Latest video from Bankrupting America

| May 21 2012
Christopher Cook

The Story of Business video series from Bankrupting America is powerful effective, and must-watch, and this latest installment is no exception.

You run a small business. The EPA tells you that one of the labels you are using for a product doesn’t meet their standards. The product themselves are environmentally safe, and the EPA has even agreed that this is the case. But they still seize your inventory, fine you, and the whole thing costs you more than it would to send your three kids to college.

Welcome to the administrative state.

 

This is the fifth episode of our Story of Business series and it centers on Rob Latham in South Carolina. His story is a case study in why we need a regulatory system that’s fair, accountable and allows our economy to grow again.

The video features Rob Latham, president, The List Company and Nick Owens, CEO, Magnolia Strategy Partners; former SBA National Ombudsman.

 

Fact sheet:

THE STORY OF BUSINESS: THE LIST COMPANY, INC.

In our fifth video in our Story of Business series, we hear from Rob Latham, the owner of the List Company Inc., where we learn that regulations should be effective and not excessive. In 2007, the Environmental Protection Agency (EPA) nearly caused his small business in South Carolina to cease operations. The culprit? The labels on the product. Although the product met the specific environmental standard, the EPA felt the labels on the products didn’t meet their standard for “non-removable.”

EXCESSIVE REGULATION

  • The EPA’s Regulation & Its Effects
  • National Ombudsman
  • The Future of the List Company, Inc.

The EPA’s Regulation & Its Effects
In 2007, the List Company was importing a private label brand of equipment (i.e., engines). While the products met EPA’s specific environmental standards, the EPA had an issue with the labels on the product. Specifically, whether the labels were “non- removable.”

According to an article in Forbes:

Latham ran afoul of both U.S. Customs and Border Protection and the Environmental Protection Agency when importing home-power generators from China. Customs agents claimed the EPA-compliant labels on the generator boxes could be easily removed — a no-no according to the law — despite plenty of additional proof that Latham had passed all relevant inspections. “We had certification that the EPA had worked with the [contract manufacturing] factory in China and photographs that the factory sent us of all the inspections,” he says.1

The EPA requires that any non-road engines ignited by a spark have a permanent and legible label that identifies the engine and specifies the engine lubricant. When the List Company attempted to import generators and chainsaws that featured labels that did not fit the EPA’s definition of permanent or specify the lubricant2, the agency seized the List Company’s inventory. As a result, the company nearly had to cease operations.

After meeting with the EPA face-to-face, Latham was told he would have to send the products back to China or pay to have them destroyed.3 According to Latham, the fees he was paying to store the equipment, in addition to the fines that had been imposed on him, were pushing his business to the brink. It was at that point he began to cold call government officials.

Ombudsman

Latham’s cold calling eventually led him to Nick Owens, the National Ombudsman at the Small Business Administration. In 1996, Congress created the Office of the National Ombudsman so small businesses to have a place to go in the federal government when they felt they had been treated unfairly in regulatory compliance or enforcement activities4.

According to Forbes:

Within several days [after calling], the ombudsman had arranged for Latham to pay a $10,000 fine, re-affix the labels, and sell the generators. It was an expensive lesson, but having to pay a stiff fine is a lot better than going out of business.

The Future of the List Company Inc.

After the incident, Latham diversified his business model and his business has grown. Today, instead of primarily relying on imports like he did in 2007, his company concentrates on selling goods made in America. This story has a happy ending, but there could be hundreds or thousands of other businesses like Latham’s that never found an advocate to help when the cost of overregulation became too much.

To view this document as a .pdf, click here.

  1. Forbes. When Regulators Come Knocking, Call the SBA. June 9, 2008. http://www.forbes.com/2008/06/06/small-business- administration-ent-law-cx_mf_0609sbaombudsman.html
  2. Environmental Protection Agency. Administrative Settlement Agreement AED/MSEB – 7217. http://www.epa.gov/compliance/resources/settlements/civil/caa/importation/sa-imports-listcompany-050807.pdf
  3. Forbes. When Regulators Come Knocking, Call the SBA. June 9, 2008. http://www.forbes.com/2008/06/06/small-business- administration-ent-law-cx_mf_0609sbaombudsman.html
  4. Small Business Regulatory Fairness Act. http://archive.sba.gov/advo/laws/sbrefa.html

 

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