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RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGZ #0315/01 1410851
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R 210851Z MAY 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0594
INFO RUEHGZ/CHINA POSTS COLLECTIVE 0173
RUEHIN/AIT TAIPEI 0121
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHKO/AMEMBASSY TOKYO 0014
RUEHUL/AMEMBASSY SEOUL 0019
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RUEKJCS/DIA WASHDC 0154

UNCLAS SECTION 01 OF 02 GUANGZHOU 000315 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, EAP/EP, EEB/TPP 
STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION RICH 
O'BRIEN /INTL PROGRAMS 
STATE PASS USTR CHINA OFFICE 
STATE PASS HOMELAND SECURITY COUNCIL 
STATE PASS IMPORT SAFETY WORKING GROUP 
 
 
E.O. 12958: N/A 
TAGS: ETRD EIND TBIO ECON PGOV CH HK
SUBJECT: Toy Safety: Phthalates Still Problematic, Lead Under 
Control 
 
REF: A) HONG KONG 649; B) 2008 GUANGZHOU 618; C) 2008 GUANGZHOU 225; 
D) 2008 GUANGZHOU 146 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. Not for release outside U.S. government channels. Not 
for internet publication. 
 
¶1. (SBU) Summary:  Supply chain security is still the biggest 
challenge for the south China toy industry, Hong Kong-based owners 
of two top-tier toy manufacturers told Congen Hong Kong and Congen 
Guangzhou officers in their Pearl River Delta factories.  Phthalates 
(an ingredient that increases plastic flexibility) have proven 
difficult to eliminate from toy components, even as lead 
contamination - the reason for the massive toy recalls of 2007 - has 
become less of a concern for manufacturers.  Product testing costs 
continue to escalate, with some western brand owners asking Chinese 
suppliers to set up internal testing laboratories and increase 
testing during the manufacturing process.  Toy makers said they are 
most concerned about inconsistent U.S. state and federal laws as a 
threat to their long-term compliance efforts.  End summary. 
 
Supply Chains Remain Greatest Risk 
---------------------------------- 
 
¶2. (U) Eliminating phthalates from toy manufacturer supply chains is 
an ongoing challenge, according to representatives of a top-tier 
Hong Kong-owned toy producer in Shenzhen.  Toy makers told Congen 
Hong Kong and Congen Guangzhou econoffs on a joint reporting tour of 
Hong Kong and Guangdong testing facilities and factories that it had 
not been difficult to adapt the production process to phthalate-free 
materials, but finding suppliers who could provide the materials had 
been more challenging. (Note: Discussions with testing companies in 
Hong Kong will be reported septel by Congen Hong Kong.  End note.) 
Because the six phthalates in question are widely used in plastic 
and other components across a range of manufacturing industries, the 
company's ability to verifiably eliminate the ingredient from supply 
chains has been more difficult than originally predicted.  The 
company's product safety manager said she was surprised to find 
phthalate contamination in fabrics and other non-plastic components, 
leading major toy companies to broaden the scope of their supplier 
and safety testing requirements for these substances. 
 
¶3. (U) Lead is no longer a major threat, according to the same 
executives.  They said that the major recalls that took place in 
summer and fall of 2007 led to dramatic changes in both supply 
chains and manufacturing processes.  The risk of lead-related 
problems is low among top-tier producers which have robust quality 
control procedures.    Paint suppliers have received the greatest 
attention, including stringent supply chain control protocols and a 
redundant testing system; moreover, lead has been eliminated or 
reduced to government-mandated levels in electronic parts and other 
toy components as well. 
 
Increased Testing Costs and Complexity 
-------------------------------------- 
 
¶4. (SBU) According to a top-tier toy supplier based in Dongguan, one 
of Guangdong Province's major manufacturing centers, toy testing 
costs have increased "10-fold" in the last two years.  Toy makers 
are conducting a higher aggregate number of tests in order to meet 
government-mandated (China and destination countries) certification 
requirements; there are also duplicative testing requirements 
required by foreign buyers and toy brand owners.  Executives said 
the newest trend was for brand owners like Mattel and Hasbro to 
request that original equipment manufacturers (OEMs) set up internal 
testing labs and build more testing procedures into each step of the 
toy production process. 
 
¶5. (U) Both manufacturers visited by econoffs demonstrated the use 
of their most expensive piece of testing equipment, the Inductively 
Coupled Plasma (ICP) Optical Emission Spectrometer, which they 
described as a USD 250,000 analysis machine that is often required 
 
GUANGZHOU 00000315  002 OF 002 
 
 
by western brand owners.  Executives said the high fixed costs of 
the ICP machine means that they spend a bit more upfront but are 
able to set up a comprehensive internal testing lab that is actually 
not much more expensive.  The Shenzhen factory representatives said 
their lab began operating a few months ago and subsequently applied 
for certification by the China National Accreditation Service (CNAS) 
for conformity assessment.  Chinese certification will help enable 
them to reduce outside testing. 
 
¶6. (U) By reducing outside testing during the manufacturing process, 
in-house labs can also cut costs and reduce production delays.  They 
emphasized that outside testing in accordance with government 
regulations would continue, but pre-production testing and other 
status checks could increasingly be handled by in-house labs in the 
lead-up to final safety certifications from accredited third-party 
laboratories. 
 
Calling for Phased-In Enforcement 
--------------------------------- 
 
¶7. (SBU) The complexity of testing for six different restricted 
phthalates, especially the substrate tests, is the greatest testing 
challenge for manufacturers right now, according to the Hong 
Kong-based toy executives.  They complained that surface tests for 
phthalates should have been enforced for a period of time before 
requiring a comprehensive ban on both surface and substrate 
phthalates.  The executives claimed that a stay of enforcement for 
substrate phthalates, as has been used for certain other children's 
products, might be an acceptable alternative while the toy industry 
fully implements the new safety requirements.  Manufacturers said 
they had no choice but to comply with the current regulations, but a 
phased-in approach would help industry adapt more easily. 
 
State Laws Scare Toy Businesses 
------------------------------- 
 
¶8. (SBU) Illinois Public Act 095-1019 is one example of new state 
laws that require toy companies to comply with quality standards 
that are stricter than federal U.S. regulations, a situation that 
Hong Kong-based executives said is their source of greatest concern 
right now.  According to the law, which will take effect on January 
1, 2010, children's products sold in Illinois and containing more 
than 40 parts per million (ppm) lead content must include a special 
warning label about lead content.  Manufacturers are concerned that 
the Illinois lead limit is less than half the allowable limit in the 
Consumer Product Safety Improvement Act (CPSIA).  They fear a 
growing number of state laws and regulations that differ from CPSIA 
would make it difficult for companies to fully comply with each 
jurisdiction's regulations. 
 
¶9. (U) This cable was coordinated with Consulate General Hong Kong. 
 
 
GOLDBERG