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[Federal Register Volume 79, Number 192 (Friday, October 3, 2014)]
[Rules and Regulations]
[Pages 59961-59989]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23341]

[[Page 59961]]

Vol. 79

Friday,

No. 192

October 3, 2014

Part IV

Consumer Product Safety Commission

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16 CFR Part 1240

Final Rule: Safety Standard for Magnet Sets; Final Rule

Federal Register / Vol. 79 , No. 192 / Friday, October 3, 2014 / 
Rules and Regulations

[[Page 59962]]

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CONSUMER PRODUCT SAFETY COMMISSION

16 CFR Part 1240

[CPSC Docket No. CPSC-2012-0050]

Final Rule: Safety Standard for Magnet Sets

AGENCY: Consumer Product Safety Commission.

ACTION: Final rule.

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SUMMARY: The Consumer Product Safety Commission (CPSC, Commission, or 
we) is issuing a rule establishing requirements for magnet sets and 
individual magnets that are intended or marketed to be used with or as 
magnet sets. As defined in the rule, magnet sets are aggregations of 
separable magnetic objects that are marketed or commonly used as a 
manipulative or construction item for entertainment, such as puzzle 
working, sculpture building, mental stimulation, or stress relief. 
Under the rule, if a magnet set contains a magnet that fits within the 
CPSC's small parts cylinder, each magnet in the magnet set must have a 
flux index of 50 kG\2\ mm\2\ or less. An individual magnet that is 
marketed or intended for use as part of a magnet set also must meet 
these requirements. The flux index is determined by the method 
described in ASTM F963-11, Standard Consumer Safety Specification for 
Toy Safety.

DATES: This rule will become effective on April 1, 2015. The 
incorporation by reference of the publication listed in this rule is 
approved by the Director of the Federal Register as of April 1, 2015.

FOR FURTHER INFORMATION CONTACT: Thomas Lee, Compliance Officer, Office 
of Compliance and Field Operations, Consumer Product Safety Commission, 
4330 East West Highway, Bethesda, MD 20814; telephone: (301) 504-7737, 
or email: tlee@cpsc.gov.

SUPPLEMENTARY INFORMATION: 

A. Background

    The Commission is issuing a safety standard under the Consumer 
Product Safety Act (CPSA) establishing requirements for magnet sets 
that have been associated with serious injuries and one reported 
death.\1\ As discussed in greater detail in section B of this preamble, 
magnet sets are sets of small, powerful magnets marketed for general 
entertainment as construction toys, desk toys, sculpture sets, or 
stress relievers. The rule also covers individual magnets that are 
marketed or intended for use with or as magnet sets. The Commission 
concludes that this rule is necessary to address an unreasonable risk 
of injury and death associated with these magnet sets.
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    \1\ The Commission voted 4-0-1 to publish this notice in the 
Federal Register. Chairman Elliot F. Kaye, Commissioner Robert S. 
Adler, Commissioner Marietta S. Robinson and Commissioner Joseph P. 
Mohorovic voted to approve publication of the final rule. 
Commissioner Ann Marie Buerkle abstained from the matter.
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1. Initial Incident Reports to CPSC and CPSC's Response

    Significant U.S. sales of magnet sets marketed for general 
entertainment began in 2009. CPSC staff received the first consumer 
incident report involving magnet sets in February 2010. No injury 
resulted from this incident. Shortly after receiving this report, CPSC 
staff collected and evaluated samples of the magnet sets.
    In December 2010, we received our first consumer incident report 
involving the surgical removal of magnets that had been part of a 
magnet set. During 2011, CPSC staff collected magnet sets marketed to 
children under 13 years old, and staff evaluated the compliance of 
these products with ASTM F963-11, Standard Consumer Safety 
Specification for Toy Safety. Staff evaluated these products under ASTM 
F-963 because some of the products were labeled and marketed in a 
manner that appeared to promote use by children and this standard 
includes requirements for the strength and size of magnets that are 
part of a toy intended for children. For firms whose products did not 
have labeling or marketing information, CPSC staff encouraged those 
firms to develop marketing programs and labeling content to help ensure 
that these magnet sets were not marketed to children. In addition, CPSC 
staff issued Notices of Noncompliance to firms that marketed magnet 
sets to children younger than 14 years of age.
    In November 2011, in response to continuing reports of injuries 
associated with the products, the CPSC, in cooperation with two 
manufacturers, launched a public awareness campaign, which included a 
video public service announcement (PSA). The PSA advised children: Not 
to put magnets from magnet sets into their mouth; described the risk of 
injury presented by the ingestion of high-powered magnets; and provided 
tips to avoid magnet ingestion injuries, along with guidance for 
children who had swallowed magnets and parents who suspect that their 
child has swallowed magnets. Despite the CPSC's compliance and public 
awareness activities, reported incidents of magnet ingestion by 
children increased from 13 in 2010, to 19 in 2011, and 52 in 2012. 
Likely due to CPSC enforcement and regulatory activity beginning in 
mid-2012, and because the largest distributor ceased operations at the 
end of 2012, reported incidents declined to 13 incidents in 2013, 
including one fatality, and two incidents in 2014. We received an 
additional magnet ingestion incident report for which there was 
insufficient information to determine the date of the incident. As of 
June 24, 2014, 100 ingestion incidents involving, or possibly 
involving, ingestion of magnets from magnet sets have been reported to 
CPSC. (As discussed in section C of this preamble, staff's analysis of 
incidents reported through the National Electronic Injury Surveillance 
System (NEISS) estimates that 2,900 possible magnet set, emergency 
department-treated ingestions occurred in the United States from 
January 1, 2009 through December 31, 2013).

2. Corrective Actions

    In May 2012, Compliance staff contacted a total of 13 independent 
importers of magnet sets and asked these importers to provide reports 
required under Section 15 of the CPSA. Most of the firms agreed to stop 
selling the products pending the results of staff's evaluation of the 
products. Given the continued injuries to children, staff negotiated 
voluntary corrective action plans with 11 of the 13 magnet set 
importers. These firms agreed to cease importation, distribution, and 
sales of magnet sets. Two importers did not agree to stop selling the 
magnets and the Commission initiated an administrative action in July 
and August 2012 seeking a determination that the magnet sets present a 
substantial product hazard and an order that the firm cease importation 
and distribution of the products. The Commission initiated a third 
administrative action in December 2012 after one of the firms that had 
agreed to stop sale subsequently resumed selling magnet sets. Two of 
the three administrative actions have been resolved. In May 2014, the 
Commission settled the administrative action against Maxfield & Oberton 
Holdings, LLC, and Craig Zucker, individually, and as an officer of 
Maxfield & Oberton Holdings, LLC. The settlement established and funded 
a Recall Trust, which, in accordance with a corrective action plan 
(CAP), is recalling the firm's magnet sets. In July 2014, the 
Commission settled the administrative complaint against Star Networks 
USA, LLC (Star). Under that settlement, Star has agreed to implement a 
CAP providing for the recall of the firm's magnet sets. The third firm, 
Zen Magnets, LLC, remains the subject of a CPSC administrative

[[Page 59963]]

action and continues to market and sell magnet sets.

3. Notice of Proposed Rulemaking

    In the Federal Register of September 4, 2012 (77 FR 53781), the 
Commission published a notice of proposed rulemaking (NPR) to address 
the unreasonable risk of injury associated with magnet sets. The NPR 
proposed a standard that would require magnets from magnet sets 
containing at least one magnet that fits within the CPSC's small parts 
cylinder to have a flux index of 50 kG\2\ mm\2\ or less. The proposed 
rule sought comment on whether the rule should include magnets sold 
individually that could be aggregated into a magnet set. The final rule 
modifies the proposal to include individual magnets marketed or 
intended for the same uses as a magnet set, i.e., as a manipulative or 
construction item for entertainment, such as puzzle working, sculpture 
building, mental stimulation, or stress relief. We discuss this 
modification and other differences between the proposed and final rule 
in Section F of this preamble. The information discussed in this 
preamble comes from CPSC staff's briefing packages for the proposed and 
final magnet set rule, which are available on the CPSC's Web site at: 
http://www.cpsc.gov/PageFiles/128934/magnetstd.pdf (NPR briefing 
package) and http://www.cpsc.gov/Global/Newsroom/FOIA/CommissionBriefingPackages/2014/SafetyStandardforMagnetSets-FinalRule.pdf (final rule briefing package).

B. The Product

1. Description of the Product

    The magnet sets covered by this rule typically are comprised of 
numerous identical, spherical, or cube-shaped magnets, approximately 3 
millimeters to 6 millimeters in size, with the majority made from NdFeB 
(Neodymium-Iron-Boron or NIB). As discussed in section F of this 
preamble, the rule also covers individual magnets that are marketed or 
intended for use with or as magnet sets. These magnets exhibit strong 
magnetic properties. The magnetized neodymium-iron-boron cores are 
coated with a variety of metals and other materials to make them more 
attractive to consumers and to protect the brittle magnetic alloy 
materials from breaking, chipping, and corroding.
    The magnets that are part of magnet sets are often referred to as 
``magnet balls'' or ``rare earth magnets.'' Magnet sets are and have 
been marketed as: adult desk toys, the ``puzzles of the future,'' 
stress relievers, science kits, and educational tools for ``brain 
development.'' As shown in product instructions and in videos on 
related Web sites, magnet sets can be used and reused to make various 
two- and three-dimensional sculptures and figures, jewelry, and toys, 
such as spinning tops. Videos also show how these magnets can be used 
to mimic mouth and tongue piercings.
    Magnet sets come with varying numbers of magnets, from as few as 27 
magnets, to more than 1,000. Most of the magnets have been sold in sets 
of 125 balls or sets of 216 to 224 balls. The one firm that is 
currently marketing magnet sets that would not meet this rule sells one 
or more balls individually. Based on product information provided by 
marketers, the most common magnet size is approximately 5 millimeters 
in diameter, although balls as small as about 3 millimeters have been 
sold, as have sets of larger magnet balls (perhaps 15 millimeters to 25 
millimeters in diameter). In addition to magnetic ball sets, magnet 
sets comprised of small magnetic cubes have also been sold, as have 
small magnetic rods. Sets made up of rods, however, have comprised a 
relatively small share of the market.
    Most magnet sets contain magnets that are glossy and highly 
reflective with the spheres often described as similar in appearance to 
BBs or ball bearings. Magnet set magnets come in a variety of colors, 
including silver, blue, yellow, green and orange. The products are 
packaged in a variety of ways, including fabric pouches, wooden boxes, 
and metal tins.
    The rule defines ``magnet set'' as: ``any aggregation of separable 
magnetic objects that is a consumer product intended, marketed or 
commonly used as a manipulative or construction item for general 
entertainment, such as puzzle working, sculpture, mental stimulation, 
or stress relief.'' As discussed in section F of this preamble, the 
rule also covers individual magnets marketed or intended for use with 
magnet sets.

2. Use of the Product

    For the NPR, CPSC's Human Factors staff provided an assessment that 
discusses the appeal and use of magnet sets. Magnet sets have some 
appeal for virtually all age groups. These types of magnets tend to 
capture attention because they are shiny and reflect light. They are 
smooth, which gives the magnets tactile appeal, and these magnets make 
soft snapping sounds as they are manipulated. These properties or 
characteristics of magnets are likely to seem magical to younger 
children and may evoke a degree of awe and amusement among older 
children and teens. These features are the foundation of the magnet 
sets' appeal as a challenging puzzle, or as a manipulative, or as 
jewelry. These magnets may also be used like a stress ball and as a way 
to hold things in place.
    Children, from toddlers through teens, have been exposed to magnet 
sets in the home setting and elsewhere. As the NPR preamble notes, we 
have reports of ingestion incidents that involve children 5 years of 
age and younger. The reports reflect similar scenarios to other 
ingestion incidents among this age group because mouthing and ingesting 
non-food items is a normal part of preschool children's exploratory 
behavior. In a number of reported incidents, the magnets were not in 
their original containers, and caregivers were unaware that some of the 
magnets from the set were missing and in the child's possession.
    As noted in the NPR preamble, magnet sets also appeal to children 
of early-to-middle elementary school age. Younger children in this age 
group are interested in simple three-dimensional puzzles, and older 
elementary school children are interested in highly complex puzzles. 
Children in the latter age group also can engage in activities that 
require the type of meticulous work and attention that would be needed 
to create the complex patterns and structures found on paper and in 
video instructions for magnet sets. Additionally, magnets typically are 
included in science curricula for elementary school children to 
demonstrate the basic concepts of magnetism.
    For all of these reasons, and consistent with reviews on retail Web 
sites, magnet sets are sometimes purchased for children under the age 
of 14, despite warnings or labeling to the contrary. For example, 
approximately one-third of 53 adults reviewing one manufacturer's 
product on Amazon.com reported purchasing the magnets for children 8 
through 11 years of age.
    Thus, it is foreseeable that some portion of these products will be 
purchased for elementary school children and teens. Moreover, given the 
relatively low cost for some magnet sets, elementary school children 
and teens may purchase the magnet sets themselves. The incident reports 
reflect behaviors that are beyond the intended use of the product but 
that are foreseeable for the groups using them. For example, it is 
foreseeable that some children will place these magnets in their mouth, 
even if the manufacturer

[[Page 59964]]

warns against this behavior. The mouthing of objects, common among 
younger children, develops into less obvious and more socially 
acceptable oral habits, which may continue through childhood and 
adolescence and into adulthood (e.g., mouthing or chewing a fingertip, 
fingernail, knuckle, pen, pencil, or other object, especially while 
concentrating or worrying). Where details are provided, the incident 
reports describe scenarios that are consistent with the behaviors of 
young children and teens. Although exploratory play is generally 
associated with very young children, people of all ages use their 
senses to explore unfamiliar phenomena. 77 FR 53781, 53783 (Sep. 4, 
2012).

3. The Market

    Based on information reviewed by staff on product sales, including 
reports by firms provided to the Office of Compliance and Field 
Operations, the number of magnet sets that were sold to U.S. consumers 
from 2009 through mid-2012, may have totaled about 2.7 million sets, 
with a value of roughly $50 million. This estimate reflects retail 
sales directly to consumers (through company Web sites and other 
Internet retail sites) and sales to retailers who market the products. 
Staff's review of retail prices reported by importers, and observed on 
Internet sites in 2012, suggested prices of magnets sets typically 
ranging from about $20 to $45 per set, with an average price of about 
$25.
    To our knowledge, all of the firms that have marketed the products, 
including the firm that continues to sell individual magnets and magnet 
sets, import the products packaged and labeled for sale to U.S. 
consumers. Several Chinese manufacturers have the facilities and 
production capacity to meet the orders of U.S. importers. Additionally, 
there are no major barriers to market entry for firms wishing to source 
products from China for sale in the United States. Firms may have sales 
arrangements with Internet retailers who hold stock for them and 
process orders.
    We have identified about 25 U.S. firms and individuals who imported 
magnet sets for sale in the United States in 2012. The combined sales 
of the top seven firms probably have accounted for the great majority 
(perhaps more than 90%) of units sold. One firm, Maxfield & Oberton 
Holdings, LLC, believed to have held a dominant position in the market 
for magnetic desk sets since the firm entered the market in 2009, 
ceased operating in December 2012, and is no longer an importer of 
magnet sets. That now-defunct firm, along with a few larger firms 
(including a firm based in Canada with a branch office in the United 
States), marketed their products through accounts with retailers. They 
have also sold their products directly to consumers via the Internet, 
using their own Web sites, or other Internet shopping sites. In 
addition to products offered for sale by U.S. importers, consumers also 
have the ability to purchase magnetic sets directly from sources in 
Hong Kong or China that market products through a leading Internet 
shopping site.

C. Risk of Injury

    The risk of injury addressed by this rule is damage to intestinal 
tissue caused when a person ingests more than one magnet from a magnet 
set (or one magnet and a ferromagnetic object). The magnets are 
attracted to each other in the digestive system, damaging the 
intestinal tissue that becomes trapped between the magnets. In rare 
cases, there can be interaction between magnets in the airways and 
digestive tract (esophagus). These injuries can be difficult to 
diagnose and treat because the symptoms of magnet ingestion often 
appear similar to those of less serious conditions, such as the flu, 
and because many doctors are unfamiliar with the risks of magnet 
ingestion. In addition, the limitations of standard diagnostic tools to 
identify and evaluate the presence of magnets in the body may make 
magnet ingestion difficult to identify. Serious injury and even death 
are consequences of ingestion of strong magnets by children.

1. Incident Data

    NEISS data. CPSC staff reviewed data from the NEISS database of 
magnet-related ingestion cases treated in emergency departments from 
January 1, 2009 to December 31, 2013.\2\ CPSC staff analyzed 456 
magnet-related ingestion cases and determined that 121 of the cases 
involved or possibly involved ingestion of magnets from magnet sets. 
Staff further determined that an estimated 2,900 ingestions of magnets 
from magnet sets were treated in U.S. emergency departments during this 
5-year period--an estimated average of 580 emergency department-treated 
magnet ingestions per year. The largest portion of these incidents 
involved children 4 through 12 years of age. An estimated 1,900 of the 
2,900 victims are in the 4- through 12-year-old age group (65.3 
percent). For more information about the process of developing the 
estimates of incidents, see the memorandum from the Directorate for 
Epidemiology, located at Tab B of staff's briefing package: http://www.cpsc.gov/Global/Newsroom/FOIA/CommissionBriefingPackages/2014/SafetyStandardforMagnetSets-FinalRule.pdf.
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    \2\ The Commission collects information on hospital emergency 
room-treated injuries through the NEISS database. This data can be 
used to provide national estimates of product-related injuries 
treated in U.S. hospital emergency departments. Incidents reported 
to the Commission represent a minimum count of injuries. To account 
for incidents that are not reported to the Commission, the staff 
calculates an estimated number of such injuries.
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    Databases other than NEISS. The preamble to the proposed rule (77 
FR at 53784 through 53785) summarized the data for incidents reported 
through databases other than NEISS from January 1, 2009 through June 
30, 2012. These incidents involved the ingestion of magnets by children 
between the ages of 1 and 15. For that period, we received reports of 
50 incidents involving the ingestion of magnets by children in this age 
range. Of those 50 incidents, 38 involved the ingestion of high-
powered, ball-shaped magnets contained in products that meet the 
definition above of ``magnet set''; five of the 50 incidents possibly 
involved ingestion of this type of magnet. In 35 of the 43 incidents 
involving or possibly involving magnets from a magnet set, two or more 
magnets were ingested. Hospitalization was required in 29 of the 43 
incidents, with surgery necessary to remove the magnets in 20 of the 29 
hospitalizations. In the other nine hospitalizations, the victim 
underwent colonoscopic or endoscopic procedures to remove the magnets. 
In 37 of the 43 incidents, the magnets were ingested by children 
younger than 4 years old or between the ages of 4 and 12 years.
    Since publication of the NPR, the Commission has received reports 
of additional incidents involving the ingestion of magnets by children 
between the ages of 1 year and 15 years old, including one report of a 
fatality associated with the ingestion of small spherical magnets. We 
have now received reports of a total of 100 incidents involving or 
possibly involving the ingestion of high-powered, ball-shaped magnets 
contained in products that meet the definition of ``magnet set.'' The 
reports indicate that the incidents occurred between January 1, 2009 
and June 24, 2014. Sixty-one of the 100 reported incidents required 
hospitalization. In 87 of the 100 reported incidents, the magnets were 
ingested by children younger than 4 years old or between the ages of 4 
and 12 years.
    Among the 100 reported incidents is one fatality that involved 
magnets from a magnet set. In August 2013, a 19-

[[Page 59965]]

month-old female died from ischemic bowel caused by magnets from magnet 
sets in her small intestine.

2. Hazard Scenarios

    As discussed in the preamble to the proposed rule, the incident 
reports describe scenarios that are consistent with behaviors of 
children in the identified age ranges. As noted in the NPR, mouthing of 
objects, which is common among younger children, develops into less 
obvious and more socially acceptable oral habits, which may continue 
through childhood and adolescence and into adulthood (e.g., mouthing or 
chewing a fingertip, fingernail, knuckle, pen, pencil, or other object, 
especially while concentrating or worrying). 77 FR 53781, 53783 (Sep. 
4, 2012). For example, in the incidents reported in the 8 through 12-
year-old age group, one child described wanting to feel the force of 
the magnets through his tongue; one was trying to see if the magnets 
would stick to her braces; and another wanted to see if the magnets 
would stick together through her teeth. In another common scenario that 
accounted for half of the reported ingestion incidents among 8 to 15 
year olds, children used multiple magnets to simulate piercings of 
their tongue, lips, or cheeks. In incidents reported among children 
under the age of 4 years, children put the magnets in their mouths and 
either intentionally or accidentally swallowed them.
    The preamble to the proposed rule provides summaries of several 
incident reports that demonstrate a few of the reported hazard 
scenarios (77 FR at 53785 to 53786). These scenarios include two 
incidents in which young girls (10 and 13 years of age) swallowed 
multiple magnet balls while using the magnets to simulate tongue and 
lip piercings. The girls underwent surgical procedures to remove magnet 
balls from their intestines. In three other scenarios, magnet balls 
ingested by children under the age of 3 years had to be removed 
surgically from the children's stomach and intestines. In three of the 
five incidents described in the preamble to the proposed rule, the 
child's parent or caregiver did not realize the child had ingested 
magnets, which resulted in a delay in treatment and an increase in the 
severity of the injuries from the magnets, which attached to each other 
across intestinal tissue.

