Under the FTC just about all clothing, including ones for adults, pretty much needs to have care and content labels even if your upcycling fabric or recycling fibers. I don't know what the FTC fines or penalties are but have heard of at least one case against DC area seamstress that made theater costumes being shut down for 5 years for investigation for violating The Textile and Wool Acts. You may want to start with
http://business.ftc.gov/selected-industries/clothing-and-textiles to see which of the Acts and regulations the FTC oversees that you may need to follow.
Under the CPSIA items even when made with 100 % lead testing exempt materials children under 13 sized clothing will need an aditional a permanant label for tracking purposes. The tracking label must lead back to a GCC kept in your files. This label is governed by the CPSC, a seprerate government agency than the FTC with it's own acts, regulations, and laws to enforce including ones about fabric flammability and burn rates when used on certain types of clothing. Additionally under the CPSIA you need to have lead test results for any non-exempt item included on the kid's clothing like zippers, buttons, snaps, fastner frogs, screen print inks, fabric paints, iron-on transfers, and other non-fabric embellishments. Depending on the sizes of children's clothing your producing additional tests may be required like phthalate, small parts, and strangulation testing.
For the current full list of raw materials offically exempt from CPSIA lead testing please read
http://www.cpsc.gov/businfo/frnotices/fr09/leaddeterminationsfinalrule-draft.pdfAn update on the stay of 3rd party & component testing
http://www.cpsc.gov/cpscpub/prerel/prhtml10/10083.htmlTracking labels required on every product for children under 13
http://www.cpsc.gov/about/cpsia/sect103policy.pdfOverview of what needs to be on a GCC
From
http://www.cpsc.gov/about/cpsia/faq/elecertfaq.pdf A general overview from the CPSIA for Small Bussinesses
http://www.cpsc.gov/about/cpsia/smbus/cpsiasbguide.htmlThe CPSIA main pages
http://www.cpsc.gov/about/cpsia/cpsia.htmlA gateway page for summeries of the law by subsection
http://www.cpsc.gov/about/cpsia/legislation.html#summariesCPSC page to search for product specific regulations
http://www.cpsc.gov/cgi-bin/regs.aspxA timeline from the CPSIA
http://www.cpsc.gov/about/cpsia/rulemaking.pdfAlso the lead testing and phthalate tesing is retro-active as considered by certain states Attorney Generals' offices
http://www.cpsc.gov/library/foia/advisory/317.pdf