CPSC RICH O'BRIEN VISITS FACTORY THAT PRODUCED TOXIC AQUA

UNCLAS SECTION 01 OF 02 GUANGZHOU 001249

SIPDIS

SENSITIVE
SIPDIS

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
SUBJECT: CPSC RICH O'BRIEN VISITS FACTORY THAT PRODUCED TOXIC AQUA
DOTS TOY ON SOUTH CHINA TOUR

(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: How does a potential toy nightmare and company
branding problem get underway? In the case of Aqua Dots, it was
partially caused by having just one manufacturing option. The toxic
adhesive formula used in the Aqua Dots was developed locally by the
Chinese manufacturer after the Australian distributor asked it to
increase adhesion in the final product. A Wangqi Product Factory
(Shenzhen) employee and local Chinese officials told Consumer
Product Safety Commission (CPSC) and Consulate officials about their
investigation during a November 15 site visit, only one week after
the Aqua Dots were pulled off shelves and production stopped. Tours
of local CIQ offices and labs, as well as a high-end toy factory,
all revealed how seriously China is working to reverse the effects
of negative publicity after a string of toy recalls since
mid-summer. Public outreach at a toy safety seminar and meetings
with the local toy industry association alerted many companies that
new product safety standards are being debated in the U.S. Congress
and toy designers should consider the possible changes when planning
future production. End summary.

Visiting the Factory that Produced Toxic Aqua Dots
-------------- --------------


2. (SBU) The toxic adhesive formula used in the Aqua Dots toy was
developed locally by the Chinese manufacturer after the Australian
distributor asked the firm to increase its adhesion, according to an
engineer involved in the toy's production. During a November 15
tour of Wangqi Product Factory arranged by Chinese inspection
officials, the engineer described to CPSC International Programs
Director Richard O'Brien and Congenoff how the first Aqua Dots
product sample was provided by Australian toy distributor Moose
Enterprise via a Hong Kong intermediary in 2005. The sample toy's
adhesive properties required further extensive development before
the Australian firm accepted the final design of the recalled toy.
Moose Enterprise ordered commercial production in 2006, after a year
of local R&D efforts succeeded in meeting the distributor's
requirements to increase the adhesion of the beads when sprayed with
water. The Aqua Dots toy was recalled world-wide on November 7
after Australian and American children who swallowed the small beads
lapsed into a coma. As has been well reported, a chemical in the
beads metabolized in the children's stomachs as GBH, also known as
the "date rape drug." The factory engineer told us that Wangqi was
the only factory producing Aqua Dots, a conclusion supported by the
investigation of Shenzhen China Inspection and Quarantine (CIQ)
officials.


3. (SBU) This factory visit, just one week after the recalls were
announced, showed U.S. officials first-hand how China's General
Administration of Quality Supervision, Inspection and Quarantine
(AQSIQ) and local Shenzhen CIQ officers responded to the
international product safety investigation by seizing and locking up
production materials and finished toy sets, as well as the molds
used to produce the Aqua Dots toy. An AQSIQ representative from
Beijing described his agency's ongoing investigation; Shenzhen CIQ
officials said they had revoked the factory's export license and
seized the relevant evidence within a day of learning about
world-wide product recalls. Wangqi Product Factory is relatively
small, producing 100 different toy products and employing 300
people, who are now out of work while Chinese authorities conduct
their investigation. More than 100 of the unemployed workers are
still housed at the dormitory on the factory premises.

Guangdong CIQ Shows Toy Testing Lab
--------------


4. (SBU) During a visit to Guangdong's Provincial CIQ Technology
Center, officials explained that the center's Toy Testing Lab
performed 10,000 quality tests in 2006. In addition, Liu Zhongyong,
Director of the center, also noted that the CIQ facility includes 8
other labs, employs more than 430 workers and has equipment worth
RMB 120 million. Separately, Guangdong CIQ Deputy Director General
Li Qingxiang explained that 80 per cent of Guangdong's toy exports
are produced by only 200 large factories, and CIQ inspects each
producer and its toys regularly to ensure quality. Comment: This

GUANGZHOU 00001249 002 OF 002


lab tested Aqua Dots for compliance with U.S. safety standards and
as a result, Guangdong CIQ granted the company a permit to export
the product. The subsequent fiasco demonstrates that even an army
of government inspectors cannot ensure compliance with all existing
laws and regulations absent industry commitment to an end-to-end
compliance assurance program. End Comment.

Silverlit Toys Literally Flying Off Shelves
--------------


5. (SBU) One of Hong Kong's most successful mainland-based toy
companies opened its doors to International Director O'Brien and
showed off the factory's safety and quality testing facilities.
General Manager Kevin Choi described Silverlit's design process as
centered on product safety, reinforced by extensive onsite testing
of each component. The company employs 4,000 workers at its
Dongguan factory, and the tour offered a glimpse at each major
production department, including tools, plastic molds and injection,
electronics, painting, assembly, testing and packaging. Silverlit's
toys are exported to the U.S. and many other developed-country
markets in addition to being one of the top three toy brands in
China's department stores.

South China's Toy Industry Welcomes CPSC
--------------


6. (SBU) Speaking at a conference sponsored by the Toy Industry
Association of America, International Director O'Brien described the
U.S. product safety system and previewed draft product safety
legislation currently being considered by the U.S. Congress. He
noted that draft bills in both houses of Congress include lower
testing thresholds for lead, increased third-party testing
requirements for children's products and increased emphasis on
traceability of production materials from initial procurement to the
final sales in U.S. stores. O'Brien contrasted differences between
China's reliance on government pre-market inspections with the U.S.
model, which stresses industry's responsibility to comply with
standards and to report problems when they are discovered.


7. (SBU) In a separate meeting with the Guangdong Toy Industry
Association (GDTA),International Director O'Brien urged producers
to demand the most accurate and up-to-date standards information and
production requirements from U.S. importers to help prevent toy
safety problems. Association Vice Chairman Li Zhuoming described
his organization's efforts to improve toy safety and increase
awareness among the 5000 toy producers in Guangdong Province, which
make 80 percent of all toys in China. Frequent training and
technical support seminars, an extensive website and an industry
magazine distributing 10,000 copies monthly are just some of the
ways GDTA works to educate toy factories and designers.


8. (SBU) This cable was cleared by CPSC Rich O'Brien.

GOLDBERG