3. Details Concerning Injuries

    Multiple factors complicate the diagnosis of injury from magnet 
ingestion (77 FR 53786). These factors include a lack of awareness by 
medical professionals of the dangers posed by the ingestion of high-
powered magnets; the inability of standard diagnostic tools to 
demonstrate that the ingested item is a magnet; the similarities 
between symptoms resulting from magnet ingestion injuries and less 
serious conditions like the flu; and victims' inability or 
unwillingness to communicate to their caregivers or medical personnel 
that they have ingested magnets.
    The preamble to the proposed rule discussed the manner in which 
ingested high-powered magnets can cause harm by compressing intestinal 
tissue, the specific types of injuries that can result when tissue is 
trapped between two magnets, and the risks associated with those 
injuries (77 FR 53786). These injuries include perforations that can 
result in infection due to leakage of gut contents into the abdominal 
cavity and obstructions that can lead to intestinal tissue becoming 
necrotic or rupturing and causing contamination of the abdominal 
cavity. Surgical procedures often are required to remove magnets from 
the digestive system. Complications can arise after these procedures, 
including bleeding, infection, and ileus (temporary paralysis of gut 
motility). Long-term complications resulting from this type of surgical 
procedure can include: (1) Adhesions (where bands of intra-abdominal 
scar tissue form that can interfere with gut movement and can cause 
obstruction); (2) removal of long sections of injured bowel; and (3) 
impaired digestive function.

D. Statutory Authority

    This rulemaking is conducted pursuant to the Consumer Product 
Safety Act (CPSA). Magnet sets are ``consumer products'' that can be 
regulated by the Commission under the authority of the CPSA. 15 U.S.C. 
2052(a).
    Under section 7 of the CPSA, the Commission is authorized to 
promulgate a mandatory consumer product safety standard that sets forth 
performance requirements for a consumer product or that sets forth 
requirements that a product be marked or accompanied by clear and 
adequate warnings or instructions. 15 U.S.C. 2056. A performance, 
warning, or instruction standard must be reasonably necessary to 
prevent or reduce an unreasonable risk or injury associated with a 
consumer product.
    Section 9 of the CPSA specifies the procedure that the Commission 
must follow to issue a consumer product safety standard under section 
7. In accordance with section 9, the Commission commenced this 
rulemaking by issuing an NPR on September 4, 2012 (77 FR 53781), 
including the proposed rule and a preliminary regulatory analysis under 
section 9(c) of the CPSA. In addition, the Commission requested 
comments on the risk of injury identified, the regulatory alternatives 
under consideration, and other possible alternatives for addressing the 
risk. Id. 2058(c). As discussed in section E of this preamble, the 
Commission considered the comments received in response to the proposed 
rule.
    Section 9 also requires the Commission to provide interested 
persons ``an opportunity for the oral presentation of data, views, or 
arguments,'' in addition to an opportunity to provide written comments. 
Id. 2058(d)(2). Accordingly, the Commission held a public hearing on 
the proposed rule on October 22, 2013, at agency headquarters in 
Bethesda, MD. The hearing notice was published in the Federal Register 
(78 FR 58491). The submissions forwarded to the agency by presenters 
before the hearing, can be read online at: http://www.cpsc.gov/en/Newsroom/Public-Calendar/2014/Public-Hearing/Agenda/Magnet-/. Videos of 
the presentations can be viewed at: http://www.cpsc.gov/Newsroom/Multimedia/?vid=66455. The Commission also allowed submitters to 
forward additional written comments for 1 week after the hearing. We 
considered all of the written and oral comments received.
    With this notice, the Commission issues a final rule, along with a 
final regulatory analysis. See id. 2058(f)(1). According to section 
9(f)(1) of the CPSA, before promulgating a consumer product safety 
rule, the Commission must consider and make appropriate findings to be 
included in the rule on the following issues: (1) The degree and nature 
of the risk of injury that the rule is designed to eliminate or reduce; 
(2) the approximate number of consumer products subject to the rule; 
(3) the public's need for the products subject to the rule, and the 
probable effect the rule will have on utility, cost, or availability of 
such products; and (4) the means to achieve the objective of the rule 
while minimizing adverse effects on competition, manufacturing, and 
commercial practices. Id. 2058(f)(1).
    Pursuant to section 9(f)(3) of the CPSA, to issue a final rule, the 
Commission must find that the rule is ``reasonably necessary to 
eliminate or reduce an unreasonable risk of injury associated with such 
product'' and find that issuing the rule is in the public interest. Id. 
2058(f)(3)(A)&(B). In addition, if a voluntary standard

[[Page 59966]]

addressing the risk of injury has been adopted and implemented, the 
Commission must find that: (1) The voluntary standard is not likely to 
eliminate or adequately reduce the risk of injury, or that (2) 
substantial compliance with the voluntary standard is unlikely. Id. 
2058(f)(3(D). The Commission also must find that the expected benefits 
of the rule bear a reasonable relationship to the cost of the rule and 
that the rule imposes the least burdensome requirements that would 
adequately reduce the risk of injury. Id. 2058(f)(3)(E)&(F).

E. Response to Comments on the Proposed Rule

    This section summarizes the issues raised by comments on the 
proposed rule and provides that Commission's responses to those 
comments.

1. Oral Presentations

    On October 22, 2013, the Commission provided the public an 
opportunity to present views on the proposed rule in person before the 
Commission Presenters at the hearing included representatives from the 
Consumer Federation of American, Consumers Union, the American Academy 
of Pediatrics, and the National Association of Pediatric 
Gastroenterology, Hepatology, and Nutrition. The medical experts 
reported that the available research most likely reflects an undercount 
of the true incidence of injuries associated with magnet sets. The 
doctors also stated there was no evidence suggesting that the victims' 
caregivers were negligent or otherwise impaired at the time of the 
ingestion incidents. Rather, the doctors noted that ingestion-related 
injuries, such as those associated with magnet sets, can be experienced 
in households with the most caring and well-educated caregivers. The 
doctors also testified that public education campaigns take a long time 
to show effects and that those campaigns would not be as effective in 
reducing magnet ingestion injuries as the proposed rule, which they 
strongly urged the Commission to finalize.

2. Written Comments

    The preamble to the NPR invited comments concerning all aspects of 
the proposed rule. We received written comments from more than 5,000 
commenters in response to the NPR. Many of the comments contained more 
than one issue, and many of the comments addressed the same or similar 
issues. Thus, we organized our responses by issue. All of the comments 
can be viewed at: www.regulations.gov, by searching under the docket 
number for this rulemaking, CPSC-2012-0050.
Commission's Authority To Promulgate the Rule
    (Comment 1)--Many commenters opine that promulgating the rule 
exceeds the Commission's authority. More specifically, several 
commenters state that the Commission has no authority to issue a rule 
that would result in a prohibition of all magnet sets currently on the 
market simply because certain consumers use magnets in a manner that is 
inconsistent with the purpose intended for the product. Other 
commenters opine that the rule violates consumers' constitutional 
rights, including the right to freedom of expression through purchasing 
products they desire, and that a rule that prohibits the sale of 
covered magnet sets is drastically out of proportion to the risks 
presented by the product. Other commenters characterize the safety 
standard as the government usurping responsibility for the safety of 
children, which they say should properly reside with children's parents 
or caregivers.
    (Response 1)--The Commission has the authority to issue a rule 
establishing performance requirements that a product must meet so that 
the product does not present an unreasonable risk of injury to 
consumers. Section 7 of the CPSA authorizes the Commission to 
promulgate consumer product safety standards as performance 
requirements or that require products to be marked or accompanied by 
clear and adequate warnings and instructions. The requirements of a 
standard issued under this provision must be reasonably necessary to 
prevent or reduce an unreasonable risk of injury associated with the 
product. Determining whether a product presents an unreasonable risk of 
injury requires the Commission to consider the costs and benefits of 
regulatory action. The regulatory analysis discusses that assessment 
(see Section H of this preamble). The Commission must balance such 
factors as the severity of injury, the likelihood of injury, and the 
possible harm the regulation could impose on manufacturers and 
consumers. If evidence demonstrates that misuse of a product results in 
an unreasonable risk of injury, the Commission has the authority to 
promulgate a rule reasonably necessary to reduce or eliminate that 
risk. Certainly parents and caregivers must be responsible for their 
children's safety. However, as discussed elsewhere, parents and 
caregivers may not be aware of the hazards that magnets present. 
Finally, there is no constitutional right to purchase a product.
    (Comment 2)--Several commenters characterize the Commission's 
enforcement activities (filing administrative complaints, requesting 
certain retailers and importers to stop sales of magnet sets, and 
requesting recalls of magnet sets) as improper means to prohibit 
certain magnet sets. The commenters suggest that rulemaking, rather 
than these enforcement actions, is the appropriate approach.
    (Response 2)--Enforcement activities are intended to remove 
products from the market that present a substantial product hazard. 
This rulemaking proceeding is intended to establish requirements that 
magnet sets must meet from the effective date of the rule going 
forward. As such, this rulemaking proceeding seeks to impose 
requirements on all magnet sets subject to the rule that are sold after 
the rule becomes effective. The administrative proceeding and 
enforcement activities address only the products currently or 
previously distributed by specific importers and retailers.
    (Comment 3)--Several commenters opine that the Commission would be 
acting arbitrarily or capriciously in violation of section 706(2) of 
the Administrative Procedures Act (APA) by promulgating the rule; that 
the rule violates due process requirements; and that the Commission 
should hold a formal hearing under Sections 556 and 557 of the APA, 
even if such a hearing is not required statutorily.
    (Response 3)--The Commission is following the rulemaking procedures 
set forth in sections 7 and 9 of the CPSA and in section 553 of the 
APA. The commenters refer to section 556 and 557 of the APA. These 
provisions apply to formal rulemaking. However, the magnet proceeding 
is governed by section 553 of the APA, which codifies the procedure for 
informal rulemaking. By following the appropriate procedures under the 
CPSA and the APA, the Commission is providing the process that is due.
Lack of Product Defect
    (Comment 4)--Commenters point out that magnet sets pose no risk of 
injury when used properly, that they function as intended, and 
therefore, they are not defective. The commenters contend that the 
improper use of a safe product by a minority of consumers does not 
render the product defective and does not warrant promulgating a rule 
that would remove the product from the market.
    (Response 4)--To promulgate a consumer product safety standard, the

[[Page 59967]]

Commission must find that the rule is reasonably necessary to reduce an 
unreasonable risk of injury associated with the product. A product may 
present an unreasonable risk of injury, even if the product does not 
contain a fault, flaw, or irregularity that impacts the manner in which 
the product functions. When assessing risk, CPSC considers how 
consumers may actually use a product, not just the manner of use 
intended by the manufacturer. For example, the Commission's cigarette 
lighter standard requires disposable and novelty lighters to meet 
child-resistance requirements to protect against the misuse of lighters 
by children. 16 CFR part 1210. Similarly, the Commission's lawn mower 
standard includes requirements to guard against consumers intentionally 
removing a shielding safety device from the mower. 16 CFR part 1205. 
See Southland Mower v. Consumer Product Safety Commission, 619 F.2d 
499, 513 (5th Cir. 1980) (reviewing the Commission's lawn mower 
standard, the court stated: ``Congress intended for injuries resulting 
from foreseeable misuse of a product to be counted in assessing 
risk'').
Impact of the Rule on the Availability of Magnet Sets for Certain Uses
    (Comment 5)--Commenters state that high-powered magnets have many 
laudable uses, including for education and research in sciences, such 
as biology, chemistry, and physics. Other commenters note that magnet 
sets are used therapeutically for individuals with autism or attention-
deficit disorder. These commenters presume that the rule would 
eliminate from the marketplace high-powered magnets intended for such 
uses.
    (Response 5)--Magnets have long played a role in education. 
However, the specific products that are covered by the rule have been 
on the market only since 2008. The rule will cover only ``any 
aggregation of separable magnetic objects that is a consumer product 
intended, marketed or commonly used as a manipulative or construction 
item for entertainment, such as puzzle working, sculpture building, 
mental stimulation, or stress relief.'' Magnets that are not subject to 
the restrictions of the rule would continue to be available. For 
example, less powerful magnets are sometimes included in science kits 
to demonstrate magnetism. In addition, high-powered magnets that serve 
industrial and commercial needs would not be covered by the rule.
    Products that meet the definition of the ``magnet sets'' that do 
not comply with this rule would no longer be available for purchase, 
even if used by individuals to manage their attention deficit disorder 
or attention deficit hyperactivity disorder (ADD/ADHD) symptoms. 
However, magnets that are not restricted by the rule would still be 
available for purchase and perhaps could be used to manage ADD/ADHD 
symptoms. More generally, magnets are but one of many objects, 
including various types of stress balls, ``worry-beads,'' and chiming 
Baoding hand exercise balls that are available for the uses commenters 
cite. A variety of other products are marketed specifically as ``fidget 
toys'' to help children manage ADD/ADHD symptoms. Staff is aware of one 
study in which the authors reported successful use of simple stress 
balls to help sixth graders maintain focus in the classroom (Stalvey & 
Brasell, Summer 2006). In short, some substitutes for magnet sets are 
available for management of ADD/ADHD symptoms, and successful use of 
these substitutes predates the availability of magnet sets.
    Magnet sets present the same hazards to children with ADD/ADHD as 
they do to children who do not have this condition. One comment 
summarizes a study of 38 cases of magnet ingestion. Among those were 
two children, a 12-year-old and a 14-year-old with ADHD, who swallowed 
strong magnets, although of a type different than those typically found 
in magnet sets. The first child required a laparoscopy; the other child 
required extensive surgical intervention. One teacher who reported 
giving magnets to children with ADD/ADHD in his middle school classes 
commented that he ``needed to buy a new set every year,'' suggesting 
the ease with which the pieces are lost over time and the difficulty 
adults may have maintaining control of the sets.
    (Comment 6)--Commenters note that magnet sets are fun stress-
relievers and have value as an artistic medium. The commenters also 
note that sculpture made from the magnet sets that are the subject of 
the rule constitute an art form that would be lost if the rule is 
promulgated.
    (Response 6)--The Commission is aware that magnet sets are used to 
relieve stress; and likewise, the Commission is aware that some 
individuals have developed a form of art with the magnets that would be 
affected if the magnet sets used for this purpose are prohibited. 
Although magnet sets of the type that have been involved in incidents 
and are currently purchased by consumers for stress relief and 
sculpture-making would not comply with the rule, magnet sets made from 
weak magnets (i.e., with a flux index 50 kG\2\ mm\2\ or less) or from 
magnets that do not fit within the small parts cylinder would be 
allowed by the rule. Magnet sets that comply with the rule could serve 
some of the purposes of magnet sets that are currently available. For 
example, Liberty Balls, marketed by Assemble, LLC, and sold in sets of 
eight large spheres, are an example of a type of magnet set that would 
meet the performance requirements of the rule. Due to the large size of 
the Liberty Balls magnets, their uses are more limited than the magnet 
sets that are the subject of this rule. However, the existence of 
Liberty Balls demonstrates the possibility that companies can develop 
magnet sets that meet the standard and serve some of the uses of the 
magnet sets that fail the standard.
    Similarly, children's magnetic toys provide an example of how 
magnet sets might be developed that would meet the standard. Children's 
toy manufacturers have successfully adapted their magnetic construction 
toys since the adoption of the requirements for toys with magnets in 
the 2007 edition of ASTM F963, ``Standard Consumer Safety Specification 
for Toy Safety.'' Following this example, individual magnets with a 
flux index over 50 could be permanently connected by rods or other 
means, such that the resulting magnetic objects are not small parts, 
i.e., do not fit entirely within the small parts cylinder. Such a 
magnet set might not be a perfect substitute for current magnet sets 
but could fulfill some of the uses of current magnet sets, without 
posing the risk of injury or death.
    (Comment 7)--Noting the popularity of magnet sets for educational, 
scientific, and therapeutic uses, some commenters claim that continued 
demand for small, high-powered magnets would result in a ``black 
market'' for the products after the rule is promulgated. Some 
commenters state that there could be consumer-to-consumer sales of used 
products, and others maintain that consumers would be able to purchase 
magnet sets directly from noncomplying companies (including firms 
located in China). A few commenters note that these black market magnet 
sets are less likely to be sold with warning labels or other 
accompanying information related to hazards.
    (Response 7)--We acknowledge that there would continue to be a 
demand for magnet sets by some consumers, which could lead to increases 
in consumer-to-consumer sales and potentially black market sales of the 
products. Furthermore, such sales are probably less likely to be 
accompanied by labeling and warnings that alert buyers to the hazards 
associated with

[[Page 59968]]

the products. CPSC enforcement activities and continued dissemination 
of consumer information on the hazards of magnet sets might be 
necessary to reduce the future sales of noncomplying products.
    (Comment 8)--Some commenters opine that magnet sets that comply 
with the size and flux index requirements of the rule will lose their 
utility as manipulative desk toys. Other commenters suggest that weaker 
magnets would be less safe because weaker, individual magnets could be 
separated more easily from the magnet set during use, or separate more 
readily within the gastrointestinal system if ingested while attached 
to other magnets.
    (Response 8)--The intent of the rule is to reduce or eliminate the 
hazard presented by magnet sets currently on the market by requiring 
that magnet sets and individual magnets for use with magnet sets that 
are small enough to fit within the small parts cylinder must have a 
flux index of 50 kG\2\ mm\2\ or less. The rule would still allow strong 
magnet sets with magnets that do not fit entirely within the small 
parts cylinder. Magnetic products sold as toys that comply with the toy 
standard for children have included rods, balls, and various geometric 
shapes that do not fit within the small parts cylinder. Such products 
offer interesting entertainment, such as sculptures and construction 
activities, but they are much larger and safer than the subject magnet 
sets intended for adults. Another possibility would be to invent a 
magnet set composed of magnets with a flux index below 50 kG\2\ mm. 
Because there currently are no magnet sets on the market with magnets 
that have a flux index of less than 50 kG\2\ mm\2\, we do not know how 
such magnets would perform when used in the same way currently 
available magnet sets perform.
    Magnet sets that comply with the requirements of the rule would 
contain magnets that are too large to be swallowed easily or would have 
very weak attraction forces that would not pose the same ingestion 
hazards as magnet sets currently on the market. Review of incident data 
does not indicate that any injuries have been caused by magnets with 
flux index values below 50 kG\2\ mm\2\.
    (Comment 9)--Some commenters disparage the intended uses of magnet 
sets, calling them, for instance, ``mindless desk ornaments,'' ``a 
diversion,'' and ``frivolous items.'' These commenters cite the high 
severity of the injuries associated with magnet sets and express dismay 
that the CPSC ever allowed them to be sold.
    (Response 9)--The CPSC does not perform premarket approvals of 
consumer products; and typically, the CPSC will not engage in 
enforcement or regulatory activity regarding a product, until 
information is received or developed, which indicates that the product 
may present an unreasonable risk of injury to consumers. Reasonable 
parties may differ on the value to society of manipulative toys; 
however, many types of manipulative toys exist for children and adults.
Impacts of the Rule on Businesses and Jobs
    (Comment 10)--Many commenters note that the rule would harm firms 
that import magnet sets and will result in lost jobs for employees of 
these firms.
    (Response 10)--In the preliminary initial regulatory analysis, 
staff noted that the economic impact of the rule would be most severe 
for the seven firms that account for the great majority (perhaps more 
than 98%) of units sold as of June 2012. Five of these importers 
reportedly derived most or all of their revenues from the sale of the 
magnet sets that do not meet the performance requirements of the rule. 
The other two leading importers of magnet sets reportedly had fairly 
broad product offerings, which could lessen the severity of the 
economic impact of the rule. As a result of compliance activity pursued 
by the Commission's Office of Compliance and Field Operations, four of 
these seven importers agreed voluntarily to stop selling magnet sets 
that would not be compliant under this rule. One additional firm, 
Maxfield & Oberton Holdings, LLC, ceased operations. This firm 
(marketer of ``Buckyballs'') is believed to account for nearly 90 
percent of magnet set sales through June 2012. Only one of the seven 
small importers, Zen Magnets, LLC, continues to market magnet sets that 
are subject to the rule. This firm apparently derives all of its 
revenues from the sale of magnet sets. Unless the firm can successfully 
market magnet sets that comply with the rule or other products, the 
firm might go out of business when the rule takes effect.
    A large share of magnet sets have been sold directly to consumers 
by importers who used their own Internet Web sites or other Internet 
shopping sites, but the rule would also affect retailers of the 
products, whether the products are sold online or physically in stores. 
However, these retailers are not likely to derive significant 
proportions of total revenues from sales of affected magnet sets. 
Accordingly, the impacts on individual firms should be minimal.
    The commenters are correct that the rule, by prohibiting the sale 
of noncompliant magnet sets in the United States, may also result in 
some job losses. However, the impact on job losses is probably limited 
because magnetic balls generally are produced outside the United States 
and are merely packaged and/or distributed by U.S. importers.
Costs and Benefits of the Rule
    (Comment 11)--One commenter opines that the preliminary regulatory 
analysis overstates the societal costs of injuries from magnet sets 
because incidents involving other small magnets are improperly 
attributed to the magnet sets that are the subject of the proposed 
rule. In addition, this commenter opines that the injury costs used in 
the analysis were higher than indicated by the CPSC's Revised Injury 
Cost Model (ICM).
    (Response 11)--Both the initial and final regulatory analyses 
acknowledge that there is some uncertainty concerning the estimated 
annual average of medically attended injuries, noting that some of the 
cases described as ``possibly'' involving magnet injuries, actually may 
not have involved the magnets that are the subject of the rule. Hence, 
it is possible that the analyses overstate the societal costs 
associated with the magnets included in the rule. The final regulatory 
analysis also points out that there were an additional 230 NEISS cases 
(representing about 1,500 emergency department-treated injuries 
annually) in which the magnet type was classified as ``unknown or 
other.'' Thus, to the extent that this category of incidents involved 
magnets covered by the rule, the analyses would tend to understate the 
societal costs associated with the magnets subject to the rule. 
Therefore, given the uncertainty concerning the societal costs 
associated with the magnet sets, the analyses could be underestimating 
or overestimating the societal costs.
    Regarding the commenter's assertion that injury costs used in the 
preliminary regulatory analysis were higher than indicated by the ICM, 
we note that the commenter fails to take into account updates to the 
ICM based on new and improved cost databases. The ICM is fully 
integrated with NEISS and provides estimates of the societal costs of 
injuries reported through NEISS. The major aggregated components of the 
ICM include: Medical costs; work losses; and the intangible costs 
associated with lost quality of life or pain and suffering. The ICM is 
described further in section H.3.a of the preamble. The commenter also 
does not

