I don't think you'll have to worry about your fabric, most fabric has been exempted from testing (unless it's been painted or otherwise added to).
You do need to have tracking labels permanently attached to your items, and if your items are too small for a label, the tracking info can go on the packaging.
Check out this thread started by myblessedbaby ... all the really important info about this law is in here!
http://www.etsy.com/forums_thread.php?thread_id=6235864