Hong Kong toy manufacturers who owned factories on the mainland urged the government to help them cope with worsening business environment caused by increasing safety requirement.

The call for help was made after the US-based giant Mattel recalled more than 18 million toys globally and a co-owner of a Hong Kong-owned factory Cheung Shu-hung, whose toys were involved in Mattel previous recall, committed suicide.

The latest recall included 436,000 Chinese-made die-cast vehicle on the popular Sarge character from the movie Cars for containing lead beyond permissible limits. The toys were made by Hong Kong-based Early Light Industrial, which subcontracted the painting of parts to vendor Hong Li Da on the mainland.

The vendor utilized paint from an unauthorized supplier instead of using paint supplied directly from Early Light as required.

About 2,000 such toy cars and 30,000 of the recalled items were sold in Hong Kong. Mattel received about 100 telephone enquiries yesterday.

Hong Kong-based toy manufacturers said they could not ship their products to US as they were waiting documents from mainland authorities certifying toys safety.

Hong Kong SME Progress and Investment Association chairman Chiu Che-hon said at least one-third of 30,000 toy factories in the Pearl River Delta region would fold up because of the new safety requirement.

"Business situation is also worsening because of rising labour and material cost. We badly need help," he said.

Chiu said manufacturers which had their products recalled might also need to compensate the buyers.

"Factories may be required in the contract to compensate the retail loss should the products be recalled or found substandard after being shipped," he said.

Toy manufacturers in Dongguan have decided to set up a limited company, which would handle the orders given to the factories. Clients need to pay a 50 percent deposit when placing an order. The clients or an authorized person can check the products quality before shipment.

The clients need to pay the remaining cost when the products are shipped, Chiu said.

"That limited company may be liquidated should the clients ask for compensation after the shipment," he said.

(HK Edition 08/16/2007 page6)