[[Page 59969]]

take into consideration that the cost estimates in the preliminary 
regulatory analysis were age and sex specific and involved only those 
under the age of 15 who had ingested magnets from magnet sets. 
Furthermore, the commenter apparently also includes injury costs 
associated with the diagnosis category ``foreign body,'' i.e., foreign 
objects propelled into the victim's body, which is a different hazard 
pattern than ``ingested foreign objects.'' The costs of injuries 
resulting from foreign objects being propelled into a victim's body are 
only about half of the costs of injuries associated with ingested 
foreign objects. Finally, the commenter applies inappropriate inflators 
in adjusting the injury cost estimates to 2011 dollars. The Commission 
maintains that the estimated injury costs associated with ingestions of 
small, high-powered magnets in the preliminary regulatory analysis and 
final regulatory analysis involved proper application of the ICM.
Risk and Severity of Injury
    (Comment 12)--The Commission received a significant number of 
comments from health care professionals with personal experience in 
treating children who either narrowly avoided, or actually sustained, 
injuries following ingestion of small, high-powered magnets.
    Virtually all comments received from medical professionals express 
support for a rule eliminating magnet sets of the type that have been 
involved in incidents. The medical professionals point out that 
injuries caused by the ingestion of high-powered magnets are often 
difficult to diagnose because of the inability of standard diagnostic 
tools to demonstrate that the ingested item is a magnet; there are 
similarities between symptoms resulting from magnet ingestion injuries 
and less serious conditions like the flu; and the victims are unable or 
unwilling to communicate to their caregivers or medical personnel that 
they have ingested magnets. The medical professional commenters express 
concern with the rapidly growing number of cases and note that magnet 
ingestions often result in rapid and severe injuries with devastating 
and costly long-term consequences.
    (Response 12)--The Commission is aware of the severity of the 
injuries that often result from the ingestion of small, high-powered 
magnets from magnet sets and the difficulties frequently encountered by 
medical professionals in diagnosing and treating these injuries. The 
Commission is also aware that there are costs associated with the 
treatment of injuries resulting from the ingestion of these magnets 
that will be reduced substantially if magnet sets must comply with the 
rule. (See Section H of this preamble).
    (Comment 13)--Commenters argue that high-powered magnet sets should 
not be prohibited because the number of injuries is low--43 reported 
injuries possibly involving magnet sets during the period from January 
2009 to June 2012--considering that approximately 2.7 million magnet 
sets have been sold since 2009. These commenters also note that there 
have been no fatalities associated with the product.
    (Response 13)--The number of incidents reported to the Commission, 
now totaling 100 cases through June 24, 2014, cannot be used to 
estimate the number of injuries in the U.S. population because case 
reports are anecdotal and are not based on a probability based sampling 
design. The anecdotal incidents reported to CPSC constitute a minimum 
number of incidents in the U.S. However, the incidents reported to CPSC 
through hospital emergency departments and captured in the NEISS 
database can be used to estimate the number of incidents nationwide 
because NEISS data come from a probability based stratified random 
sample of U.S. hospitals with emergency departments. An analysis of 
incidents obtained through the NEISS estimates that 2,900 possible 
magnet set, emergency department-treated ingestions occurred in the 
United States from January 1, 2009 through December 31, 2013. This 
amounts to approximately one incident per 930 magnet sets. We do not 
agree that this is a low figure for injuries. In addition, we are aware 
of one fatality involving a 19 month-old female, who died from ischemic 
bowel caused by the ingestion of magnets from a magnet set.
    Furthermore, the benefits of the rule, notwithstanding the public's 
desire for current magnet sets that do not meet the rule, bear a 
reasonable relationship to the costs of the rule.
    (Comment 14)--Several commenters point out that the dangers posed 
by the ingestion of small, high-powered magnets are not obvious.
    (Response 14)--Staff agrees that the unique hazard resulting from 
the ingestion of small, strong magnets is unlikely to be obvious to the 
general public. People are generally aware of the choking hazard posed 
by small balls and other small parts, but they do not understand how 
the characteristics of magnets can cause injuries that are different 
from, and more severe than, swallowing another small object. Despite 
the publicity and response generated by the NPR, as well as the 
Commission's compliance and communications activities, some commenters 
misunderstand the hazard. Many commenters seem unaware that the 
majority of victims are older children and teens, and the commenters 
focus exclusively on the risk to young children. Similarly, commenters 
tend to mention magnets as a choking hazard, comparable to choking on 
foods, such as hot dogs and non-food small parts. In reality, choking 
is not the injury mechanism related to magnets. The ways that children 
and teens interact with magnets are not obvious and seem unclear to 
many commenters. For example, some commenters write derisively about 
``people letting their children eat magnets.'' However, most incidents 
are unwitnessed, and based on data from choking and poisoning incidents 
in which children intentionally ingest non-food items, it is likely 
that only the youngest children voluntarily swallow magnets. This is 
because choking on non-food items occurs predominantly among children 
younger than three years, and ingestion of poisonous substances 
declines as children approach five years of age.
    (Comment 15)--Other commenters point out that the Commission has 
not prohibited certain products, such as trampolines, balloons, and 
hazardous household chemicals, which commenters contend present a 
greater risk of injury to children than magnet sets. They assert that 
this weighs against a rule prohibiting certain magnet sets that do not 
meet the rule's performance requirements.
    (Response 15)--Magnet sets, and the hazard patterns associated with 
them, are quite different from other products. Because of these 
differences, comparisons of injury rates between magnet sets and other 
products are not meaningful. Key differences include: the obviousness 
of the hazard; the severity of the resulting injury; the difficulty in 
diagnosing the resulting injury; the numbers of products in use; the 
breadth of products covered in the product category; the age of the 
victims sustaining injuries; and the existence of requirements to 
address the hazard.
Responsibility of Caregivers for Injuries Resulting From Magnet 
Ingestion
    (Comment 16)--Several commenters claim that the incidents involving 
magnet sets are caused by negligent caregivers, who should supervise 
their children better. However, other commenters opine that caregiver 
supervision was not a relevant factor in determining the causation of 
the incidents.
    (Response 16)--The issue of caregiver supervision is related to 
caregiver

[[Page 59970]]

compliance with warnings and other hazard communications. Consumers may 
be aware of a hazard, but they may not make changes in their behavior 
that would avoid the hazard. Securing or preventing access to magnet 
sets would be especially difficult regarding older children and 
adolescents because they are strongly independent and resourceful. 
Expecting caregivers to supervise these children constantly is 
unrealistic. Magnet ingestions can happen quickly, and the Commission 
believes that it is also unrealistic to expect caregivers to maintain 
continuous, focused attention on younger children, especially children 
at the upper end of the at-risk age range. Indeed, research has found 
that people cannot be perfectly attentive, particularly over long 
periods of time, regardless of their desire to do so.\3\ Caregivers are 
likely to be distracted, at least occasionally, because they must 
perform other tasks, are responsible for supervising more than one 
child, are exposed to other salient but irrelevant stimuli, or are 
subject to other stressors.
---------------------------------------------------------------------------

    \3\ Wickens, C. D., & Hollands, J. G. (2000). Engineering 
psychology and human performance (3rd Ed.). Upper Saddle River, NJ: 
Prentice Hall.
---------------------------------------------------------------------------

    Moreover, caregivers are unlikely to maintain high levels of 
vigilance, unless they believe that such vigilance is necessary. If 
caregivers who own magnet sets believe they have properly secured the 
sets or think that their children are not aware of the sets, caregivers 
are unlikely to assume that constant supervision is needed. 
Furthermore, children may be exposed to these magnet sets in locations 
where caregivers cannot supervise the children or do not have direct 
control over the amount of supervision required, such as at school or 
in other households. Adolescents, in particular, are strongly 
independent, and it is unrealistic to expect caregivers to supervise 
adolescents constantly.
Alternatives to the Rule: Warnings and Education Programs
    (Comment 17)--Many commenters state that current warnings are 
sufficient to address the risk of injury presented by magnet sets, or 
they express the belief that more robust and prevalent warnings and 
educational programs are a better alternative than a rule prohibiting 
products that do not meet the rule's performance requirements. Some 
commenters state that the assumption that warnings do not work 
undermines past safety standards accepted by the CPSC and, in fact, 
calls into question the entire safety-monitoring process.
    (Response 17)--As discussed in the Human Factors staff memorandum 
that was part of the NPR briefing package, warnings are widely 
recognized as a less reliable approach to controlling hazards than 
design or guarding approaches. Unlike these latter approaches, which 
directly limit hazard exposure, warnings and other hazard 
communications must first educate consumers about the hazard and then 
persuade consumers to change their behavior to avoid the hazard. In 
addition, to be effective, warnings must rely on consumers to behave 
consistently, regardless of situational or contextual factors (e.g., 
fatigue, stress, social influences) that influence precautionary 
behavior.
    The Commission's position is not that warnings are uniformly 
ineffective. However, consumer compliance with warnings depends 
strongly on the specific circumstances surrounding the hazard. Several 
factors suggest that compliance with warning labels related to magnet 
sets is likely to be low because consumers may not notice and attend to 
the warnings. Exposure to ingestion warnings is likely to be very 
limited because: (1) The individual magnets are too small to contain 
on-product warnings; (2) the magnet sets do not inherently require 
consumers to return the magnets to a storage case or other package 
after every use, in packaging that might include a warning; and (3) the 
magnet sets can be manipulated without the necessity of referring to 
instructions that might include a warning. In addition, the nature of 
the magnet-ingestion hazard and the resulting injuries can be difficult 
to convey to consumers; and the resulting injuries have been 
misunderstood even by medical personnel and by commenters to the NPR, 
some of whom erroneously identify choking on the magnets as the hazard 
presented by this product. Without a clear understanding of this 
information and how magnet ingestions differ from other small-part 
ingestions, consumers are unlikely to comply with a warning.
    We acknowledge that developing understandable warnings aimed at 
parents and other caregivers may be possible; and we acknowledge that 
caregivers who receive such warnings may attempt to keep these products 
out of the hands of young children. However, as noted, consumer 
compliance with warnings depends strongly on the specific circumstances 
surrounding the hazard. Several factors suggest that compliance with 
warning labels related to magnet sets is likely to be low, even if 
consumers understand the hazard and its consequences. For example, the 
cost of compliance associated with magnet-ingestion warnings is high. 
``Cost of compliance'' is defined as any cost, such as time, effort, or 
inconvenience that is required to comply with a warning; compliance is 
negatively associated with cost. The warnings on the packaging and 
instructional material for some magnet sets instruct consumers to 
secure the magnets and keep them away from all children ages 14 years 
and younger. As evidenced in the comments, many consumers are likely to 
reject these warnings as lacking credibility. We recognize that 
caregivers who receive warnings about magnet sets may attempt to keep 
these products out of young children's hands. However, warnings are 
likely to be particularly ineffective among caregivers with older 
children and adolescents because caregivers would not expect these 
children to mouth toys and other objects as frequently as younger 
children. Furthermore, even if caregivers attempt to comply with 
warnings about the magnet-ingestion hazard, preventing a child's access 
to these magnets still might prove quite difficult. The time and effort 
to secure the product after every use, and the difficulties associated 
with trying to identify a suitably secure location to store the 
product, may deter consumers from heeding the warnings.
    Some adolescents have cognitive and motor skills similar to an 
adult's, making it extremely challenging to keep the product out of 
adolescents' hands, despite caregivers' efforts. Although adolescents 
also may be capable of understanding warnings about magnet ingestions, 
their behavior is influenced strongly by social and peer pressures, and 
adolescents are known to test limits and bend rules.\4\ Thus, warnings 
against using magnets to simulate tongue or facial piercings are 
unlikely to be very effective among this age group, unless such 
piercings are viewed as socially unacceptable among their peers.
---------------------------------------------------------------------------

    \4\ Brown, T., & Beran, M. (2008). Developmental stages of 
children. In R. Lueder & V. J. B. Rice (Eds.), Ergonomics for 
children: Designing products and places for toddlers to teens (pp. 
13-30). New York: Taylor & Francis. Kalsher, M. J., & Wogalter, M. 
S. (2008). Warnings: Hazard control methods for caregivers and 
children. In R. Lueder & V. J. B. Rice (Eds.), Ergonomics for 
children: Designing products and places for toddlers to teens (pp. 
509-539). New York: Taylor & Francis. Zackowitz, I.B., & 
Vredenburgh, A.G. (2005). Preschoolers, adolescents, and seniors: 
Age-related factors pertaining to forensic human factors analyses. 
In Y. I. Noy & W. Karwowski (Eds.), Handbook of human factors in 
litigation (Chapter 35). Boca Raton, FL: CRC Press.
---------------------------------------------------------------------------

    Educational programs may offer more opportunities to present the 
information in varied ways and in greater detail than is possible via a 
warning label.

[[Page 59971]]

However, mere knowledge or awareness of a hazard is not enough. Such 
programs suffer from limitations similar to those of warnings because, 
like all hazard communications, the effectiveness of educational 
programs depends upon the affected consumers, not only in terms of 
receiving and understanding the message, but also in being persuaded to 
heed the message. Magnet sets present an especially difficult challenge 
for public education programs because the hazard is obscure and 
difficult to convey in simple terms. Furthermore, teenagers are a 
significant part of the at-risk population, and they provide distinct 
challenges to the effectiveness of public education programs. Thus, 
even education programs that clearly communicate the hazard to 
consumers will not necessarily motivate appropriate behavioral change 
or reduce the frequency of incidents.
Alternatives to the Rule: Bitterants
    (Comment 18)--A small number of commenters discuss bitterants (also 
known as aversives) as an option. Some conclude that adding a bitter 
coating to magnets would be an effective alternative to the prohibition 
of magnet sets that do not meet the rule's performance requirements. A 
few commenters assert that the method is unproven and question that 
approach for various reasons.
    (Response 18)--In principle, adding an aversive agent to a product 
is a rational approach to reducing the risk of mouthing and ingestion. 
Laboratory studies have shown this approach to be effective among 
children and adults in deterring repeated ingestion of various 
substances. Yet, real-world investigations have not demonstrated the 
effectiveness of bitterants in preventing poisonings.\5\ CPSC staff's 
1992 final report of its study of the topic (http://www.cpsc.gov/library/foia/foia99/os/aversive.pdf. at p. 3) concluded that because 
bitterants do not deter initial ingestion, ``[a]versive agents are 
unlikely to protect children from being harmed after ingesting . . . 
substances that can injure or kill after one or two swallows.''
---------------------------------------------------------------------------

    \5\ Cf. White, N. C., Litovitz, T., Benson, B. E., Horowitz, B. 
Z., Marr-Lyon, L., & White, M. K. (2009). The impact of bittering 
agents on pediatric ingestions of antifreeze. Clinical Pediatrics, 
48(9), 913-921.
---------------------------------------------------------------------------

    Bitterants are least likely to be effective among young children 
who gain access to high-powered magnets. Despite rejecting bitter 
substances in testing environments, children in home settings, 
nevertheless, frequently ingest unpalatable substances, such as 
gasoline, cleanser, toilet bowl cleaner, and ammonia. Younger children, 
particularly those under 3 years of age, may swallow a number of 
magnets at a time before reacting to any aversive agent applied to the 
magnets.
    Aversives may be a more effective deterrent for older children and 
young teens, presuming these children are aware that the agent has been 
applied to the magnets and they are familiar with its taste. For older 
children who are not familiar with the taste of an aversive, the mere 
presence of the agent would not deter mouthing the magnets or trying to 
use them to mimic pierced lip or tongue jewelry. Older children and 
teens may also give magnets to others to try as a prank. Preteens and 
teens are prone to test what they have been told, particularly when 
what they have been told involves restrictions of any sort. Thus, 
warnings that the products taste bad may not prevent children in these 
age groups from tasting the magnets. (Some proportion of the 
population, possibly as high as 30 percent, may be insensitive to 
bitterants such as denatonium benzoate.) However, children are likely 
to reject magnets treated with bitterants, and the bitterant may indeed 
deter repeated attempts among most children.
    Ingestions could still occur even if a bittering agent is found 
effective for this purpose. Ingestions may be intentional among the 
youngest children, but ingestions are likely to be accidental among 
older groups. The power of the magnetic forces inherent in these 
products can cause magnets to move erratically as pieces repel or 
attract, and movement of magnets toward the back of the throat could 
trigger the reflex to swallow the magnets before the person can remove 
them.
Alternatives to the Rule: Child-Resistant Packaging
    (Comment 19)--Several commenters state that child-resistant (CR) 
packaging requirements are a better alternative than the proposed 
performance requirements. However, others believe that such 
requirements would be ineffective in reducing or eliminating the risk 
of injury.
    (Response 19)--CR packaging could be devised to make an enclosed 
magnet set inaccessible to most young children. However, compliance 
with CR packaging is likely to be low and inconsistent; and the 
effectiveness of this approach depends on the caregiver and other users 
securing the magnets in the CR packaging after every use. This is 
behavior that we consider unlikely to occur. Although CR closures have 
been shown to be effective in reducing poisonings with various products 
(e.g., Rodgers, 2002), non-use and incorrect use of CR closures on 
products containing chemicals or pharmaceuticals--products consumers 
are more likely to understand to be hazardous (as opposed to strong 
magnet sets)--can result in many poisonings annually among children 
younger than 5 years old. Furthermore, CR packaging, referred to as 
``special packaging'' under the Poison Prevention Packaging Act, is 
designed to be significantly difficult for children under 5 years of 
age to open. 15 U.S.C. 1471(4). Thus, CR packaging is an impractical 
approach for older children, whose cognitive and motor skills overlap 
those of adults.
Flux Index
    (Comment 20)--One commenter questions the relationship of the flux 
index (FI) to anatomical data, which the commenter considers to be most 
germane to the hazard. The commenter requests that the rule be modified 
to redefine the criteria, ``by relying on objective anatomical data 
tied to the potential risks associated with swallowing injuries and 
refine the testing protocol to isolate the field strength and/or attach 
forces that can reasonably be expected to develop at the distances 
reflected by anatomical data.'' Referencing an ultrasound study, the 
commenter asserts that the minimal gut wall thickness in children is 
0.5 mm, and the commenter suggests that when measuring the magnet 
maximum surface gauss reading, instead of measuring at a probe distance 
of 0.25 to 0.51 mm above the magnetic pole surface, as currently 
required in ASTM F963-11, it is more appropriate to base the measuring 
distance on the minimum gut wall thickness. The commenter suggests that 
using a probe separation distance of 1.0 mm (2 x 0.5 mm = 2 sections of 
gut wall) makes more sense because 1 millimeter ``is the magnetic field 
strength at that critical distance that may bear a rational 
relationship to injuries.''
    (Response 20)--Commission staff agrees that the strength of the 
magnet field and the separation of the magnets, or lack thereof, are 
important factors contributing to the risk of injury posed by any 
strong magnet. The gastrointestinal (GI) system is folded on itself 
within the abdominal cavity, and during transit through the GI system, 
there are many opportunities for magnets in different GI locations to 
pass nearby to each other and then interact when separated by only the 
thin gut walls. Commission staff believes that measuring the maximum 
surface gauss reading for the FI input at a set distance of 1.0 mm 
(equivalent to two

