declaration states, the cost to consumers would be more than $1.4 billion, which accounts for 30% margins at both wholesale and retail. This, it said, is 462% higher than the CPSC’s $250 million estimate.
The declaration went on to state specific cost increases for various items based on interviews with different manufacturers. In one specific case, it said, the compliance costs for a six-drawer chest increased the retail price by $140.35, to $429.80. In another, the estimated compliance cost for a nine-drawer dresser raised the retail price from $357 to $667.14, an 87% increase.
The overall estimated compliance cost for a two-drawer nightstand would raise the retail price from $227.85 to $568.51, a nearly 150% increase.
The CPSC has not responded to Home News Nows’ request for comment regarding AHFA’s motion to delay the implementation date of the ruling or other aspects of the motion.
However, in its final rule published Nov. 25, the CPSC acknowledged that the costs of designing, producing and distributing compliant product would initially be incurred by manufacturers and suppliers, but that most of the costs would be passed along to consumers in the form of higher prices.
“It is unlikely, given that large suppliers apparently plan to raise prices to cover the cost of compliance, that small suppliers would not be able to pass any of the cost of regulatory compliance on to retail customers, as is implied by the Office of Advocacy’s comments,” the rule states. “That would only occur if demand were highly elastic (any price increase would cause demand to drop sharply), so suppliers are unable to pass any of the cost of compliance on to retail consumers.”
“The costs involving the loss of utility because CSUs with certain features or characteristics are no longer available would be borne directly by those consumers who desired CSUs with those characteristics or features,” it added, while also acknowledging that some manufacturers may exit the market because their increased costs will exceed what consumers are willing to pay for their products.
The AHFA noted that could also impact retailers selling these products.
“Retailers who must undertake these dramatic cost increases not only experience eroded margins,” it said in its declaration. “They also risk losing customer opportunities due to the goods being priced out of their customers’ budget. Manufacturers known for having safe, affordable options will suffer a loss of goodwill among customers who now find that they are unable to afford these manufacturers’ and retailers’ products due to the rule’s unnecessary price increases.”
Other points it made in the declaration are as follows:
+ Manufacturers and retailers also will suffer loss of goodwill “on account of the hangtags’ rating regime, which will mislead consumers into believing that lower-rated CSUs are unsafe.”
+ Manufacturers and retailers also will need to incur expenses in redesigning their online sales platforms, such as e-commerce websites, to display the required hangtag disclosure and warnings at the point of online sale as the rule requires.
+ Manufacturers and retailers also will incur expenses to train their customer service employees about the new stability standard that must appear on the hangtags.
+ Manufacturers also will be harmed by being forced to divert limited design and engineering resources away from new product development and innovation and back toward redesigning old product lines.
