Transcript
Page 1: Newsletter january 2017  schoenfeld consulting

SCHOENFELD CONSULTING NEWSLETTER – JANUARY 15, 2017 – Volume 3, Issue 1

SCHOENFELD CONSULTING NEWSLETTER JANUARY 2017 HEADLINE NEWS

New Formaldehyde Regulations from U.S.EPA FINAL RULE

The U.S. Environmental Protection Agency on December 12,2016 finalized the new Federal regulation to reduce formaldehyde emissions from composite wood products used in furniture.The rules and regulations were published in the Federal Register. Starting on February 10,2017the required accreditation bodies and Third Party Certifiers(TPC’s) can apply to the U.S.EPA for approval.These TPC’s are in most cases are similar to the

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43 CARB TPC’s established since 2009 for the California law for formaldehyde emissions regulation ATCM #93120. All regulatory provisions and requirements take effect on December 12,2017,one year after the regulation was published. In summary the US EPA added Title VI to the TSCA (Toxic Substance Control Act)to reduce exposure to formaldehyde.This final rule includes standards for emissions from hardwood plywood,medium density fiberboard,and particle board and finished furniture goods containing these products that are,sold,supplied,offered for sale,or manufactured(including imported)in the United States. In this final EPA rule are provisions relating to;laminated products,products made with NAF(no added formaldehyde

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resins) ULEF(ultra low-emitting formaldehyde resins),testing requirements,product labeling,chain of custody documentation and other record keeping requirements,enforcement,import certification and PRODUCT INVENTORY SELL-THROUGH PROVISIONS,including a product stockpiling prohibition.This final rule also establishes a third-party certification program for composite wood products used in furniture and includes procedures for the accreditation of TPC’s and general requirements for accreditation bodies who approve the TPC’s. The are now over 1200 mills worldwide producing composite wood products used in furniture that have been approved by the California Air Resources Board(CARB).These mills will also be in

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compliance with the new federal law. The finals rule also establishes an EPA Third Party Certification Program.TPC’s already approved by CARB are eligible for EPA TSCA Title VI recognition through “reciprocity”,provided that they meet all applicable requirements.Existing CARB TPC’s and TPC’s approved by CARB during the two year transition period may certify composite wood products under TSCA Title VI until December 12,2018.After that time EPA will only recognize TPC’s ,including CARB approved TPC’s who are accredited by EPA recognized accredition bodies. Between now and the December 12,2017 date when the manufacturing of composite wood products are required to be compliant with the new EPA Federal law TSCA Title VI(40 CFR 770) we will be following all final details in the new law as

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it effects our furniture industry in future issues of this newsletter.

CHINESE PLYWOOD IMPORTS FOR U.S. FURNITURE PRODUCERS The U.S.International Trade Commission and the U.S.Department of Commerce received a petition from a group of U.S.hardwood plywood manufacturers

known as the “Coalition for Fair Trade in

hardwood plywood” asking for increased

import duties on plywood imports from China.Claiming that Chinese plywood imports are being dumped at below U.S.market value prices.They are now asking for an increase of more than 105% duty on these imports. Another group the American Alliance for Hardwood Plywood(AAHP) in a statement from Chairman Greg Simon

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stated that “The same six petitioners

brought this case in 2012 and lost unanimously by the International Trade

Commission’s ruling.Then they appealed

to federal court and lost again.Now their solution is to use the same playbook and bring another case in the hopes of disrupting proven fair trade that is fostering the production of U.S.made goods employing tens of thousands of

U.S.workers” How this would effect furniture costs for U.S. furniture manufacturers is somewhat complicated.

Looking into the history of this effort in 2012/2013 and the results: A)Initial Petition filed on September 27,2012. B)Dep. Of Commerce initiates CVD/AD Investigations in November of 2012. C)Preliminary determination announced Import duties were assessed on Chinese

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plywood imports in February of 2013 at a CVD(countervailing Duty) rate of 22.63%. D)-Commerce announced AD(additional duty) rate of 22.14%,in May of 2013 combined rate was then 44.77%.

E)-September of 2013 final combined determination announced at 73.04% after public hearings. F)-November 25, 2013 ITC announced that the case was dismissed.

Then after the ITC ruled against the institution of these duties in November of 2013 the duties already paid by the importers of record were refunded to these importers.HOWEVER in the interum the producers raised prices to cover the higher duty paid.When the producers received the refunds they did not lower their prices back, they simply kept the prices at the higher levels and kept the windfall profits.