[[Page 59972]]

thicknesses/layers of gut wall) is oversimplistic and inappropriate, 
unless the maximum surface gauss reading measured at that 1.0 
millimeter distance is essentially zero.
    Although the suggested value of 1.0 millimeter is anatomically 
valid, it is not particularly meaningful in terms of the injury 
mechanism. This is because conventional magnets do not ``wait'' to get 
within 1 millimeter of each other before they begin to interact, and 
the gut wall cannot block magnetic forces. Rather, once a pair of 
magnets comes within a distance where the extent or reach of their 
magnetic fields allows them to interact, the result is near-
instantaneous attraction, with consequent near-instantaneous 
compression of any trapped tissues. Although the thin wall of the small 
intestine can be conveniently defined anatomically by its thickness, 
the tissue offers minimal resistance to the compression forces of the 
magnet. Thus, the tissue trapped between magnets may be compressed so 
that the distance between the magnets is much smaller than 1.0 
millimeter. The compression forces deprive the tissue of its blood 
supply, and they also squeeze out the tissue fluids, rapidly reducing 
the gut wall thickness to micron values, and essentially mummifying the 
tissue in situ. The measurement distance for the FI in the rule is 
closer to this negligible distance than the 1.0 millimeter distance 
that the commenter suggests; and therefore, the measurement distance 
for the FI in the rule is more appropriate for defining powerful 
magnets capable of causing GI injuries.
    (Comment 21)--Several commenters question whether a flux index 
value of 50 kG\2\ mm\2\ is low enough to prevent harm.
    (Response 21)--The development of the flux index requirement that 
appears in ASTM F963, Consumer Safety Specification for Toy Safety, 
which is now a mandatory CPSC standard, was outlined in the NPR. (77 FR 
53781-82, September 4, 2012). ASTM F963-11 defines a ``hazardous 
magnet'' and a ``hazardous magnet component'' as one that has a flux 
index greater than 50 kG\2\ mm\2\ and that is a small object. ASTM set 
the flux index value at 50 kG\2\ mm\2\, by measuring the weakest 
magnets in children's toys that were suspected of causing injuries, and 
then adding a safety factor. Review of incident data related to 
children's toys and magnet sets does not indicate that any injuries 
have been caused by individual magnets with flux index values below 70. 
CPSC staff will continue to monitor incidents and seek information 
about the lower-bound limits of the injury mechanism so that the 
established method continues to be appropriate.
    (Comment 22)--Several commenters question whether the rule is 
adequate for assessing the hazard posed by an aggregation of individual 
magnets, each of which has a flux index of 50 or less.
    (Response 22)--The staff memorandum included in the NPR briefing 
package acknowledged concerns with the existing ASTM F963 standard 
method regarding aggregated magnets, as follows: ``A toy with multiple 
weak small part magnets could present an issue that the existing ASTM 
F963 magnet requirements do not address, namely: stacking or stringing 
of magnets. . . . when these small part magnets are combined, they 
could create a(n aggregated) magnet with an effective flux index over 
50 kG\2\ mm\2\ depending upon their characteristics.'' (Notice of 
Proposed Rulemaking for Hazardous Magnet Sets, Staff Briefing Package, 
pp. 54-55). Individual magnets with a flux index of 50 kG\2\ mm\2\ or 
less (which currently do not exist in the market) would be smaller and 
more difficult to manipulate and have less attraction force than 
magnets in existing magnet sets. Individual magnets with a flux index 
of 50 kG\2\ mm\2\ or less could be mounted permanently or attached 
side-by-side to create a magnetic object with multiple magnetic poles 
on one surface. Doing so would create a multipole magnetic object that 
has a higher attraction force than the individual magnets on its 
surface. Because there currently are no magnet sets on the market with 
magnets that have a 50 kG\2\ mm\2\ flux index or less, we do not know 
how they would perform when used as a part of a magnet set.
    (Comment 23)--One commenter disagrees with the proposed flux index 
method, stating that the commenter's proprietary technology could be 
used to make ``safe'' magnet sets, even if the flux index measurement 
of individual magnets is greater than 50. The commenter uses a 
proprietary technology to magnetize the surface of a single magnet to 
create multiple poles (positive and negative regions) on the surface of 
a single magnet. The commenter refers to these proprietary magnets as 
``Polymagnets.[supreg]'' Essentially, this process creates a permanent 
aggregation of north and south poles in the surface of a single magnet. 
The commenter requests that the Commission narrow the scope of the rule 
to apply only to magnet sets comprised of magnets having no more than 
two magnetic pole regions on any exposed magnet surface, thereby, 
exempting multiple pole magnets.
    (Response 23)--The commenter's claim that a process exists that 
could be used to make ``safe'' magnet sets, even if the flux index 
measurement of individual magnets is greater than 50 kG\2\ mm\2\, is 
based on proprietary technology, which, to our knowledge, has not been 
applied to any magnet sets currently on the market. The commenter 
concedes that he ``has not fully analyzed the use of a densely coded 
pattern'' on small cubes or spheres and claims only that ``early 
indications suggest that dramatic improvements to the magnetic field * 
* * can be achieved'' using the proprietary technology. These 
statements indicate that the commenter has not applied this technology 
to small, high-powered magnet sets or even concluded that such an 
application is scientifically possible or economically feasible. CPSC 
is not aware of any magnet set products on the market that are 
comprised of magnets with multipole surfaces using the commenter's 
technology. Moreover, it is not likely that this process will be 
applied to small, high-powered magnet sets in the foreseeable future. 
Thus, the Commission does not believe that any exemption for these 
types of magnets is necessary or appropriate, particularly because 
currently, no Polymagnet[supreg] magnet sets exist that could be tested 
to determine whether such magnet sets present an unreasonable risk of 
injury.
    (Comment 24)--The same commenter also states that the flux index 
measurement method is imprecise because it provides a range of 
acceptable distances between the gauss meter and the magnetic surface 
being measured.
    (Response 24)--The flux index measurement method specifies the use 
of a gauss meter and an axial probe with a distance between the active 
area (diameter of 0.76 +/- 0.13 mm) and probe tip of 0.38 +/- 0.13 mm. 
This means the magnetic flux density is measured at a distance of 
between 0.38 millimeters and 0.51 millimeters above the magnet surface. 
The tolerance cited accounts for variations in the length of the axial 
probe tip, which is a function of the equipment used, and therefore, 
does not constitute a precise value.

F. Description of the Final Rule

    The Commission is issuing a rule establishing a standard for magnet 
sets and individual magnets that are marketed or intended for use with 
or as magnet sets. This section of the preamble describes the rule, 
including differences between the proposal and the final rule.

[[Page 59973]]

1. Scope, Purpose, and Effective Date--Sec.  1240.1

    This section of the final rule states that the requirements in 16 
CFR part 1240 are intended to reduce or eliminate an unreasonable risk 
of injury to consumers who ingest magnets that are part of magnet sets 
and individual magnets that are marketed or intended for use with or as 
a magnet set. The standard applies to all magnet sets, as defined in 
Sec.  1240.2, and relevant individual magnets manufactured or imported 
on or after the date 180 days after publication of the final rule.
    Individual magnets. The scope of the final rule has been revised 
from the proposal so that the rule explicitly covers magnets that are 
sold individually and are intended or marketed to be used in the same 
way as magnet sets or as a part of a magnet set. The Commission is 
aware of one firm that sells magnet sets and also sells single magnet 
spheres at a per-magnet price through the same Web site on which the 
firm promotes and sells sets of magnets. This firm sells individual 
magnet spheres for 10 cents each and allows customers to purchase up to 
1,152 magnets in a single order. The firm charges a shipping rate of 
$5.00 for any quantity of individual magnets purchased. Another firm, 
Star, which recently settled an administrative complaint with the 
Commission, sold individual magnet spheres for between 9 and 19 cents 
each (depending on the number ordered), and allowed customers to 
purchase up to 10,000 magnets in a single order.
    Because the proposed rule described the scope of the rule as 
covering aggregations of magnets, magnets that are sold individually, 
arguably would not be subject to the requirements of the safety 
standard under the scope provision, as proposed. Thus, under the 
proposed scope, firms might be able to circumvent the safety standard 
requirements simply by pricing and selling magnet spheres individually 
that are intended to be used as part of an aggregation of magnets as a 
magnet set. Under the final rule, all magnet spheres intended for use 
as magnet sets, as defined by the rule, are subject to the requirements 
of the safety standard, whether they are sold individually or in the 
aggregate.
    Changing the word ``children'' to ``consumers.'' The proposed scope 
section stated that the rule is intended to reduce or eliminate an 
unreasonable risk of injury to children. The final rule changes the 
word ``children'' to ``consumers'' to clarify that the rule is intended 
to address risks posed to teens as well as young children. As the 
incident data make clear, both teens and young children have been 
harmed when swallowing magnets from magnet sets. Because the term 
``children'' could be subject to interpretations that might exclude 
teens, the final rule uses the term ``consumers.''

2. Definitions--Sec.  1240.2

    This section of the final rule provides definitions for the terms 
``magnet set'' and ``individual magnet.'' The final rule modifies the 
proposed definition of ``magnet set'' to clarify certain aspects of the 
definition. The Commission does not intend for these modifications to 
change the scope of the rule from the proposal, but rather, to describe 
more clearly the products subject to the rule. The final rule also adds 
a definition for the term ``individual magnet.''
    Definition of ``magnet set.'' To respond to comments on the NPR and 
to provide greater precision, the Commission has modified the 
definition of ``magnet set'' in the proposed rule by:
     Removing the word ``permanent'';
     Replacing the phrase ``intended or marketed by the 
manufacturer primarily'' with the phrase ``intended, marketed or 
commonly used'';
     Replacing the word ``desk toy'' with ``item''; and
     Specifying factors that could indicate whether a magnet 
set meets the definition.
    The final rule definition removes the word ``permanent'' from the 
phrase ``separable, permanent magnetic objects'' because the word 
``permanent'' is superfluous. Any magnet, whether it maintains its 
magnetic strength permanently or not, can cause serious damage to 
intestinal tissue, if ingested.
    The final rule replaces the phrase, ``intended or marketed by the 
manufacturer primarily,'' with the phrase: ``intended, marketed or 
commonly used.'' The revision seeks to prevent a manufacturer or 
importer of magnet sets from avoiding the rule by simply stating in 
marketing and other materials that the magnets are intended for uses 
other than those specified in the definition. For example, this 
modification will preclude firms from claiming that their products are 
intended as science kits to avoid the rule, if, in fact, the products 
are commonly used as magnet sets (i.e., as a manipulative or 
construction item for entertainment, such as puzzle working, sculpture 
building, mental stimulation, or stress relief). Common uses may be 
indicated by information found in consumer reports to the CPSC, firm 
reports to the CPSC, injury reports, and consumer comments/reviews 
posted on product Web sites stating that a product, regardless of 
whether it is intended or marketed by the manufacturer as such, was, in 
fact, being used as a manipulative or construction item for 
entertainment, such as puzzle working, sculpture building, mental 
stimulation or stress relief. This change clarifies that the common 
usage of a firm's magnet products could be a consideration in 
determining whether the magnets are intended for use as manipulatives 
for entertainment, irrespective of the firm's stated intentions.
    The final rule definition replaces the term ``desk toy'' with 
``item'' to prevent excluding magnet sets from the scope of the rule if 
a particular product is not explicitly labeled or expressly marketed as 
a desk toy.
    The final rule specifies factors that are relevant in determining 
the intended uses of a magnet set. These are factors that Commission 
staff may consider in determining whether a product falls under the 
definition of ``magnet set.'' Explicitly stating these factors in the 
rule should provide clearer direction to firms and the public about 
what products will be covered by the rule. We may consider the manner 
in which the individual magnet or magnet set is promoted, marketed, and 
advertised. As part of this inquiry, staff may review the labeling and 
packaging of the product, information on the firm's Web site about 
intended uses of the product, information in other promotional 
materials, and where and how the product is displayed at retail stores 
or on the Internet. In addition, we may consider the uses for which the 
product is commonly recognized by consumers. Information provided by 
consumers and firms, injury reports, and consumers' online reviews or 
comments for the product are examples of sources that could be useful 
to determine what consumers consider to be the uses of the product.
    In developing this part of the ``magnet set'' definition, the 
Commission considered regulatory and statutory provisions that describe 
factors to be used in determining the intended use of a product. The 
Commission's small parts regulation specifies factors relevant to a 
determination of which toys and other articles are intended for use by 
children under 3 years of age. 15 U.S.C. 1501.2(b). The small parts 
regulation states: ``In determining which toys and other articles are 
intended for use by children under 3 years (36 months) of age, for 
purposes of this regulation, the following factors are relevant: the 
manufacturer's stated intent (such as on a label) if it is a reasonable 
one; the advertising,

[[Page 59974]]

promotion, and marketing of the article; and whether the article is 
commonly recognized as being intended for children under 3.'' Id. The 
definition of ``children's product'' in the CPSA lists factors to 
consider in determining whether a product is primarily intended for 
children 12 years of age or younger. 15 U.S.C. 2051(a)(2). The ``magnet 
set'' definition draws from both the regulatory definition in the small 
parts rule and the statutory definition of ``children's product'' to 
specify factors, which include the manufacturer's stated intent, 
information provided with or on the product, and the commonly 
recognized uses of the product.
    The definition does not include other magnetic products, such as 
toys intended for children and jewelry. Magnets that are part of a toy 
intended for children are already covered by the requirements in ASTM 
F963-11, which is a mandatory CPSC standard. The definition also does 
not include magnets intended for industrial or commercial applications, 
such as motor components, magnetic bearings, magnetic couplings, 
welding clamps, oil filters, disc drives, loudspeakers, headphones, 
microphones, instrumentation, switches, and relays.
    Definition of ``individual magnet.'' The final rule adds a 
definition of ``individual magnet.'' As discussed above, the Commission 
is aware that the firm that currently sells magnet sets that would be 
prohibited by the rule also sells individual magnets for use with 
magnet sets. The Commission seeks to prevent firms from circumventing 
the rule by selling individual magnets for the same uses as the magnet 
sets that have been involved in incidents, and at the same time 
claiming that the individual magnets are not subject to the rule 
because the magnets are not sold as sets. The individual magnets 
covered by the rule are only the magnets that are intended or marketed 
for use with or as a magnet set. The Commission does not intend to 
cover the many types of individual magnets that are sold for other 
uses, such as refrigerator magnets, collar stays, or various commercial 
and industrial uses.

3. Requirements--Sec.  1240.3

    This section sets forth the requirements for magnet sets. If a 
magnet set contains a magnet that fits within the small parts cylinder 
that CPSC uses for testing toys, all magnets from that set must have a 
flux index of 50 kG\2\ mm\2\ or less. Because the final rule covers 
individual magnets that are intended or marketed for use with or as a 
magnet set, the requirements section of the final rule states that 
individual magnets, as defined in the rule, must meet the requirements. 
The proposed rule set out the small parts and the flux index 
requirements in two subsections of Sec.  1240.3. The final rule 
consolidates these provisions into one section.
    The small parts cylinder referenced in the rule is specified in 16 
CFR part 1501--Method for Identifying Toys and Other Articles Intended 
for Use by Children Under 3 Years of Age Which Present Choking, 
Aspiration, or Ingestion Hazards Because of Small Parts. If an object 
fits completely within the small parts cylinder, this indicates that 
the object is small enough to be ingested. If a magnet that is part of 
a magnet set (or an individual magnet, as defined) is too large to fit 
within the small parts cylinder, the magnet meets the standard, 
regardless of the magnet's flux index.
    Small magnets (i.e., those that fit within the small parts 
cylinder) that are part of a magnet set (and individual magnets, as 
defined) must have a flux index of 50 kG\2\ mm\2\ or less. This limit 
is based on the level that is specified in ASTM F963-11. As discussed 
in the preamble to the NPR (77 FR 53781), the flux index of a magnet is 
an empirical value developed by ASTM to estimate the attraction force 
of a magnet. The flux index limit of 50 kG\2\ mm\2\ was developed by 
ASTM, with CPSC staff's participation, to address injuries resulting 
from strong magnets that separate from toys. Because the magnets from 
toys involved in incidents had flux index measurements greater than 70 
kG\2\ mm\2\,the ASTM working group chose a flux index of 50 kG\2\ mm\2\ 
as a cutoff because that value was significantly below the value for 
the magnets involved in incidents.

4. Test Procedure for Determining Flux Index--Sec.  1240.4

    This section of the rule describes how to determine the flux index 
of magnets that are part of a magnet set. If the magnet set contains 
more than one shape or size of magnet, at least one of each shape and 
size is selected for testing. The flux index of the selected magnets is 
measured in accordance with the procedure set forth in sections 8.24.1 
through 8.24.3 of ASTM F963-11, Standard Consumer Safety Specification 
for Toy Safety. The flux index of the magnet is calculated by 
multiplying the square of the magnet's surface flux density (in 
KGauss), by its maximum cross-sectional area (in mm\2\). The ASTM 
standard uses a gauss meter and probe that measures the surface flux 
density at 0.015 inches (0.38 mm) above the magnet's surface. The area 
is measured at the largest cross-section of the magnet that is 
perpendicular to the axis of its magnetic poles.
    In the NPR, we noted that the products at issue are typically 
aggregations of magnets, rather than individual magnets that often 
separate from toys. We also observed that when magnets are aggregated, 
their magnetic strength may increase. We requested comments on whether 
it may be desirable to develop a method for testing the strength of 
aggregated magnets in addition to the method for testing the strength 
of individual magnets. We received no comments proposing methodologies 
for testing the strength of an aggregation of magnets. Furthermore, 
because there are no magnet sets currently on the market with magnets 
that have a 50 kG\2\ mm\2\ flux index or less, we believe that the 
aggregation scenario is adequately addressed in the rule.

5. Findings--Sec.  1240.5

    In accordance with the requirements of the CPSA, we have made the 
findings stated in section 9 of the CPSA. The findings are discussed in 
section N of this preamble.

G. Alternatives

    The Commission has considered alternatives to reduce the risk of 
injury related to the ingestion of magnets contained in magnet sets. 
However, as discussed below, the Commission does not believe that any 
of these alternatives would adequately reduce the risk of injury.

1. Voluntary Recalls

    Although most of the companies that manufacture or import magnet 
sets have voluntarily agreed to stop selling (and in some cases recall) 
these products, and several retailers have agreed to recall and stop 
sale, the Commission has been unsuccessful in negotiating voluntary 
recalls and stop sales with one company that continues to market magnet 
sets. Pursuing voluntary recalls with current and possibly future 
manufacturers and importers of magnet sets would be reactive and would 
entail waiting for new incidents to occur rather than preventing them. 
Moreover, recalls would not prevent new entrants into the market in the 
future; a rule will set requirements that all products must meet from 
the effective date of the rule going forward.

2. Voluntary Standard

    Currently, there is no applicable voluntary standard in effect. 
Before publication of the NPR, a group of magnet set importers and 
distributors requested that ASTM International

[[Page 59975]]

develop a voluntary standard for the labeling and marketing of these 
products. Specifically, these companies requested the creation of a 
voluntary standard to: (1) Provide for appropriate warnings and labels 
on packages of these magnets sets; and (2) establish guidelines for 
restricting the sale of these magnet sets to children, by not selling 
to stores that sell children's products exclusively, and advising 
retailers not to sell the magnet sets in proximity to children's 
products. To date, ASTM has not formed a committee to consider the 
development of a voluntary standard for magnet sets.
    Moreover, whether such a voluntary standard would be effective in 
reducing or eliminating the risk of injury associated with magnet sets 
is questionable. Despite companies' marketing and labeling their 
products in an attempt to limit children's exposure to magnets, 
ingestion incidents involving children have continued to occur; and 
labeling does not change the attractiveness of the product to children 
or the intrinsic play value of the magnet sets. From March 2010, when 
the firm with the largest share of the market undertook certain 
labeling enhancements and marketing restrictions, through June 2012, 
the Commission learned of 47 additional incidents of ingestion of 
magnets from magnet sets, 26 of which involved ingestion of that 
company's magnets. As discussed more fully in the next section of this 
preamble, we do not believe that warnings would adequately reduce the 
injuries associated with magnet sets.
    We also note that Zen Magnets has announced its own ``voluntary 
standard'' for magnet sets requiring that:
     Customers must be 18 years of age or older to purchase 
magnets and that the sales location must have an age floor for persons 
18 and older or 21 and older, or age must be otherwise verified by 
Government ID; and
     All stores must verbally remind customers to keep magnets 
away from mouths.
    We do not consider a standard issued by one company to be a 
``voluntary standard'' as that term is used in the CPSA. Moreover, the 
measures that Zen magnets announced would have the same limitations 
discussed above.

