The toys, fabricated by Mattel and subsidiary Fisher Price, were found to have traces of lead paint in them.

The damage payment will be shared among 39 US states which reached a settlement agreement Monday with Mattel and Fisher-Price, resolving a 15-month probe into the events that lead to the voluntary recall of the companies' toys.

The consent judgment requires Mattel to make a payment of US$12 million by Jan 30 to be divided among the participating states, said Ms Martha Coakley, Attorney General of Massachusetts, which led the multi-state group investigation and settlement.

'Lead is highly toxic, particularly to young children. Higher exposures to lead, such as the levels found in these toys, can cause grave health problems, Ms Coakley said in a statement.

She said the agreement also included lead monitoring requirements aimed at preventing such a public health scare, in addition to funds for protecting children from the dangers of lead poisoning.

From August to October, 2007, the United States Consumer Product Safety Commission recalled about two million Mattel and Fisher-Price toys, all manufactured by contractors in China as they contained excessive lead levels.

The US Congress has since enacted a law, the Consumer Product Safety Improvement Act, requiring more stringent standards for lead in toys, effective February 2009.

Under a judgment filed on Monday, Mattel must phase-in more stringent standards ahead of the timelines provided by the newly enacted law, Ms Coakley said.

China is the world's biggest toy exporter, with total sales of 60 billion toys in 2006, amounting to 60 per cent of the world market.

Concerns have mounted over the years about the safety of China-made products following a series of scandals, ranging from dairy products, to tires, toothpaste, dog food and toys. -- AFP