enlarge Doug Jones/Staff Photographer

Manager Kimberly Frank straightens out children’s hats on the racks of The Little Hat Co. in South Berwick. The company’s owner is discontinuing her line of children’s hats because it will cost too much to comply with federal product-safety requirements.

enlarge John Ewing/Staff Photographer

William John Woods, owner of Ogunquit Wooden Toy, uses a sander to polish his wooden rattles. “I keep thinking that someone is going to say, ‘Oh, we don’t mean that,’ ” he said of mandatory lead and phthalate testing.

SOUTH BERWICK — Jennifer Houghton is getting out of the children's hat business.

Houghton, owner of The Little Hat Co., is among the thousands of small manufacturers and retailers nationwide who say they can't afford to comply with a new federal law requiring that all products for children 12 or younger be tested for lead and phthalates, which are chemicals used to soften plastics.

Houghton looked at the law and did the math: For a recent special order of 24 hats for a local ski resort, she would send one finished hat for testing. If it cleared, she could sell the hats. Then, even if she used the same raw materials for a new hat, it would have to be tested again as a new product.

Since it costs about $400 to test each component, a hat with four of five components – thread, ribbon, cloth and buttons – could cost as much as $2,000 to test.

"I can't afford that," said Houghton, who is now holding a fire sale to dump the 1,000 children's hats in her inventory by Feb. 9, when she'll switch her business to adult hats. "It's just surreal that this is happening."

The Consumer Product Safety Improvement Act was signed into law in August 2008 in response to the recall of millions of Chinese-made toys.

Under the law, which takes effect Feb. 10, manufacturers must pay a third-party lab for the testing and put tracking labels on all products to show when and where they were made. Retailers must ensure that their entire inventory is in compliance.

"Our phone has been ringing off the hook the last couple of weeks," said Curtis Picard, who represents about 1,000 Maine retailers as executive director of the Maine Merchants Association. "It's a well-intentioned law, but it's certainly having some unintended consequences. They unleashed a whole army, when the problem probably just needed a more moderate response."

Large manufacturers mass-producing a toy can absorb the cost, but smaller operations say it will be too costly to comply. Fines are $100,000 per violation.

"If this law had been applied to the food industry, every farmers' market in the country would be forced to close while Kraft and Dole prospered," read a posting at the Web site for the Handmade Toy Alliance, a grass-roots effort by thousands of toymakers nationwide to change the law.

Alliance member William John Woods, who sells about 2,000 handmade wooden baby rattles and toys through his Ogunquit Wooden Toy company, agreed that the new law is a problem. The only thing he puts on the wood is walnut oil and beeswax, he said.

"When I first heard about the law, I didn't pay much attention to it because I didn't think it applied to me – but of course, it does," said Woods, who has been making toys for about 35 years.

"It seems like a law that doesn't have a lot of thought behind it. I keep thinking that someone is going to say, 'Oh, we don't mean that.' "

And if the law takes effect?

"I don't want to say it would put me out of business, but I guess I'd have to ignore it. I know that's not right, but what am I going to do?" Woods said. "In all my years of making toys, I have never had one complaint. I've never, ever gotten one back."

There are signs in Washington that the toymakers are being heard.

Several lawmakers, including both of Maine's U.S. senators, are getting involved on behalf of their constituents, and the Consumer Product Safety Commission is considering recommendations from its own toxicologists that some unfinished natural materials – such as cotton, silk, wool, hemp, flax and linen – should be considered lead-free and thus exempt.

"I cannot overstate how critical it is that CPSC expeditiously work, within the constraints of the law, to exclude merchandise that poses no danger to the public," U.S. Sen. Olympia Snowe, R-Maine, wrote in a Jan. 16 letter to the Safety Commission chairwoman.

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