3. Warnings

    A possible alternative to the rule would be to require warnings 
with or on magnet sets. As discussed in the NPR preamble and in 
response to comments set forth in section E of this preamble, it is 
unlikely that warnings on the packages of magnet sets would 
significantly reduce the ingestion-related injuries caused by high-
powered magnets. Safety and warnings literature consistently identifies 
warnings as a less effective hazard-control measure than eliminating 
the hazard through design or guarding the consumer from a hazard. 
Warnings do not prevent consumer exposure to the hazard but rely on 
persuading consumers to alter their behavior in some way to avoid the 
hazard. With this product, warnings are particularly unlikely to reduce 
or eliminate the ingestion of these magnets. Warnings are especially 
unlikely to be effective among young children because children may lack 
the cognitive ability to appraise a hazard or appreciate the 
consequences of their own actions and may not understand how to avoid 
hazards effectively.
    Although older children are better at appreciating the hazards 
described in a warning, peer acceptance and social influences can 
strongly influence adolescent behavior. Because adolescents have a 
tendency to test limits and bend rules, warnings about keeping the 
product away from children could have the unintended effect of making 
the product more appealing to some children. For example, warnings 
against specific uses, such as mimicking piercings, might actually 
encourage this behavior among older children. If children repeatedly 
use the product in this way, without ingesting the magnets, these 
children most likely will become convinced that the hazard is not 
especially likely, or is not relevant to them.
    In the NPR, we noted that staff generally found the content of 
warnings accompanying magnet sets to be lacking in several ways. For 
example, the warnings often did not describe the incident scenarios 
prevalent among older children and adolescents, whom caregivers may not 
believe are likely to put magnets into their mouth. Warnings lacked 
detailed information that would allow consumers to understand how 
swallowing magnets differs from swallowing other small parts, or how 
magnets sticking together could pose a hazard because the magnets will 
not simply pass through the child's system. Without a clear, explicit, 
and accurate description of the nature of the hazard and its 
consequences, consumers may find the warning implausible. Moreover, 
even with enhanced warnings, consumers are unlikely to comply with the 
action recommended in the warning.
    Even if warnings could effectively communicate the ingestion 
hazard, the consequences of ingesting magnets, and appropriate hazard-
avoidance measures, warnings still may not be effective if consumers do 
not concur with the content of the warning. Warnings are particularly 
likely to be ineffective among caregivers of older children. Unless 
caregivers are convinced that their older child is likely to mimic lip, 
nose, or similar piercings, or perform other activities that might lead 
these adolescents to place magnets into their mouth or nose, caregivers 
may doubt that the warnings are relevant to their child, despite the 
warnings' assertions to the contrary.
    As noted in the NPR preamble and in section E of this preamble, 
even if caregivers believe the warnings, several factors may limit 
compliance. Caregivers, particularly those with older children, might 
feel significant social pressure from children who are accustomed to 
using the magnet sets. Caregivers who own the product and attempt to 
heed the warnings might find it quite difficult to prevent their 
child's access to the magnets and still keep the product reasonably 
accessible for their own use.
    The cost of compliance with warnings for these products is high. 
Caregivers may be reluctant to secure the product from a child after 
every use. Identifying an appropriate location to store the magnet sets 
may dissuade consumers from doing so, particularly for a product often 
marketed to be for ``stress relief.'' Caregivers may underestimate 
their child's abilities and place the product in locations that seem 
secure but that are still accessible to the child. All of these factors 
may lead caregivers to reject the warning message.
    Based on these concerns about the likely ineffectiveness of 
warnings for magnet sets, we do not believe that warning labels would 
adequately reduce the risk of injury presented by these products.

4. Packaging Restrictions

    Theoretically, magnet sets could be sold with special storage 
containers to reduce the likelihood that children would access the 
magnets. Possible storage might include a container that would clearly 
indicate when a magnet is missing from the set. Such a requirement 
might prevent injuries resulting from a small number of magnets being 
separated from a set without the owner being aware. However, many 
consumers may not use such containers because using them could require 
time to gather the magnets and put them in the container, or consumers 
may be reluctant to dismantle a shape or structure that took them time 
and effort to construct. Thus, the effectiveness of such special 
containers to reduce ingestions is doubtful. Finally, it is not clear 
that the

[[Page 59976]]

Commission would have the regulatory authority to issue a rule 
prescribing requirements for packaging, other than child-resistance 
requirements (discussed below).
    Another alternative might be to require that magnet sets be sold in 
child-resistant packaging. Child-resistant packaging, also called 
``special packaging,'' is packaging that is significantly difficult for 
children under five years of age to open or obtain a harmful amount of 
the substance. 15 U.S.C. 1471(4). The ability of such an approach to 
reduce ingestion injuries of magnets from magnet sets would be limited. 
Child-resistant packaging would not prevent teens and adolescents (and 
even some younger children) from opening the packaging. Additionally, 
the packaging would have to be secured after each use. According to the 
Division of Human Factors, it is unlikely that adults would accept 
child-resistant packaging for a product like the magnet sets because of 
the level of inconvenience involved in returning the magnets to the 
package.\6\ Additionally, for the reasons described above, consumers 
may leave magnets out of their container.
---------------------------------------------------------------------------

    \6\ Sedney, C.A., & Smith, T.P. (2012). Human factors assessment 
of strong magnet sets. CPSC memorandum to Jonathan D. Midgett, 
Project Manager, U.S. Consumer Product Safety Commission, Bethesda, 
MD.
---------------------------------------------------------------------------

5. Restrictions on Sales of Magnet Sets

    Another possible alternative to address the hazard of children 
ingesting magnets from magnet sets might be to limit the places where 
magnet sets are sold, keeping magnet sets away from toy stores, 
children's sections of stores, and other such locations. Sales 
limitations or requirements for strong warnings might also be required 
on Web sites that offer magnet sets for sale on the Internet. However, 
these restrictions are unlikely to reduce ingestions significantly 
because children can access magnet sets from many sources other than 
stores. Moreover, sales restrictions are unlikely to deter teens. 
Finally, the Commission does not have the regulatory authority to 
impose such sales restrictions by rule.

6. Adoption of a Standard With Different Performance Requirements

    Another alternative to the rule would be to establish a different 
set of requirements. For example, such requirements might allow a 
different flux index for magnet sets, different specifications 
regarding shapes and sizes of magnets within the scope of the standard, 
or some other criteria that have yet to be developed (but would not be 
as stringent as the rule requires). If different requirements would be 
effective, they could reduce the risk of injury associated with magnet 
sets, and at the same time, potentially allow the product to maintain 
the qualities that would facilitate use by adults. It is unclear, 
however, whether alternative requirements for the sizes and flux index 
of magnets would eliminate or substantially affect the physical 
qualities of the products that make them enjoyable for adults.
    A competing concern is whether an alternative set of requirements 
could reasonably be expected to reduce or eliminate the risk of injury 
associated with magnet sets. Because the hazard presented by these 
magnet sets is ingestion by children, we are concerned that any 
requirements that allow magnets with a greater attractive force and 
permit sizes or shapes that could fit through the small parts cylinder 
would not address the risk of injury adequately.
    As noted in Section E, some commenters suggest that, as an 
alternative to the rule, the Commission could require manufacturers to 
add an aversive (bittering) agent to the product. However, as discussed 
in the response to Comment 18, aversives are unlikely to be effective 
in deterring initial ingestion by young children because children 
frequently ingest unpalatable substances.

7. No Action

    Another option for the Commission is to take no regulatory action 
to address the risk of injury posed by magnet sets. As the NPR preamble 
mentioned, it is possible that, over time, increased awareness of the 
hazard could result in some reduction in ingestions. The magnitude of 
any such reduction in incidents is uncertain. The Commission could rely 
entirely on enforcement activities, rather than regulatory action, to 
address the risk of injury posed by magnet sets. However, as discussed 
in the ``voluntary recall'' section above, several manufacturers/
importers of magnet sets have refused to participate in any recall or 
stop sale of their products; and in any event, recalls and/or stop 
sales conducted by these companies would not prevent new entrants into 
the market in the future.

H. Final Regulatory Analysis

    The Commission is issuing this rule under sections 7 and 9 of the 
CPSA. The CPSA requires that the Commission prepare a final regulatory 
analysis and publish the final regulatory analysis with the text of the 
final rule. 15 U.S.C. 2058(f). This section of the preamble presents 
the final regulatory analysis of the rule.

1. Need for and Description of the Rule

    The CPSC has received information regarding injuries with, and 
hazards posed by, sets of small, powerful magnets. Some of these 
injuries have required surgical removal of individual magnets 
originally contained in the sets and ultimately ingested by children. 
Reported magnet ingestions have ranged from young children, who put the 
magnets in their mouths, to adolescents and teens, who experimented 
with the sensation of magnets (e.g., on their braces), or paired 
magnets to mimic tongue or lip piercings. These behaviors have led to 
the accidental swallowing of the powerful magnets, with unexpected, and 
sometimes severe, medical consequences, including significant damage to 
the gastrointestinal tract (Inkster, 2012) and death. From January 1, 
2009 through December 31, 2013, there were an estimated 2,900 possible 
magnet set, emergency department-treated ingestions. There was also one 
fatal incident in 2013 (Garland, 2014).
    The final rule establishes a standard limiting the size and 
strength of magnets in a magnet set. The rule applies to any 
aggregation of separable, magnetic objects that is a consumer product 
intended, marketed, or commonly used as a manipulative or construction 
item for entertainment, such as puzzle working, sculpture building, 
mental stimulation, or stress relief.\7\ Under the rule, magnet sets 
would not comply with the standard if: (1) The individual magnets are 
small enough to fit into the small parts cylinder (e.g., a ball-shaped 
magnet with a diameter of less than 31.7 mm, or 1.25 inches); and (2) 
the individual magnets have a flux index of more than 50 kG\2\ mm\2\, 
as measured by the procedures for determining the flux index described 
in the toy standard. Because these requirements already apply to 
magnets used in products marketed as toys for children, the rule 
essentially extends the toy requirements to the subject magnet sets.
---------------------------------------------------------------------------

    \7\ Although the definition of ``magnet set'' changed slightly 
from the NPR, and the rule extends to the individual magnets sold 
for use as or with a magnet set, these changes did not affect the 
scope of products considered in conducting the Final Regulatory 
Analysis.
---------------------------------------------------------------------------

    The current designs of magnet sets containing small powerful 
magnets of the type that are the subject of this regulatory proceeding 
(which are typically comprised of individual ball-shaped magnets with 
diameters of 5mm and, based on testing by CPSC staff, having flux index 
values in the range of 400-500) would not meet the

[[Page 59977]]

requirements of the standard. To meet the requirements, the individual 
magnets would have to be much weaker (i.e., have a flux index of 50 
kG\2\ mm\2\ or less, rather than an index of 400 to 500); or the 
magnets would have to be much larger (i.e., be at least 31.7 mm (1.25 
inches) in diameter rather than 5 mm). Either requirement eliminates a 
distinctive product attribute and would limit greatly the magnet sets 
as candidates for manipulative novelty products. Magnets with a flux 
index of 50 kG\2\ mm\2\ or less may be too weak for building sculptures 
or too weak to be used in other construction activities; magnets with 
diameters of 1.25 inches or more would be too large to have any 
practical value in such activities.
    Staff has identified magnet sets in the market, Liberty Balls, 
marketed by Assemble, LLC, that would meet the definition of magnet 
sets, would meet the performance standard, and might serve some of the 
uses of magnet sets that would not meet the standard. The Liberty Balls 
magnet sets consist of a set of eight large ball-shaped magnets. The 
Liberty Balls magnet sets consist of a set of eight large ball-shaped 
magnets selling for $30 to $40 per set. The Ball of Rights generally 
consists of a set of two large ball-shaped magnets selling for $10 to 
$13 per set. The balls in these sets are 33 mm (1.3 inches) in 
diameter, and consist of ferrite magnets, rather than rare earth 
materials (See http://unitedweball.org/, accessed February 25, 2014).
    Even though these products satisfy the performance requirements of 
the rule, for purposes of the economic analysis, we do not consider any 
impacts due to the entry of Liberty Balls and Ball of Rights in the 
market because we do not consider these sets to be good substitutes for 
the subject magnet sets. To be considered a good or close substitute, 
we would need to observe that consumers, who would have purchased the 
subject magnet sets (if they had remained available at historical 
prices and quantities) are now, to a large degree, purchasing the 
Liberty Balls sets instead, and the available data suggest 
otherwise.\8\ Moreover, Liberty Balls magnet sets are not marketed as a 
substitute for the smaller and powerful neodymium magnets sets. Rather, 
Liberty Balls apparently have been sold specifically to generate funds 
to defend the producer against the recently settled lawsuit with the 
CPSC (Helm, 2014).
---------------------------------------------------------------------------

    \8\ Sales of Liberty Balls have not come close to matching the 
levels observed for the subject magnet sets (estimated at 800,000 
sets and $20 million annually, and discussed below). Based upon 
available information, sales revenue for Liberty Balls appears to 
have amounted to about $200,000 during October and November 2013, or 
about $100,000 per month. (See http://unitedweball.org/, accessed 
February 25, 2014). By March 2014, reported sales revenue from 
Liberty Balls had increased to about $250,000 (Helm, 2014), 
suggesting that for December 2013 through February 2014, sales were 
only about $15,000 (($250,000-$200,000)/3) per month. By comparison, 
monthly sales for the subject magnet sets were about $1.7 million on 
average. (CPSC staff conducted no independent evaluation of the 
accuracy of these figures for Liberty Balls.)
---------------------------------------------------------------------------

    Rather than develop a complying alternative that serves the same 
niche as the subject magnet sets, producers of magnet sets have opted 
to exit the market altogether. Although Liberty Balls comply with the 
standard, we base the benefit cost analysis presented below on the 
disappearance of the noncompliant magnet sets containing small powerful 
magnets from the market.

2. Description of the Product and Market

    Magnet sets that would be affected by the scope of the rule are 
comprised of small, powerful magnetic balls, cubes, and/or cylinders 
that can be arranged in many different geometric shapes. These magnet 
sets were introduced in 2008, but 2009 marked the first year with 
significant sales to U.S. consumers.\9\ Most magnet sets have been sold 
in sets of either 125 balls or sets of 216 to 224 balls; although some 
firms have sold just a few balls as extras or replacements, others have 
sold large sets of more than 1,000 magnetic balls.
---------------------------------------------------------------------------

    \9\ However, small neodymium-iron-boron magnets previously have 
been, and continue to be, marketed by firms such as magnet suppliers 
and distributors of educational products.
---------------------------------------------------------------------------

    Product information provided by marketers indicates that the most 
common magnet size is approximately 5 millimeters in diameter; although 
balls as small as about 3 millimeters have been sold, in addition to 
sets of larger magnet balls (perhaps 15 millimeters to 25 millimeters 
in diameter).\10\ In addition to magnetic ball sets, sets of small 
magnetic cubes have also been sold, although magnetic cubes have 
comprised a relatively small share of the market. In 2012, the leading 
marketer of magnet sets also added to its desk toy product line small 
magnetic rods intended to be used with magnetic balls to make geometric 
shapes.
---------------------------------------------------------------------------

    \10\ One firm's larger magnet balls are reportedly made with 
cores of strontium ferrite 
(SrO[middot]6Fe2O3), rather than neodymium-
iron-boron.
---------------------------------------------------------------------------

    Based on information reviewed on product sales, including reports 
by firms provided to the Office of Compliance and Field Operations, the 
number of such magnet sets that were sold to U.S. consumers from 2009 
through mid-2012 may have totaled about 2.7 million sets, with a value 
of roughly $50 million. This value reflects a combination of retail 
sales directly to consumers (through company Web sites and other 
Internet retail sites) and sales to retailers who marketed the 
products. A review of retail prices reported by importers, and observed 
on Internet sites during that period, suggested prices typically 
ranging from about $20 to $45 per set, with an average price of about 
$25. Larger sets of more than 1,000 individual magnets reportedly were 
sold at prices as high as $300, depending on the number of magnets and 
the type of packaging. Such larger sets only accounted for about 0.5 
percent of all sets (and a little over 2 percent of all magnets) sold 
to consumers during the period from 2009 to mid-2012.
    The small, powerful magnets to be affected by the rule are made of 
alloys of neodymium, iron, boron, or other rare earth metals. This 
composition has been confirmed in analyses of product samples by CPSC 
staff from the Directorate for Laboratory Sciences. The magnetized 
neodymium-iron-boron cores are coated with a variety of metals and 
other materials to make them more attractive to consumers and to 
protect the brittle magnetic alloy materials from breaking, chipping, 
and corroding. Nearly 100 percent of neodymium and other rare earth 
metals are now mined in China, which also reportedly holds close to a 
worldwide monopoly on the production of neodymium-iron-boron magnets 
(Dent, 2012). Based on available information, all of the small magnets 
used in magnet sets, as well as most of the finished and packaged 
products that would be subject to CPSC regulation, are produced by 
manufacturers located in China.\11\
---------------------------------------------------------------------------

    \11\ One importer reported to a CPSC Compliance investigator 
that some of the magnet sets it sold and shipped to U.S. consumers 
were made from bulk magnets received from its supplier in China that 
the importer packaged for sale.
---------------------------------------------------------------------------

a. Importers of Magnet Sets
    As noted above, none of the magnets found in sets that are within 
the scope of the rule are produced domestically. Nearly all of the 
firms that have marketed magnet sets are believed to have imported them 
packaged and labeled for sale to U.S. consumers. Several Chinese 
manufacturers have the facilities and production capacity to meet the 
orders of U.S. importers.
    The Directorate for Economic Analysis identified about 25 U.S. 
firms and individuals who imported magnet sets for sale in the United 
States in 2012. The combined sales of the top seven firms have probably 
accounted for

[[Page 59978]]

the great majority (perhaps more than 98%) of units sold since the 
product was introduced in 2008. One firm, Maxfield & Oberton Holdings, 
LLC, is believed to have held a dominant position in the market for 
magnet sets from its entry in the market in 2009, until it ceased 
operations late in 2012. That firm, and a few of the larger firms 
(including a firm based in Canada with a branch office in the United 
States), have marketed the products through accounts with retailers, in 
addition to selling directly to consumers on the Internet, using their 
own Web sites or other Internet shopping sites.
    Some of the firms with smaller sales volumes reported to Compliance 
staff that they mainly marketed products (sourced from manufacturers in 
China) through Internet sales arrangements with Amazon.com, which held 
stock for them and processed orders. A review of the product listings 
of the Internet retailer found that several other firms had similar 
business models. Other U.S. firms and individuals have sold magnet sets 
they imported from China through Internet ``stores'' they maintain on 
eBay. In addition to products offered for sale by U.S. importers, 
consumers have also been able to purchase magnet sets directly from 
sources in Hong Kong or China, many of which marketed products through 
``stores'' on eBay.\12\
---------------------------------------------------------------------------

    \12\ More than 40 such stores shipping magnet sets directly from 
Hong Kong or China were identified in a brief review of product 
offerings on the Internet site in 2012.
---------------------------------------------------------------------------

b. Market Disruption Related to Other CPSC Actions on Magnet Sets
    CPSC Compliance staff contacted 13 magnet set importers for 
corrective actions before the Commission published the NPR.\13\ At 
staff's request in July 2012, 10 firms agreed to stop the manufacture, 
importation, distribution, and sale of high-powered, manipulative 
magnetic products of the types that would be subject to the rule. Three 
other firms did not stop selling the products (although one of these 
firms initially had agreed to cease sales voluntarily). The Commission 
voted to initiate administrative actions seeking a determination that 
certain magnet sets are a substantial product hazard, along with an 
order requiring the firms that import these products cease sales and 
offer refunds to customers.\14\ The three firms that have been subject 
to the administrative complaints by the CPSC, and the 10 firms that 
have agreed to stop sales voluntarily, accounted for virtually all 
sales of the products during the period from 2009 to mid-2012. 
Additionally, the largest importer of magnet sets subject to the rule 
(one of the three firms sued in administrative complaints), Maxfield & 
Oberton Holdings, LLC, announced that it ceased operations, effective 
December 27, 2012. Another of the three firms sued in administrative 
complaints, Star Networks USA, LLC, agreed to stop further sales of 
magnet sets in July 2014, leaving just one major magnet set importer, 
Zen Magnets, LLC. As a result of these actions and events, sales of the 
subject magnet sets currently are dramatically lower than they were at 
the time of the enforcement actions.
---------------------------------------------------------------------------