In this case when governmental intervention occurs, the rules of supply

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and demand are disrupted and an artificial inflationary price increase is allowed that is not warranted by increased costs of goods produced but is the unintended consequensce of political intervention.However,perhaps not so unintended.As Mr.Simon stated this play book is being tried again by the same six manufacturers who benefited from their

“FAILED”effort in 2013.The costs to

furniture manufacturers in the U.S.then has had an artificial increase in 2013 and

remains so. Any support of the “Coalition

for fair trade of hardwood plywood” is

support for higher prices for our furniture industry products using hardwood plywood in the supply chain and will result in higher prices to the consumers of furniture products.This increase is unwarranted and should be opposed by all,since it will occur again even if the ITC initially rejects it again!

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We will continue to follow this case as we proceed with the new petition which was filed on November 18,2016.If the same scenario is repeated by the ITC, the final determination of the case will be released in December 2017.

TIP-OVER Recalls and Prevention Continue After the 29 million Ikea Malm dressers were recalled in 2016 at a cost of $50 million another large producer, Masco has issued a voluntary recall of a variety of its freestanding islands,vanities and kitchen cabinets for potential tip-over risks to consumers.About 135,000 units were recalled. UNIVERSAL FURNITURE offers a Solution.

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In order to prevent these tip-over incidences Universal Furniture has designed a new anti-tip feature in two case pieces of its new Axis line of youth furniture aimed to increase safety in children’s bedrooms.The new “safe stop” drawer mechanism allows only one drawer of the chest to be pulled out at a time and the dresser allows only one drawer on either side to be opened at a time.Preventing children from using the drawers as a ladder to reach the top.Also the drawer locking mechanism limits the amount of weight of all drawers containing clothes and other items since they cannot all be opened at once which can prevents tip-overs. Gary Bocock stated that Universal plans

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to offer this new mechanism on all future “Smartstuff” youth collections. The CPSC voluntary standard for clothing storage units ASTM-F2057-14 should be checked to confirm if the new collection has been approved by compliance testing to this voluntary standard. We will continue to cover developments that engineer solutions to tip-over risks by “designing in” solutions and safety standards before these products are manufactured and released to consumers. We urge the CPSC and furniture manufacturers worldwide to make the voluntary standards(ASTM F2057-14) that exist now for Tip-over prevention a

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required standard for our furniture industry.

DODD FRANK And Furniture In 2010 Congress passed the “Dodd Frank” legislation for U.S.Banks. In this banking bill(H.H.R.4173)requirements, there is a section called the “conflict minerals rule” which for PUBLICLY TRADED furniture companies is regulated by the SEC(security and exchange commission) there is an annual obligation to get reports from all suppliers that ship anything electronic.This includes power motion,lamps,power bed bases or

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anything else that uses electric current.A list of conflict minerals includes; tin,tantalum,wolframite,cassiterite, coltan,gold and tungsten.These minerals are used in electrical components in some furniture items mainly in power motion recliners. The rule is designed to prevent the minerals sourced from the Democratic Republic of the Congo(DRC) from being used because more often that not the mineral sales profits are used to support genocide,murder,rape and forced labor. The latest version for compliance by

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EPA standards is level VI which became effective on February 10,2016.Any electronic component used must pass this standard if shipped after February 2016.Again this is only required for publicaly traded furniture companies regulated by the SEC. Flame retardant Chemicals The California DTSC(Department of Toxic Substances Control) has stated that the decline in the use of Polybrominated Diphenyl Ethers (PBDE’s) a common flame retardant used in many household products

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and was used in upholstered furniture until a ban of this chemical took effect in 2006 by California Assembly bill AB 302.The results of the study showed a decline of 39% in the level of PBDE found in women’s breast milk.Since 2006 a dozen other States have instituted similar bans. The DTSC study reveals the effectiveness of their (SCP)Safer Consumer Products program.PBDE’s can migrate out of products, especially upholstered furniture and eventually settle down in the home environment as dust.Consumers breathing in contaminated air or hand to mouth absorption by

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children can transmits the chemical. With the passage of Cal-117-2013 in 2014 for the flammability of upholstered furniture, the use of any dangerous flame retardant chemicals were effectively eliminated since the new regulation changed from an open flame test requirement(1976) to a smolder test requirement for compliance where these chemicals were not required to meet the now current regulation.This California standard is now effectively applied to most all upholstered furniture produced worldwide.Thanks to the efforts of Arlene Blum of the Green Science

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Policy Institute and Said Nurbakhsh of the California Bureau of Hone Furnishings.

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Furniture Laws & Regulations [email protected] 415-290-4144 Website:

www.schoenfeldconsulting.net

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