Etsy is a venue for selling. They will not be "policing", but it is against the TOS to sell anything that is not lawful to sell. We are responsible to know the laws that apply to our products and be in compliance.
As for "under the radar" one doesn't really know if a product has been tested, there is no label that is required that screams "tested and everything is okay". Currently some products can use the testing reports from their suppliers if they can get them. Some things have no stay, and must be tested now. That has been one of the most confusing parts of this law (one among many). I do believe that screen printing inks must be tested as some could contain lead, since they are considered surface paints and do not become part of the substate.
Your embroidery itself should be exempt as it is just thread, depending on what it is going on, such as a t shirt would also be exempt, but if you stitch on a onepiece snaped outfit for a baby, then you would have to test as the snaps are not exempt.