    \13\ Although other importers were identified, these other 
importers were believed to sell so few magnet sets that staff did 
not have the resources to pursue these matters on a case-by-case 
basis against all known importers. Thus, targeting for corrective 
actions was limited to 13 firms believed to account for the largest 
portion of the market.
    \14\ For example, see the December 19, 2012, CPSC press release 
related to the administrative complaint filed against Star Networks 
(http://www.cpsc.gov/en/Newsroom/News-Releases/2013/CPSC-Sues-Star-Networks-USA-Over-Hazardous-High-Powered-Magnetic-Balls-and-Cubes/).
---------------------------------------------------------------------------

3. Evaluation of the Rule

a. Societal Costs and the Potential Benefits
i. Estimated Societal Costs of Injuries
    The purpose of the final rule is to prevent serious intestinal 
injuries that can result when children ingest two or more of the 
magnets from a subject magnet set (or one magnet and another metallic 
object). The final rule would establish a standard for magnet sets and 
individual magnets that are marketed or intended for use as parts of a 
magnet set. Distributing magnet sets and individual magnets intended 
for magnet sets that do not meet specified requirements would be 
prohibited. Therefore, a reduction in injuries would be the resulting 
benefit of the rule.
    Baseline. Our analysis of the potential benefits of the rule 
focuses on injuries reported through the National Electronic Injury 
Surveillance System (NEISS), a probability sample of U.S. hospital 
emergency departments that can be used to provide national estimates of 
product-related injuries initially treated in U.S. hospital emergency 
departments. The expected benefits of a product safety regulation must 
be measured against a baseline representing the best assessment of how 
the market would operate and how products would be used in the absence 
of the intervention. In the case of the rule prohibiting the subject 
magnet sets, the baseline would represent the time period before the 
actions by which the CPSC: (1) Requested that importers and retailers 
stop selling the magnet sets; (2) initiated administrative actions 
against importers that refused to stop selling the magnet sets (each of 
which seeks an order directing the importer to offer refunds in 
exchange for the return of purchased magnet sets); (3) publicized 
corrective actions, whereby certain importers and retailers of magnet 
sets agreed to provide refunds to consumers in exchange for the return 
of purchased magnet sets; and (4) issued warnings to the public 
regarding the grave dangers that the subject magnet sets posed to 
children. Because CPSC compliance actions have significantly altered 
the state of the market, the environment before these actions occurred 
represents the best approximation of how the market would have operated 
in the absence of CPSC intervention and is the appropriate reference 
baseline for evaluating the impact of the rule. Consequently, although 
the Directorate for Epidemiology's hazard analysis described injuries 
involving magnets that occurred from 2009 through December 2013 
(Garland, 2014), our analysis will be limited to the period from 2009 
through June 2012, before the request to stop sales, administrative 
actions, recalls, and public warnings ensued.
    Based on a review of incident narratives coded from emergency 
department medical records for magnet ingestion cases obtained from 
NEISS hospitals, the Directorate for Epidemiology staff has identified 
86 ingestions of high-powered and/or ball-shaped magnets, which 
occurred from 2009 through June 2012. These incidents were determined 
to involve, or possibly involve, the magnets of interest. Although 
manufacturer or brand name information is rarely available in the 
medical records extracted for NEISS, nine of the 86 NEISS-reported 
cases (10.5%) mentioned a brand name of magnet sets that are the 
magnets of interest; 77 cases (89.5%) were determined possibly to have 
involved the magnets of interest because the case narratives included 
terms such as ``high powered,'' ``magnetic ball,'' ``magnetic marble,'' 
``BB size magnet,'' or ``magnetic beads'' (Garland, 2014).
    Injuries and Societal Costs. Based on the 86 NEISS-reported magnet 
cases, there were an estimated 2,138 injuries treated in U.S. hospital 
emergency departments from 2009 through June 2012. About 11 percent of 
these NEISS-reported cases were injuries requiring hospitalization, as 
opposed to the 89 percent that were treated and released. The benefits 
of the rule can be estimated as the reduction in the societal costs 
associated with the injuries that would be prevented by the rule. The

[[Page 59979]]

Directorate for Economic Analysis bases estimates of the societal costs 
of emergency department-treated magnet injuries on the CPSC's Injury 
Cost Model (ICM) (Miller et al., 2000).
    The ICM is fully integrated with NEISS and provides estimates of 
the societal costs of injuries reported through NEISS. The major 
aggregated components of the ICM include: medical costs; work losses; 
and the intangible costs associated with lost quality of life or pain 
and suffering.\15\
---------------------------------------------------------------------------

    \15\ A detailed description of the cost components, and the 
general methodology and data sources used to develop the CPSC's 
Injury Cost Model, can be found in Miller et al. (2000).
---------------------------------------------------------------------------

    Medical costs include three categories of expenditure: (1) Medical 
and hospital costs associated with treating the injury victim during 
the initial recovery period and in the long run, the costs associated 
with corrective surgery, the treatment of chronic injuries, and 
rehabilitation services; (2) ancillary costs, such as costs for 
prescriptions, medical equipment, and ambulance transport; and (3) 
costs of health insurance claims processing. Cost estimates for these 
expenditure categories were derived from a number of national and state 
databases, including the National Healthcare Cost and Utilization 
Project--National Inpatient Sample and the Medical Expenditure Panel 
Survey, both sponsored by the Agency for Healthcare Research and 
Quality.
    Work loss estimates, based on information from the National Health 
Interview Survey and the U.S. Bureau of Labor Statistics, as well as a 
number of published wage studies, include: (1) The forgone earnings of 
parents and visitors, including lost wage work and household work, (2) 
imputed long term work losses of the victim that would be associated 
with permanent impairment, and (3) employer productivity losses, such 
as the costs incurred when employers spend time juggling schedules or 
training replacement workers. The earnings estimates were updated most 
recently with weekly earnings data from the Current Population Survey 
conducted by the Bureau of the Census in conjunction with the Bureau of 
Labor Statistics.
    Intangible, or non-economic, costs of injury reflect the physical 
and emotional trauma of injury as well as the mental anguish of victims 
and caregivers. Intangible costs are difficult to quantify because they 
do not represent products or resources traded in the marketplace. 
Nevertheless, they typically represent the largest component of injury 
cost and need to be accounted for in any benefit-cost analysis 
involving health outcomes (Rice et al., 1989). The Injury Cost Model 
develops a monetary estimate of these intangible costs from jury awards 
for pain and suffering. While these awards can vary widely on a case-
by-case basis, studies have shown them to be systematically related to 
a number of factors, including economic losses, the type and severity 
of injury, and the age of the victim (Viscusi, 1988; Rodgers, 1993). 
Estimates for the Injury Cost Model were derived from a regression 
analysis of about 2,000 jury awards in nonfatal product liability cases 
involving consumer products compiled by Jury Verdicts Research, Inc.
    In addition to estimating the costs of injuries treated in U.S. 
hospital emergency departments and reported through NEISS, the Injury 
Cost Model uses empirical relationships between emergency department 
injuries and those treated in other settings (e.g., physicians' 
offices, clinics, ambulatory surgery centers, and direct hospital 
admissions) to estimate the number, types, and costs of injuries 
treated outside of hospital emergency departments (Miller et al., 2000; 
Lawrence, 2013). Thus, the Injury Cost Model allows us to expand on 
NEISS by combining (1) the number and costs of emergency department 
injuries with (2) the number and costs of medically attended injuries 
treated in other settings to estimate the total number of medically 
attended injuries and their costs across all treatment levels.
    Table 1 below provides annual estimates of the injuries and the 
societal costs associated with ``high-powered and/or ball-shaped magnet 
ingestions'' that involve, or possibly involve, the magnets that are 
the subject of the rule. As shown in Table 1, the 2009 through June 
2012 NEISS estimates suggest an estimated annual average of about 610 
emergency department-treated injuries, including 544 injuries that were 
treated and released and 66 injuries that required hospitalization. 
About 60 percent of these emergency department-treated ingestions 
involved children ages 4 through 12 years. Just over half of the magnet 
cases from the emergency departments of the hospitals that comprise the 
NEISS sample appear to have involved the ingestion of more than one 
magnet. Additionally, based on estimates from the ICM, there were 
another 319 injuries treated annually in locations other than hospital 
emergency departments.\16\
---------------------------------------------------------------------------

    \16\ Although no deaths were reported during the baseline time 
period for this analysis, one death involving the subject magnets 
was reported in 2013.

    Table 1--Estimated Average Annual Medically Attended Injuries and
  Associated Societal Costs for High-Powered and/or Ball-Shaped Magnet
  Ingestions That Were Determined To Involve, or Possibly Involve, the
                   Magnets of Interest, 2009-June 2012
------------------------------------------------------------------------
                                                             Estimated
           Injury disposition                Estimated    societal costs
                                              number      ($ millions) *
------------------------------------------------------------------------
Treated and Released from Hospital                   544            11.4
 Emergency Department (NEISS)...........
Admitted to Hospital Through the             [dagger] 66             8.6
 Emergency Department (NEISS)...........
                                         -------------------------------
    Medically Treated Outside of                     319             8.6
     Hospital Emergency Department (ICM)
Total Medically Attended Injuries.......             929            28.6
------------------------------------------------------------------------
* In 2012 dollars.
[dagger] According to the Directorate for Epidemiology, the estimated
  number of hospital-admitted, emergency department-treated injuries is
  a not a reliable estimate because of the small number of cases upon
  which the estimate was based.

    After including the injuries treated outside of hospital emergency 
departments, there was an estimated annual average of about 929 
medically attended injuries involving ingestions of the magnets of 
interest. Based on the ICM, these injuries resulted in annual societal 
costs of about $28.6 million (in 2012 dollars) during the 2009 to June 
2012 time period. The injury cost estimates differ from those presented 
in the preliminary regulatory analysis

[[Page 59980]]

because of an expansion of the baseline time period from 2009 through 
2011 to 2009 through June 2012 and because of updates to the CPSC's 
Injury Cost Model (Lawrence, 2013). The injury cost estimates were also 
inflated from 2011 to 2012 dollars.
    The average estimated societal costs per injury was about $27,000 
for injuries treated in locations other than emergency departments 
(such as physicians' offices, clinics, ambulatory surgery centers, or 
direct hospital admissions); about $21,000 for injuries that were 
treated and released from emergency departments; and about $130,000 for 
injuries that required admission to the hospital for treatment. Medical 
costs and work losses (including work losses of caregivers) accounted 
for about 30 percent of these injury cost estimates, and the less 
tangible costs of injury associated with pain and suffering accounted 
for about 70 percent of the estimated injury costs.
    Uncertainty. As noted in the preliminary regulatory analysis, there 
is uncertainty concerning these estimates. Some of the cases described 
as involving the magnets of interest that were included in Table 1 may 
not have involved the magnets that are the subject of the rule. As 
noted above, about 90 percent of the cases upon which the table was 
based were described as only possibly involving the magnets of interest 
because NEISS narratives are not required to list manufacturer or brand 
name. Hence, it is possible that Table 1 overstates the societal costs 
associated with the magnets that would be included in the rule.
    On the other hand, in addition to the magnet cases upon which the 
table was based, there were also 230 NEISS cases (representing about 
1,526 emergency department-treated injuries annually), in which the 
magnet type was classified as ``unknown or other.'' These cases 
included narratives that mentioned that a magnet was involved but 
presented insufficient information to classify the magnet type. 
Consequently, to the extent that the unknown magnet types involved 
magnets that would be covered by the rule, the Table 1 results would 
tend to understate the societal costs associated with the magnets 
subject to the rule.
ii. Estimated Benefits of the Rule
    As noted above, the benefits of the magnet rule would be the 
reduction in the societal costs of the injuries that would be 
prevented. Because the rule will eliminate from the market all magnet 
sets involved in the ingestion injuries described above, all injuries 
that would have occurred in the absence of a rule would be prevented. 
Although no deaths involving magnet sets occurred during the time 
period covered by our analysis, we know of a magnet set related 
fatality that occurred in 2013. Thus, we anticipate that the rule would 
prevent future fatalities as well as injuries. However, if children, 
adolescents, and teens cannot play with or use the prohibited magnets, 
they could play with or use substitute products (including high-powered 
magnets intended for other uses \17\) that also may result in injury. 
Hence, the overall benefits of the rule should be measured as the net 
reduction in injuries and the concomitant reduction in societal costs 
that would result. Based on the injury estimates presented in Table 1, 
and given the absence of information on expected use and risks of 
alternative products or activities, the expected benefits of the rule 
might amount to about $28.6 million annually.
---------------------------------------------------------------------------

    \17\ Common commercial and industrial applications of small 
neodymium-iron-boron magnets include their use in holding systems, 
motors (DC, servo, linear, and voice coil), magnetic bearings, 
magnetic couplings, jewelry, welding clamps, oil filters, disc 
drives, loudspeakers, headphones, microphones, instrumentation, 
switches, and relays.
---------------------------------------------------------------------------

b. Potential Costs of the Rule
    Both consumers and producers benefit from the production and sale 
of consumer products. The consuming public obtains the use value or 
``utility'' associated with the consumption of products; producers 
obtain income and profits from the production and sale of products. 
Consequently, the costs of a rule that eliminates certain magnetic sets 
would consist of: (1) The lost use value experienced by consumers who 
would no longer be able to purchase magnets that do not meet the 
standard at any price; and (2) the lost income and profits to firms 
that could not produce and sell non-complying products in the future. 
The same baseline used in the benefits assessment, 2009 to June 2012, 
is used for the cost analysis.
i. Lost Utility to Consumers
    First, consider the lost utility to consumers. We cannot estimate 
in any precise way the use value that consumers receive from these 
products, but we can describe use value conceptually. In general, use 
value includes the amount of: (1) Consumer expenditures for the 
product, plus (2) what is called ``consumer surplus.'' In the case of 
the magnet sets, given sales of about 800,000 sets annually during the 
2009 to June 2012 time period, and assuming an average retail price of 
about $25 in 2012, consumer expenditures would amount to about $20 
million annually in 2012 dollars. These expenditures represent the 
minimum value that consumers would expect to get from these products. 
It is represented by the area of the rectangle OBDE in the standard 
supply and demand graph below, where B equals $25, and E equals 800,000 
units.

[[Page 59981]]

[GRAPHIC] [TIFF OMITTED] TR03OC14.003

    The consumer surplus is given by the area of the triangle BCD under 
the graph's demand function and represents the difference between the 
market clearing price and the maximum amount consumers would have been 
willing to pay for the product. This consumer surplus will vary for 
individual consumers, but it represents a benefit to consumers over and 
above what they had to pay (McCloskey, 1982).\18\ For example, although 
tickets to a concert or football game might sell for $100 each, some 
consumers who buy them for $100 would have been willing to pay $150 per 
ticket. In other words, they paid $100 and received benefits that they 
value at $150. Hence, each of these consumers would receive a consumer 
surplus of $50.\19\
---------------------------------------------------------------------------

    \18\ The concept of consumer surplus is discussed in OMB's 
Circular A-4 (OMB, 2003) and has been applied in several CPSC staff 
analyses, including Tohamy (2006) and Rodgers (2004).
    \19\ If the above graph represents the market for tickets, the 
demand curve describes the quantity of tickets demanded at each 
price (i.e., the quantity of tickets consumers are willing and able 
to purchase at each price). In this example, the $150 that the 
consumer would have been willing to pay for the ticket is 
represented on the demand curve at a point to the left of point D. 
The consumer surplus is given by the relevant point on the demand 
curve (i.e., where price = $150), minus the market clearing price of 
$100.
---------------------------------------------------------------------------

    In general, the use value of the magnet sets obtained by consumers 
is represented by the area of the trapezoid OCDE. However, the 
prospective loss in use value associated with the rule, which would 
prohibit certain magnet sets that do not comply with the rule, would 
amount to, at most, the area of the triangle representing the consumer 
surplus. This is because consumers would no longer be able to obtain 
utility from the prohibited product, but they would, nevertheless, 
still have the $20 million (represented by the rectangle OBDE) that 
they would have spent on magnet sets in the absence of a rule. Although 
consumers would no longer be able to purchase magnet sets, which would 
have been their first choice, they can use this money to buy other 
products providing use value.
    We have no information regarding aggregate consumer surplus; and 
hence, no information on the amount of utility that would be lost from 
a magnet set rule. Although the magnet sets clearly provide ``utility'' 
to purchasers, magnet sets are not necessities. Consequently, the 
demand for magnet sets is probably not price inelastic, a factor that 
would tend to reduce estimates of utility losses.\20\ Additionally, if 
the magnetic sets are ``faddish,'' they may not be the type of product 
that will be used intensely by consumers over long periods of time. 
However, if, for example, consumers who purchased the magnetic sets at 
an average price of $25 would have been willing to spend, on average, 
$35 per set, the lost utility from the magnet sets might amount to 
about $8 million on an annual basis (i.e., [$35-$25] x 800,000 units 
annually).
---------------------------------------------------------------------------

    \20\ To say that the demand for a product is price ``inelastic'' 
means that the quantity demanded tends to be insensitive to changes 
in the price of the product. Gasoline is an example of a product 
with an inelastic demand. Consumers are not likely to reduce 
substantially their purchase of gasoline (at least in the short 
run), even if the price increases substantially.
---------------------------------------------------------------------------

    Finally, we note that the loss in consumer surplus just described 
represents the maximum loss of consumer utility from the rule; the 
actual loss is likely to be lower. This is because consumers are likely 
to gain some amount of consumer surplus from products that are 
purchased as an alternative to those magnet sets that would no longer 
be available because of the rule. If, for example, there were close 
substitutes for the magnet sets that do not meet the standard (e.g., 
desk toys that are almost as satisfying and similarly priced), the 
overall loss in consumer surplus (and, hence, the costs of the rule) 
would probably tend to be small. On the other hand, if there are no 
close substitutes, the costs of the rule would tend to be higher.

[[Page 59982]]

    Some alternative products might serve some of the same uses of the 
subject magnet sets. For example, consider the Liberty Balls mentioned 
earlier, which are comprised of large (1.3 inch) ferrite magnetic 
objects. Their size, weight, and relatively high price per ball make 
Liberty Balls unsuitable and impractical for use in most sculpturing 
and other construction activities for which the subject magnet sets are 
used. They might still be used by some for ``fidgeting,'' but there 
does not seem to be any unique attribute of this product that would 
cause a consumer to purchase Liberty Balls specifically for fidgeting; 
common objects, such as paper clips or ball bearings, could serve the 
same fidgeting purpose at a lower price.
    Another possible alternative product discussed by the Directorate 
for Engineering Sciences (Amodeo, 2013) could be magnet sets comprised 
of individual magnets permanently connected by rods or other means, 
such that the resulting magnetic objects are not small parts. Such sets 
are marketed as children's toys because the individual pieces in the 
set do not fit into the small parts cylinder. Although these products 
have not been marketed for adults, and we have no evidence that they 
could be considered a good substitute for the subject magnet sets, if 
such sets could satisfy some consumers' needs in constructing geometric 
shapes, then the lost consumer surplus might be reduced.
    Notwithstanding the availability of alternatives to the subject 
magnet sets, the rule will still result in some level of lost utility. 
By purchasing the products in question, rather than other products, 
consumers are revealing that they have a preference for the subject 
magnet sets that they believe are likely to provide them more utility 
than a substitute purchase.
ii. Lost Benefits to Producers
    The lost benefits to firms resulting from a rule that effectively 
eliminates a product they produce are measured by a loss in what is 
called producer surplus. Producer surplus is a profit measure that is 
somewhat analogous to consumer surplus. Whereas consumer surplus is a 
measure of benefits received by individuals who consume products, net 
of the cost of purchasing the products, producer surplus is a measure 
of the benefits accruing to firms that produce and sell products, net 
of the costs of producing them. More formally, ``producer surplus'' is 
defined as the total revenue (TR) of firms selling the magnet sets, 
less the total variable costs (TVC) of production. Variable costs are 
costs that vary with the level of output and usually include 
expenditures for raw materials, wages, distribution of the product, and 
the like.\21\
---------------------------------------------------------------------------

    \21\ Note that although producer surplus (PS) is a measure of 
profits, it is not the same as profits. Whereas PS = TR-TVC, profits 
([pi]) = TR-(TFC + TVC), where TFC represents total fixed costs 
(i.e., those costs borne by the firm regardless of the level of 
output). If we substitute PS into the profit equation, and rearrange 
terms, we have PS = [pi] + TFC. Thus, producer surplus is equal to 
profits, plus total fixed costs. In the case of the market for 
magnet sets, the fixed costs of production for American importers 
are small. The magnet sets were generally produced, packaged, and 
shipped from China and sometimes sent directly to the importer's 
point of sale. Even when the magnet sets were shipped directly to 
importers, most additional costs incurred by importers, such as 
shipping and marketing costs, would be considered variable. 
Consequently, in the case of the market for magnet sets, lost 
profits would be approximately equal to lost producer surplus.
---------------------------------------------------------------------------

    In Figure 1, total revenue is given by the area OBDE, which is 
simply the product of sales and price. The total variable costs of 
production are given by the area under the supply function, OADE. 
Consequently, producer surplus is given by the triangle, ABD, which is 
the area under the market clearing price and above the supply function.
    As described earlier, sales of the magnet sets averaged roughly 
800,000 sets annually during the 2009 through mid-2012 time period, 
with an average retail price of about $25 per set in 2012. Thus, total 
industry revenues averaged about $20 million annually (i.e., 800,000 
sets x $25 per set) in 2012 dollars. Additional information provided by 
firms to the Office of Compliance and Field Operations suggests that 
the average import cost of the magnets to U.S. importers, a major 
variable cost, may have amounted to about $10 per set, or an average of 
about $8 million annually (i.e., 800,000 sets x $10 import cost per 
set). We have no information on other variable costs associated with 
the production, packaging, marketing, and distribution of the magnet 
sets. However, it seems likely that variable costs would constitute a 
significant proportion of the remaining difference between revenues 
($20 million) and import costs ($8 million). If we assume that variable 
costs amount to about half of the difference, lost producer surplus 
would amount to about $6 million.\22\
---------------------------------------------------------------------------

    \22\ This value is lower than the value presented in the 
preliminary regulatory analysis, due to the use of more refined 
sales figures for the affected producers.
---------------------------------------------------------------------------

iii. Summary of Costs of the Rule
    The costs of the rule, in terms of reduced benefits for firms and 
lost utility by consumers, are uncertain. However, based on annual 
sales estimates available for 2009 through mid-2012, these costs could 
amount to as much as $6 million in lost producer surplus and some 
unknown quantity of lost utility. The estimate of lost producer surplus 
differs from impacts estimated in the NPR (7.5 million, expressed as 
lost profits) because of a revised estimate of annual sales, and 
different assumptions regarding profit rates and variable costs.
c. Sensitivity of Results to Product Life Assumptions
    Implicit in this analysis is the assumption that the expected 
useful life of the magnet sets is about 1 year. Because this product 
has only been in widespread consumer use since 2009, this assumption is 
made without extensive knowledge about the actual use of the magnetic 
sets by consumers. We consider magnet sets to be novelty products, 
which means for many consumers, they may lose much of their appeal 
quite quickly. Accordingly, we chose a one-year rather than a longer 
useful life even though the magnets may be physically durable products. 
Even if some of the products remain in homes or offices longer than a 
year, the risk of ingestion by children may be much higher in the first 
month or two after the magnet sets are purchased, when the appeal of 
the product is at its highest and the consumer actively uses or plays 
with the product frequently. Once novelty products lose their appeal, 
they are likely to be put away and stored indefinitely or perhaps even 
discarded.
    However, we note that the results of our analysis are not 
particularly sensitive to this product life assumption. For example, 
had we assumed that the average product life was about 2 years, rather 
than 1 year, estimates of the number of sets in use at any given time 
would approximately double, reducing the estimated annual risk of 
injury, per magnet set in use (and hence, reduce estimated societal 
costs per set), by about half. However, this reduced estimate of annual 
societal costs would be offset by the fact that the sets remain in use 
for 2 years, rather than 1 year. Thus, annual benefits, per magnet set 
in use, would be about halved, but the present value of benefits would 
be accrued over 2 years, rather than 1 year. Consequently, even if we 
had doubled the assumed product life, the relationship between benefits 
and costs would have remained roughly the same. Estimated benefits 
would be slightly lower under a two year useful product life due to 
discounting second year benefits.

[[Page 59983]]

d. Alternatives to the Rule
    There are several possible alternatives to the rule. We are unable 
to quantify either the costs or the benefits of these alternatives, in 
part because the requirements of such alternatives have not been 
specified. To estimate the potential costs of the alternatives, we 
would need a precise description of what the requirements would be. 
Moreover, even with this information, it would still be difficult to 
determine the expected injury reduction from the various alternatives.
    Nevertheless, the costs of each of the alternatives discussed below 
are expected to be substantially lower than the costs of the rule. This 
is because, generally speaking, the alternatives would allow consumers 
and businesses to continue buying, selling, and using the magnet sets 
that would no longer be available under the rule. Similarly, the 
benefits of these alternatives, in terms of injury reduction, would 
also be expected to be lower than the benefits for the rule. This is 
because, under these alternatives, some children would continue to have 
access to the magnet sets.
    The Commission may not have authority for some of the alternatives 
discussed. None of the alternatives was chosen because the expected 
injury reduction from each was believed to address the hazard 
inadequately. Comments on the NPR did not alter this decision.
i. Alternative Performance Requirements
    As an alternative to the rule, the Commission could consider 
promulgating an alternative set of requirements that could reduce the 
risk of injury from magnet sets but not necessarily eliminate the risk. 
For example, some alternatives to the rule might include: Setting a 
different flux index for the magnets sold as manipulative desk sets; 
requiring different specifications for shapes and sizes of magnets 
within the scope of the standard; or setting forth some other criteria 
that have not yet been developed (but are not as stringent as in the 
final rule). If these alternative requirements led to the production of 
magnet sets with physical characteristics that appealed to consumers, 
the cost of the rule for both consumers and businesses would be 
reduced. Businesses would continue to be able to produce and sell 
magnet sets, and consumers would continue to be able to buy and use 
them. However, these alternative requirements would likely reduce the 
benefits of a rule: Magnets that present a risk of harm would still be 
available and some children would undoubtedly have access to them and 
be injured by them.
    One practical question, however, is whether alternative 
requirements for the sizes and flux index of magnets would eliminate or 
substantially affect the physical qualities of the products that make 
them enjoyable for adults. Regarding the alternative size requirements, 
consumers can use magnet sets of 216 or more 5mm balls to make a 
variety of constructions. Larger individual magnets that would meet an 
alternative (that is smaller than the 1.25-inch diameter specified in 
the final rule) might be determined to reduce the risk associated with 
ingestions somewhat, but, depending upon their size, might make them 
unsuitable for many of the uses of the sets with smaller magnets.
    Similarly, allowing a flux index greater than the 50 kG\2\ mm\2\ 
flux limit of the rule might improve the usefulness of the magnet sets 
in construction activities. However, given that the subject magnet sets 
have flux index values typically in the range of 400-500 for spherical 
magnets, the flux index limit might have to be increased substantially 
higher than the flux index limit of 50 kG\2\ mm\2\ to provide levels of 
satisfaction that are similar to those of the subject magnet sets. 
Moreover, a flux index limit of substantially more than 50 kG\2\ mm\2\ 
could, relative to the proposed rule, substantially increase the harms 
associated with the ingestion risk--the harms the rule is intended to 
prevent.
    Another alternative might be to create specifications for the 
application of bittering agents on the magnets to make them less 
appealing to young children. However, the effectiveness of bittering 
agents in reducing magnet ingestions is questionable (Sedney & Smith, 
2012).
    Neither the costs, nor the benefits of these alternative sets of 
requirements are quantifiable with available information. The staff is 
reasonably certain that magnets with a flux index of less than 50 kG\2\ 
mm\2\ will substantially reduce the risk injury. However, the risk 
associated with flux indices greater than 50 kG\2\ mm\2\ but less than 
the indices of 400 to 500 for the subject magnet sets are unknown and 
cannot be estimated with available data. The staff is also reasonably 
certain that the risk of ingesting magnets is substantially reduced if 
the magnets are too large for the small parts container. However, the 
increased risk of ingestion with smaller sized magnets is unknown.
Require Safer Packaging
    The Commission could require magnet sets to be sold with special 
storage containers that are fitted to the product so that consumers 
would be able to determine whether any of the magnets were missing from 
the sets. Such a requirement might prevent injuries resulting from a 
small number of magnets being separated from a set without the owner 
being aware. In reality, however, many consumers may not use such 
containers because using them could require time to form the magnets 
into a shape, such as a cube; or consumers might wish to keep the 
magnets out of their container to preserve a shape or structure that 
took time and effort to construct.
    Alternatively (or in combination), the Commission could require the 
magnets to be sold in child-resistant packaging. The benefit of such an 
approach is the potential to reduce ingestion injuries. However, the 
benefits of this approach would be limited. Child-resistant packaging 
would not prevent teens and adolescents (and even some younger 
children) from opening the packaging. Additionally, the packaging would 
have to be secured after each use. According to the Division of Human 
Factors, it is unlikely that adults would accept child-resistant 
packaging for a product like the magnet sets because of the level of 
inconvenience involved in returning the magnets to the package (Sedney 
& Smith, 2012). Additionally, for the reasons described above, 
consumers may leave magnets out of their container.
    The costs of this alternative would depend upon the packaging 
requirements but would be substantially less costly than the rule, 
which eliminates the subject magnet sets from the marketplace. It seems 
unlikely that the costs would amount to more than a dollar or so per 
magnet set, although these costs might be somewhat higher if child-
resistant packaging was required. The benefits of requiring safer 
packaging are unknown, but based on the HF discussion above, the 
benefits may be relatively small if consumers would not use the 
packaging containers appropriately.
ii. Warnings
    The Commission could require strong warnings on labels and on-
product instructions designed to prevent the use of the magnet sets by 
children. Based on HF staff's examination, the ingestion warnings that 
currently accompany magnet sets are generally aimed at adults, but the 
warnings are deficient in their content. For example, some

[[Page 59984]]

warnings caution against children swallowing the magnets, but the 
warnings do not describe the incident scenarios. Some warnings refer to 
the propensity of swallowed magnets to stick to intestines, without 
referring to the presence of other magnets or metal objects. Other 
warnings refer to magnets sticking together or attaching to other 
metallic objects inside the body, but the warnings do not explain that 
the magnets can attract through the walls of the intestines and 
forcefully compress these tissues, resulting in serious injuries. 
According to HF staff, without detailed information in the warnings, 
consumers may not really understand how swallowing magnets differs from 
swallowing other small parts or how magnets sticking together could 
pose a hazard.
    HF staff believes that it may be possible to develop warnings that 
could communicate the ingestion hazard, the consequences of ingestion, 
and how to avoid the hazard. To the extent that the subject magnets 
present a ``hidden'' hazard about which consumers are unaware, explicit 
and adequate warnings could reduce ingestions and allow adults to 
continue to enjoy the use of the product.
    The costs of such warnings would most likely be small, and 
consumers could make informed decisions about the purchase and use of 
magnet sets. However, although HF staff believes warnings could be 
developed to communicate the hazard, HF staff also believes that injury 
reduction would be limited. They point out that avoiding the ingestion 
hazard requires consumers to keep the product away from all children in 
the incident age group, and while caregivers who read and understand 
the warnings may attempt to keep this product out of the hands of young 
children, HF staff doubts that many caregivers are likely to be so 
diligent about heeding the warning with older children and adolescents 
(Sedney & Smith, 2012). Also, HF staff doubts that caregivers will 
think that constant supervision is needed if they believe the sets have 
been properly secured or that their children are not aware of the sets 
(Sedney & Smith, 2013). As noted in the NPR (77 FR 53781), a corrective 
action in 2010, which included stronger warnings combined with 
provisions for controlling distribution of magnet sets, was found to be 
inadequate because of a subsequent increase in ingestion injuries 
involving the products. Consequently, warnings (combined with sales 
restrictions and other measures) have not been judged to address the 
risk posed by the subject magnet sets adequately.
iv. Restrictions on the Sale of Magnet Sets
    Another lower-cost option the Commission could consider is to 
prohibit sales of magnet sets in toy stores, children's sections of 
general purpose stores, and near cash registers of stores that sell any 
children's products. The costs of this option would be lower than the 
rule because this would allow the magnet sets to be marketed to and 
used by consumers. Sales limitations or requirements for strong 
warnings might also be required on Web sites advertising the sale of 
magnets on the Internet.
    The details of developing a set of sales limitations and 
requirements would need to be worked out, but the idea would be to make 
sure that magnet sets, to the extent possible, are not sold at 
locations where children are likely to be present. Sales requirements 
might also be combined with strong and explicit warnings that HF staff 
has suggested could be developed.
    However, the benefits of this option are probably limited. Some 
parents would still allow their children (especially older children and 
adolescents) to play with the magnet sets, despite the warnings.\23\ In 
addition, some children will get into the packaging, even if parents 
try to restrict the use of the desk toys.
---------------------------------------------------------------------------

    \23\ As noted in the NPR (77 FR 53781), one firm agreed to a 
corrective action in 2010, which included provisions for controlling 
distribution by agreeing to ask retailers who market products 
primarily to children to execute a Responsible Sellers Agreement 
prohibiting marketing and sales to children, as well as agreeing to 
stop the sale of magnet sets to retailers who market products 
exclusively to children. However, with a subsequent increase in 
ingestion injuries involving the products, Compliance began 
negotiation of corrective action plans with 11 of 13 magnet set 
importers that voluntarily agreed to cease the importation, 
distribution, and continued sale of their magnet sets, and 
administrative actions were initiated by the Commission against two 
firms that did not agree to cease sales voluntarily. By implication, 
sales restrictions (combined with warnings and other measures) have 
not been judged to address the risk posed by the subject magnet sets 
adequately.
---------------------------------------------------------------------------

v. Address Through Corrective Actions Rather Than Regulatory Action
    The Commission could continue to address the hazard through 
corrective action plans. However, this approach may be inadequate 
because this approach is reactive and would entail waiting for new 
incidents to occur rather than preventing them.
vi. Take No Action
    The Commission could determine that no rule is reasonably necessary 
to reduce the risk of ingestion injuries associated with small, 
powerful magnet sets. Under this alternative, future societal losses 
would be determined by the numbers of products in use, and other 
factors that affect the likelihood that young children, adolescents, 
and teens will ingest the magnets. Although there would be no costs, 
such a determination would not reduce injuries.

4. Summary

    Based on reports to the CPSC, ingestions of small magnets contained 
in certain magnet sets have caused multiple, high-severity injuries 
that require surgery to remove the magnets and repair internal damage. 
Based on the NEISS cases identified by the Directorate for Epidemiology 
staff as involving high-powered and/or ball-shaped magnet ingestions, 
the estimated benefits of the rule might amount to about $28.6 million 
annually.
    The costs of the rule consist of the reduced producer surplus for 
firms and lost utility by consumers, also are uncertain. Based on 
annual sales estimates available for 2009 through mid-2012, these costs 
could amount to as much as $6 million in lost producer surplus and some 
unknown quantity of lost utility.
    There are alternative regulatory actions that might allow the 
magnet sets to continue to be marketed. For example, the Commission, by 
regulation, could issue alternative requirements; issue requirements 
for the packaging of the magnet sets (e.g., develop requirements for 
child-resistant packaging); require warnings that describe explicitly 
the hazard and how to avoid it; and/or place limitations on how and 
where the magnet sets can be sold. These alternative actions--which 
might be considered alone, or in combination--would have varying levels 
of effectiveness, but all of them would be result in lower reductions 
in injuries associated with magnet ingestion.

I. Paperwork Reduction Act

    The rule does not require manufacturers (including importers) to 
perform testing or require manufacturers or retailers to keep records. 
For this reason, the rule does not contain ``collection of information 
requirements,'' as that term is used in the Paperwork Reduction Act, 44 
U.S.C. 3501-3520. Therefore, the rule need not be submitted to the 
Office of Management and Budget (OMB) in accordance with 44 U.S.C. 
3507(d) and implementing regulations codified at 5 CFR 1320.11.

[[Page 59985]]

J. Regulatory Flexibility Analysis

1. Introduction

    The Regulatory Flexibility Act (RFA) requires that agencies review 
rules for their potential economic impact on small entities, including 
small businesses. Section 604 of the RFA calls for agencies to prepare 
a final regulatory flexibility analysis, describing the impact of the 
rule on small entities and identifying impact-reducing alternatives. 
The final regulatory flexibility analysis is to contain:
    (1) A statement of the need for, and objectives of, the rule;
    (2) a statement of the significant issues raised by the public 
comments in response to the initial regulatory flexibility analysis, a 
statement of the agency's assessment of those issues, and a statement 
of any changes made to the proposed rule as a result of such comments;
    (3) the response of the agency to any comments filed by the Chief 
Counsel for Advocacy of the Small Business Administration in response 
to the proposed rule, and a statement of any changes made in the final 
rule as a result of the comments;
    (4) a description of, and where feasible, an estimate of the number 
of small entities to which the proposed rule will apply;
    (5) a description of the projected reporting, recordkeeping, and 
other compliance requirements of the proposed rule, including an 
estimate of the classes of small entities that will be subject to the 
requirement and the types of professional skills necessary for the 
preparation of the report or record; and
    (6) a description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of the 
factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each one of the other alternatives to 
the rule considered by the agency which affect the impact on small 
entities was rejected.
Accordingly, staff prepared a final regulatory flexibility analysis, 
which is summarized below.

2. Statement of the Need for, and Objectives of, the Rule

    The rule prohibits the sale or distribution in commerce of magnet 
sets and individual magnets intended to be used with or as magnet sets 
that do not meet the specific requirements described in section F of 
this preamble. The current designs of magnet sets of the type that 
became popular in recent years would not meet the rule's requirements. 
The CPSC has received information, described in section C of this 
preamble, regarding incidents with, and hazards posed by, sets of 
small, powerful magnets. According to the final regulatory analysis, 
there was an annual average of about 929 medically attended magnet 
ingestions that were defined as at least ``possibly of interest'' 
during the period from 2009 through June 2012. These ingestions 
resulted in societal costs of about $28.6 million per year.
    The objective of the rule is to eliminate or reduce the risk of 
injury to consumers from the ingestion of one or more small powerful 
magnets that comprise the subject consumer products. Because the magnet 
sets that have been involved in incidents would not meet the rule's 
requirements, the rule will substantially reduce the future incidence 
and cost to society of ingestions of magnet sets.

3. Comments on the Initial Regulatory Flexibility Analysis

    The Commission received comments from more than 5,000 people in 
response to the NPR. Many of the comments related to issues that have a 
bearing on the economic impacts of the proposed rule on small 
businesses. The Commission's responses to comments that address issues 
that were mentioned in the initial regulatory flexibility analysis 
(IRFA) are in included in Section E of this notice.

4. Small Entities Subject to the Rule and Possible Economic Impacts

    The final rule would impact U.S. importers and retailers of magnet 
sets comprised of small, powerful magnets of the size and magnetic 
force proscribed by the rule. None of the magnet sets within the scope 
of the rule is produced domestically. All of the U.S. firms that have 
marketed the products are believed to have imported them from 
manufacturers in China. The one remaining firm that currently imports 
magnet sets is a small business under U.S. Small Business 
Administration (SBA) size standards (SBA, 2012).
    Based on information reviewed on product sales, including reports 
by firms to the Office of Compliance and Field Operations, the number 
of such magnet sets that were sold to U.S. consumers from 2009 through 
mid-2012 may have totaled about 2.7 million sets, with a value of 
roughly $50 million in 2012 dollars. This value reflects a combination 
of retail sales directly to consumers (through company Web sites and 
other Internet retail sites) and sales to retailers who market the 
products. A review of retail prices reported by importers and observed 
on Internet sites suggests prices typically ranged from about $20 to 
$45, with an average price of about $25 for magnet sets that commonly 
contain 216 to 224 magnets. Larger sets of more than 1,000 individual 
magnets have reportedly been sold at prices up to $300, depending on 
the number of magnets and the type of packaging.
    We noted in the IRFA that the economic impact of the rule would be 
most severe for seven small importing firms, which account for the 
great majority (perhaps more than 98%) of units sold according to sales 
information provided to CPSC Compliance staff; and five of these 
importers reportedly derived most or all of their revenues from the 
sale of the magnet sets or related products. We judged that these firms 
could go out of business as a result of the rule. Two of the other 
leading importers of magnet sets apparently had fairly broad product 
offerings, which could lessen the severity of the economic impact of a 
rule. Nevertheless, we noted that the expected impacts of a final rule 
could also be significant for these small importers.
    As discussed in section H.2.b. of this preamble, due to CPSC's 
enforcement actions, current sales of magnet sets are dramatically 
smaller than at the time of the enforcement actions. We are aware of 
only one major importer of magnet sets that remains active in the 
market. The rule will likely have an adverse impact on this remaining 
firm. That firm might go out of business, unless the firm successfully 
markets other products, including magnet sets that would comply.

5. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements of the Rule

    The rule does not contain any reporting or record keeping 
requirements.

6. Alternatives to the Rule

    The Commission could pursue other options, including: Adopting an 
alternative set of requirements for the flux index or size of the 
magnets; requiring safer packaging; requiring warnings on the packaging 
and promotional materials; imposing restrictions on the locations where 
magnet sets can be sold; addressing the risk of injury presented by 
magnet sets through corrective actions; and taking no action at all. 
Each of these alternatives is addressed in Section G of this preamble 
and in the Final

[[Page 59986]]

Regulatory Analysis at Section H of this preamble. All of these 
alternatives would reduce the expected impact of the rule on small 
business. However, as discussed in Sections G and H of this preamble, 
these alternatives would not be expected to achieve the same injury 
reductions as the rule, and some of the suggested alternatives would be 
beyond the Commission's authority.

K. Environmental Considerations

    CPSC rules establishing performance requirements are considered to 
``have little or no potential for affecting the human environment,'' 
and environmental assessments are not usually prepared for these rules 
(16 CFR 1021.5 (c)(1)). This rule falls within the categorical 
exemption.

L. Executive Order 12988 (Preemption)

    As required by Executive Order 12988 (February 5, 1996), the CPSC 
states the preemptive effect of the rule as follows:
    The rule is promulgated under authority of the CPSA. 15 U.S.C. 
2051-2089. Section 26 of the CPSA provides that ``whenever a consumer 
product safety standard under this Act is in effect and applies to a 
risk of injury associated with a consumer product, no State or 
political subdivision of a State shall have any authority either to 
establish or to continue in effect any provision of a safety standard 
or regulation which prescribes any requirements as the performance, 
composition, contents, design, finish, construction, packaging or 
labeling of such product which are designed to deal with the same risk 
of injury associated with such consumer product, unless such 
requirements are identical to the requirements of the Federal 
Standard.'' 15 U.S.C. 2075(a). Upon application to the Commission, a 
state or local standard may be excepted from this preemptive effect, if 
the state or local standard: (1) Provides a higher degree of protection 
from the risk of injury or illness than the CPSA standard, and (2) does 
not unduly burden interstate commerce. In addition, the federal 
government, or a state or local government, may establish and continue 
in effect a nonidentical requirement that provides a higher degree of 
protection than the CPSA requirement for the hazardous substance for 
the federal, state, or local government's use. 15 U.S.C. 2075(b).
    Thus, with the exceptions noted above, the magnet set requirements 
would preempt nonidentical state or local requirements for magnet sets 
designed to protect against the same risk of injury.

M. Effective Date

    The Commission has determined that the rule will become effective 
180 days from publication of the final rule in the Federal Register and 
will apply to all magnet sets imported into or otherwise distributed in 
the United States that are manufactured or imported on or after that 
date. The CPSA requires that consumer product safety rules take effect 
not later than 180 days from their promulgation, unless the Commission 
finds there is good cause for a later date. 15 U.S.C. 2058(g)(1). In 
the NPR, the Commission proposed that the rule would take effect 180 
days after promulgation of a final rule. The Commission received no 
comments on the proposed effective date.

N. Findings

    The CPSA requires the Commission to make certain findings when 
issuing a consumer product safety standard. Specifically, the CPSA 
requires that the Commission consider and make findings about the 
degree and nature of the risk of injury; the number of consumer 
products subject to the rule; the need of the public for the rule and 
the probable effect on utility, cost, and availability of the product; 
and other means to achieve the objective of the rule, while minimizing 
the impact on competition, manufacturing, and commercial practices. The 
CPSA also requires the rule to be reasonably necessary to eliminate or 
reduce an unreasonable risk of injury associated with the product; and 
issuing the rule must be in the public interest. 15 U.S.C. 2058(f)(3).
    In addition, the Commission must find that: (1) If an applicable 
voluntary standard has been adopted and implemented, that compliance 
with the voluntary standard is not likely to adequately reduce the risk 
of injury, or compliance with the voluntary standard is not likely to 
be substantial; (2) that benefits expected from the regulation bear a 
reasonable relationship to the regulation's costs; and (3) that the 
regulation imposes the least burdensome requirement that would prevent 
or adequately reduce the risk of injury. Id. These findings are stated 
in Sec.  1240.5 of the rule and are based on information provided 
throughout this preamble and the staff's briefing packages for the 
proposed and final rules.

O. Conclusion

    For the reasons stated in this preamble, the Commission concludes 
that magnet sets and individual magnets that do not meet the 
requirements specified in this rule present an unreasonable risk of 
injury.

List of Subjects in 16 CFR Part 1240

    Consumer protection, Imports, Infants and children, Labeling, Law 
enforcement, Incorporation by reference.
    For the reasons stated in the preamble, the Commission amends Title 
16 of the Code of Federal Regulations by adding part 1240 to read as 
follows:

PART 1240--SAFETY STANDARD FOR MAGNET SETS

Sec.
1240.1 Scope, purpose, and effective date.
1240.2 Definitions.
1240.3 Requirements.
1240.4 Test procedure for determining flux index.
1240.5 Findings.

    Authority:  15 U.S.C. 2056 and 2058.

Sec.  1240.1  Scope, purpose, and effective date.

    This part 1240, a consumer product safety standard, prescribes 
requirements for magnet sets, as defined in Sec.  1240.2, and for 
individual magnets that are marketed or intended for use with or as 
magnet sets. These requirements are intended to reduce or eliminate an 
unreasonable risk of injury to consumers who ingest magnets that are 
part of magnet sets. This standard takes effect on April 1, 2015 and 
applies to all magnet sets and individual magnets, as defined in Sec.  
1240.2, that are manufactured or imported on or after that date.

Sec.  1240.2  Definitions.

    (a) The definitions in section 3 of the Consumer Product Safety Act 
(15 U.S.C. 2052) apply to this part 1240.
    (b) Magnet set means: Any aggregation of separable magnetic objects 
that is a consumer product intended, marketed or commonly used as a 
manipulative or construction item for entertainment, such as puzzle 
working, sculpture building, mental stimulation, or stress relief. 
Relevant factors in determining intended uses of a magnet set include, 
but are not limited to: The manufacturer's stated intent (such as on a 
label or Web site), if reasonable under the circumstances; the content 
and nature of advertising, promotion, marketing, packaging, or display 
relating to the product; and the uses for which the product is commonly 
recognized by consumers.
    (c) Individual magnet means: An individual magnetic object intended 
or marketed for use with or as a magnet set as defined in paragraph (b) 
of this section.

[[Page 59987]]

Sec.  1240.3  Requirements.

    Each magnet in a magnet set, and any individual magnet, that fits 
completely within the cylinder described in 16 CFR 1501.4 must have a 
flux index of 50 kG\2\ mm\2\ or less when tested in accordance with the 
method described in Sec.  1240.4.

Sec.  1240.4  Test procedure for determining flux index.

    (a) Select at least one magnet of each shape and size in the magnet 
set.
    (b) Measure the flux index of each selected magnet in accordance 
with the procedure in sections 8.24.1 through 8.24.3 of ASTM F963-11, 
Standard Consumer Safety Specification for Toy Safety, approved on 
December 1, 2011. The Director of the Federal Register approves this 
incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR 
part 51. You may obtain a copy from ASTM International, 100 Barr Harbor 
Drive, PO Box 0700, West Conshohocken, PA 19428; telephone 610-832-
9585; www.astm.org. You may inspect a copy at the Office of the 
Secretary, U.S. Consumer Product Safety Commission, Room 820, 4330 East 
West Highway, Bethesda, MD 20814, telephone 301-504-7923, or at the 
National Archives and Records Administration (NARA). For information on 
the availability of this material at NARA, call 202-741-6030, or go to: 
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.

Sec.  1240.5  Findings.

    (a) Degree and nature of the risk of injury. (1) Based on a review 
of National Electronic Injury Surveillance System (NEISS) data, we have 
determined that an estimated 2,900 ingestions of magnets from magnet 
sets were treated in emergency departments during the period from 
January 1, 2009 to December 31, 2013, an average of about 580 ingestion 
incidents per year. From review of databases other than NEISS, we are 
aware of 109 reported incidents occurring from January 1, 2009 through 
June 24, 2014, involving the ingestion of magnets by children between 
the ages of 1 and 15. Of those 109 incidents, 83 involved the ingestion 
of high-powered, ball-shaped magnets that were contained in products 
that meet the above definition of ``magnet set,'' and 17 of those 109 
incidents possibly involved ingestion of this type of magnet. Thus, 100 
reported incidents of ingestions involved or possibly involved magnets 
from magnet sets. Hospitalization was required to treat 61 of the 100 
incidents. In 81 of the 100 incidents, the magnets were ingested by 
children younger than four years old, or between the ages of four and 
12 years.
    (2) Once ingested, these strong magnets begin to interact in the 
gastrointestinal tract, which can lead to tissue death, perforations, 
and/or fistulas, and possibly intestinal twisting and obstruction. If 
left untreated, these injuries can lead to infection of the peritoneal 
cavity and other life-threatening conditions. The number of magnets 
swallowed increases the risk of attraction and injury; but as few as 
two magnets can cause serious internal damage in a very short time. The 
fact that many medical professionals do not appreciate the health 
consequences of magnet ingestion increases the severity of the risk 
because a doctor who is unfamiliar with these strong magnets may send a 
child home and expect the magnets to pass naturally. There are also 
health consequences to the treatment and surgery for removal of 
ingested magnets. There may be a risk of gastrointestinal bleeding; 
leakage of holes that were repaired; rupturing of resectioned bowels; 
temporary paralysis of the bowels; use of a colostomy bag; IV feeding 
initially, or for some longer time period; and compromise of nutrition 
and digestive function. Long-term health consequences can be severe, as 
well: loss of intestinal tissue; compromised nutrition absorption; 
adhesions and scarring of intestines; need for a bowel transplant; and 
possible impediments to fertility for girls. Even children who pass the 
magnets naturally and do not require surgery still need close 
observation by doctors and may undergo sequential x-rays, thus, 
exposing children to repeated dosages of radiation.
    (b) Number of consumer products subject to this part. The market 
for magnet sets increased substantially from the time magnet sets were 
first introduced, through mid-2012. We estimate that the number of 
magnet sets that have been sold to U.S. consumers since 2009, the first 
year of significant sales, may have totaled about 2.7 million sets, 
representing a value of roughly $50 million. Because of CPSC 
enforcement activity and actions taken by firms since mid-2012, most 
firms have ceased selling the magnet sets. Actual sales since the end 
of 2012 by the firms remaining in the market are unknown but believed 
to be small. The remaining major importing firm that continues to sell 
the products is estimated to hold a market share of less than 2 percent 
of pre-enforcement action sales. The approximate number of products 
subject to this part (in terms of unit sales) could be fewer 25,000 
sets per year.
    (c) The need of the public for magnet sets and the effects of this 
part on their utility, cost, and availability. (1) We cannot estimate 
precisely the use value that consumers receive from magnet sets. In 
general, use value would be the amount of money that consumers expend 
on the product, plus the consumer surplus (i.e., the difference between 
the market price and the maximum amount consumers would have been 
willing to pay for the product). Magnet sets of the type that have been 
involved in incidents would not comply with this part. Therefore, 
consumers will no longer be able to obtain utility from these magnet 
sets. Although magnet sets clearly provide utility to purchasers, 
magnet sets are not necessities. Products that meet the requirements of 
this part might be developed that would serve some of the purposes of 
magnet sets. This part would continue to allow strong magnets for other 
uses, such as commercial or industrial uses.
    (2) Individual magnets that are intended or marketed for use with 
or as magnet sets also must comply with the requirements of this part. 
The Commission is aware that firms selling magnet sets have offered 
individual magnets. To avoid firms circumventing the rule by selling 
individual magnets that are nevertheless intended or marketed to be 
used as magnet sets, this part covers such individual magnets. 
Individual magnets sold for other uses are not subject to this part. 
Thus, this part does not affect the need for, utility, or availability 
of individual magnets that are sold for uses other than as magnet sets.
    (d) Other means to achieve the objective of this part, while 
minimizing the impact on competition and manufacturing. (1) The 
Commission considered various alternatives to the requirements 
specified in this part. This part requires that if a magnet set 
contains a magnet that fits within the small parts cylinder that CPSC 
uses for testing toys, all magnets from that set must have a flux index 
of 50 kG\2\ mm\2\ or less. In addition, individual magnets intended or 
marketed for use with or as magnet sets must meet these requirements. 
We do not believe that options other than a rule establishing these 
requirements would sufficiently reduce the number and severity of 
injuries resulting from the ingestion of magnets from these magnet 
sets. The circumstances associated with this product limit the likely 
effectiveness of warning labels. Despite existing warning labels and 
market restrictions, ingestion incidents have continued to occur. 
Parents and caregivers may not

[[Page 59988]]

appreciate the hazard associated with magnet sets. Accordingly, parents 
and caregivers will continue to allow children access to the product. 
Children may not appreciate the hazard and will continue to mouth the 
items, swallow them, or in the case of young adolescents and teens, use 
the magnets to mimic body piercings. Once the magnets are removed from 
their carrying case, the magnets bear no warnings to guard against 
ingestion or aspiration; the small size of the individual magnets 
precludes the addition of any warning. Because individual magnets from 
magnet sets are shared easily among children, many end users of the 
product are likely to have had no exposure to any warning.
    (2) The Commission has considered other alternatives to reduce the 
risk from magnet sets: alternative performance requirements, such as 
setting a different flux limit or requiring bittering agents; safer 
packaging requirements, such as requiring a specific design for storage 
containers or requiring child resistant packaging; sales restrictions; 
continued corrective actions; and taking no action. Some of these 
alternatives may not be within the Commission's authority. Although 
each of the alternative actions would have lower costs and less impact 
on small business, none is likely to significantly reduce the injuries 
associated with ingestion of magnets from magnet sets.
    (e) Unreasonable risk. (1) As stated in paragraph (a) of this 
section, according to NEISS, an estimated 2,900 ingestions of magnets 
from magnet sets were treated in emergency departments during the 
period from January 1, 2009 to December 31, 2013, an average of about 
580 ingestion incidents per year. From sources other than NEISS, CPSC 
has reports of 100 incidents of ingestions that involved or possibly 
involved magnets from magnet sets, including one fatality.
    (2) For the regulatory analysis, we considered the period of time, 
2009 through June 2012, before CPSC's compliance activities affected 
the market. We identified 86 ingestions of high-powered and/or ball-
shaped magnets, which occurred from 2009 through June 2012 reported 
through NEISS. These incidents were determined to involve, or possibly 
involve, magnet sets. Based on these 86 incidents, we have determined 
that an estimated 2,138 ingestions of magnets from magnet sets were 
treated in emergency departments from January 1, 2009 to June 2012. 
About 11 percent of the victims of these ingestion incidents required 
hospitalization, as opposed to victims who were treated and released. 
The 2009 through June 2012 NEISS estimates suggest an estimated annual 
average of about 610 emergency department-treated injuries, including 
544 injuries that were treated and released and 66 injuries that 
required hospitalization. About 60 percent of these emergency 
department-treated ingestions involved children ages 4 through 12 
years. Additionally, based on estimates from the Commission's injury 
cost model (ICM), there were another 319 injuries treated annually in 
locations other than hospital emergency departments (such as doctors' 
offices, clinics, ambulatory surgery centers, or direct hospital 
admissions).
    (3) After including the injuries treated outside of hospital 
emergency departments, there was an annual average of about 929 
medically attended injuries involving ingestions of magnets that were 
defined as at least ``possibly of interest'' during the period from 
2009 through June 2012. Injuries resulting from such ingestions of 
magnets can be severe and life threatening. The risk posed by these 
magnets may not be appreciated by children or caregivers, who may 
assume, mistakenly, that the consequences of ingesting magnets would be 
similar to ingesting any other small object. However, once ingested, 
these strong magnets do not pass naturally. Rather, these magnets are 
mutually attracted to each other and exert compression forces on the 
trapped gastrointestinal tissue.
    (4) We estimate that these injuries resulted in annual societal 
costs of about $28.6 million (in 2012 dollars) during the 2009 through 
June 2012 time period. The average estimated societal costs per injury 
was about $27,000 for injuries treated in locations other than 
emergency departments (such as physicians' offices, clinics, ambulatory 
surgery centers, or direct hospital admissions); about $21,000 for 
injuries that were treated and released from emergency departments; and 
about $130,000 for injuries that required admission to the hospital for 
treatment. Preventing these injuries would be the expected benefit 
resulting from the rule.
    (5) The costs of the rule would consist of the lost producer 
surplus to firms that produce and sell magnet sets, plus the lost use 
value that consumers would experience when magnet sets that do not 
comply with the rule are no longer available. Sales of magnet sets 
averaged roughly 800,000 sets annually during the 2009 through mid-2012 
time period, with an average retail price of about $25 per set in 2012. 
Thus, total industry revenues averaged about $20 million annually 
(i.e., 800,000 sets x $25 per set) in 2012 dollars. The average import 
cost of the magnet sets to U.S. importers, a major variable cost, may 
have amounted to about $10 per set, or an average of about $8 million 
annually (i.e., 800,000 sets x $10 import cost per set). We estimate 
other variable costs associated with the production, packaging, 
marketing, and distribution of the magnet sets would constitute a 
significant proportion of the remaining difference between revenues 
($20 million) and import costs ($8 million). If we assume that variable 
costs amount to about half of the difference, lost producer surplus 
would amount to about $6 million.
    (6) Thus, we estimate costs of the rule to be about $6 million in 
lost producer surplus and some unknown quantity of lost utility. 
Considering the injuries associated with magnet sets--and the resulting 
societal costs, balanced against the likely impact that the rule would 
have on firms producing and selling the product, and on consumers who 
would lose the utility of the product--we conclude that magnet sets 
pose an unreasonable risk of injury and that the rule is reasonably 
necessary to reduce that risk.
    (f) Public interest. The regulations in this part are in the public 
interest because they would reduce deaths and injuries associated with 
magnet sets in the future. A rule establishing requirements that would 
eliminate magnet sets of the type that have been involved in incidents 
will mean that children will have less access to this product, thereby 
reducing the number of incidents of children swallowing the magnets and 
the resulting cost to society of treating these injuries.
    (g) Voluntary standards. Currently, there is no voluntary standard 
for magnet sets, nor any activity to develop a voluntary standard for 
magnet sets.
    (h) Relationship of benefits to costs. (1) Based on reports to the 
CPSC, ingestions of small magnets contained in magnet sets have caused 
multiple, high-severity injuries that require surgery to remove the 
magnets and repair internal damage. Based on the information discussed 
in paragraph (e) of this section, we estimate that the benefits of this 
part might amount to about $28.6 million annually.
    (2) The costs of the rule, in terms of reduced profits for firms 
and lost utility by consumers, also are uncertain. However, based on 
annual sales estimates available for the 2009 through June, 2012, study 
period, these costs could amount to about $6 million in lost producer 
surplus and some unknown quantity of lost utility.
    (i) Least burdensome requirement. We have considered several 
alternatives to

[[Page 59989]]

this part. We conclude that none of these alternatives would adequately 
reduce the risk of injury. Alternative performance requirements might 
allow a different flux index for magnets contained in magnetic sets or 
require the addition of an aversive (bittering) agent to the magnets. 
Theoretically, these alternatives might allow continued production of 
some current products. However, it is unclear whether a different flux 
index would succeed in making products that have the desired physical 
qualities that make them sufficiently enjoyable to adults, and at the 
same time eliminate the characteristics that make these strong magnets 
hazardous to children. Furthermore, the effectiveness of aversive 
agents in reducing magnet ingestions is questionable. We have 
considered the possibility of requiring rigorous warnings on the 
products or in the instructions for the products. However, magnet sets 
currently and formerly on the market provide warnings concerning the 
potential hazard to children. Accordingly, it is unlikely that even 
strengthened warnings would substantially reduce the incidence of 
magnet ingestions. This is particularly true for incidents involving 
older children and adolescents. Moreover, children who are old enough 
to understand the warnings may still not abide by them. Some type of 
sales restriction, limiting the location where magnet sets could be 
sold, might be possible. However, even with restrictions on sales, 
ingestions are still likely to occur as children encounter these 
magnets in the home, at school, or other locations where adults have 
brought them and made them available to children. The Commission could 
continue to address the hazard from magnet sets through corrective 
actions, i.e., recalls of the product. However, these actions would not 
prevent additional companies from entering the market and importing 
magnet sets into the country in the future. The Commission also has the 
option of taking no regulatory action. Although it is possible that, 
with increased awareness of the hazard over time, some reduction in 
ingestions could occur, the magnitude of any such reduction in 
incidents is uncertain and would likely be smaller than those resulting 
from the requirements of this part.

    Dated: September 26, 2014.
Todd A. Stevenson,
Secretary, U.S. Consumer Product Safety Commission.
[FR Doc. 2014-23341 Filed 10-2-14; 8:45 am]
BILLING CODE 6355-01-P
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