The 111th session of the U.S. Congress is anything but dull when it comes to the issues that are currently being debated by lawmakers. Faced with some enormous challenges, bills currently under way could change the face of the business climate for decades. From stimulus and tax issues to climate change, many of these measures could make a profound impact on the U.S. forest products industry.
Given this backdrop, I recently discussed the current status of major legislation with Deb Hawkinson, the executive director of the Hardwood Federation. The Hardwood Federation is the only trade association that represents the U.S. hardwood industry and its public policy interests on Capitol Hill. As an umbrella organization with 25 trade associations the HF represents the majority of organizations engaged in the manufacturing of American hardwood products. The industry uniting together with one voice ensures a unified voice on legislation impacting hardwood businesses.
Pallet Enterprise: House Resolution 81 is one of your big priorities this session. What is its status and why is it needed?
Hawkinson: We thought House Resolution 81 was going to go for a vote before the August recess, which did not happen. But we do expect the House to take it up as soon as they get back, and are hopeful it will pass quickly in September.
If passed, H.Res 81 will not be a law, but rather the recognition by Congress that the U.S. hardwood industry is sustainable, and that Congress feels there is no reason to exclude U.S. hardwoods from any kind of environmental preferred green building system.
Hardwood companies across the U.S. face a lot of challenges on some of the green building schemes. We are starting to see both the federal and state governments mandate green building standards for government buildings to guide architects, builders, and customers. Whenever we see something that could create some marketplace disadvantages for hardwoods, we take action.
One of the things that I want to make clear is that the Hardwood Federation has no position one way or another on any particular lumber certification scheme. We fully recognize that the lumber industry has made progress on developing certification options and we see a movement in that direction. But the numbers are still that about 80% or so of American Hardwood businesses are not certified. That’s a large number. We felt it put hardwoods at a disadvantage if legislation were to be passed that something had to be LEED certified or the like. We want Congress to understand that hardwoods too are renewable, sustainable resources. We just happen to have not found that perfect fit with green building schemes. Until we find that fit, we are looking to protect the industry where we can.
We are only looking to pass this resolution in the House for now. The Hardwood Federation Board will meet in September and will decide if we want to pursue a similar resolution passed in the U.S. Senate. Since this is not a law, passage in both the House and the Senate is not a requirement.
Pallet Enterprise: Every industry has been trying to do what it can to stimulate spending. What tax credits have been considered by Congress that could provide relief to the forest products industry? Where do these bills stand?
Hawkinson: The Hardwood Federation has supported stimulus bills aimed at encouraging growth in the housing market and consumer purchases of home furnishings and building products. We continue to support the temporary tax credit of $8,000 for first time home buyers, which was in the initial stimulus bill. The Senate is now considering S. 1230 that would increase the tax credit to $15,000 and open it up to any home buyer when the current credit expires. We are very supportive of that. That is some legislation that is moving through the House side right now.
We are also very supportive of a tax credit of $2,000 per family for the purchase of qualifying home furnishings and building products. Congressmen Hank Johnson (D-GA) and Nathan Deal (R-GA) have introduced the HIRE Act, H.R. 3382, to offer tax credits and relief, (up to $2,000 per family) to consumers and businesses purchasing qualifying home improvement furnishings and building products. Urge your Congressman to become a co-sponsor and to contact Reps. Johnson or Deal for more information.
There is a lot of noise on Capital Hill. Everyone is trying to do what they can for their industries to stimulate the marketplace. But we feel that housing has a real story to tell. Everyone knows that the housing market is so important to the recovery, not only for the country but definitely for our industry.
Pallet Enterprise: Are these tax measures likely to pass?
Hawkinson: It is too early to know that for sure. There is support for our industry. People on the Hill know how important it is for the country. But for these two provisions, it is too early to tell.
Pallet Enterprise: The House passed a climate change and renewable energy bill earlier this year. What is likely to happen in the Senate? What are your concerns as a final bill gets hammered out?
Hawkinson: The House narrowly approved the American Clean Energy and Security Act, H.R. 2454, by a vote of 219-212. The sweeping legislation now awaits action by the U.S. Senate, where there is discussion of breaking the bill into smaller, more manageable pieces.
On the House side, when the bill first came out of the House Energy Commerce Committee, there was some language in there that we were very concerned about. It didn’t recognize the forestry solution to renewable energy in a broad manner. There was some very restrictive language. Fortunately, once it left the committee, we were able to work to get that language amended.
While we didn’t come out in support of this legislation, the Hardwood Federation, like many around the table, just wanted to have a seat at the table. We wanted to do our best to protect our industry. At the same time, we didn’t come out and say that we support current climate change mediation efforts. That is a conversation that our board will have to have in September. What we did do is try to influence the language that affects wood as renewable energy, carbon sequestration, and recognizing forest products in that equation. We didn’t want them to only look at carbon sequestration from the forests; we also wanted them to consider sequestration from wood products.
When the House bill passed, we were satisfied that we achieved those goals. For example, the U.S. Department of Agriculture would be the lead on carbon offset policy and not the Environmental Protection Agency. There were also several improvements to the biomass definition that we felt was closer to the Farm Bill in terms of material that can be included in renewal energy for biomass. That definition is fairly solid for hardwoods. It would include residue waste and the kind of material that we would see the hardwood industry use as new sources of energy.
On the House bill, we met our top goals. On the Senate side, we have already heard that Senator Boxer plans to work from the House Energy & Commerce bill that passed, which was the version we did not like, that we had to work hard to change. So we are gearing up along with our coalitions to address these same issues again in the Senate. We have our work cut out for us.
Pallet Enterprise: What small businesses issues, especially tax policies are on your radar screen for this session of Congress?
Hawkinson: Tax policy is an important consideration for driving industry. One issue that comes to mind is estate tax reform. That continues to be debated. We have a 2010 deadline approaching when the current policies expire. We are working with a broad coalition of interests on that issue. We are trying to represent the interests of the small businesses that make up much of our industry that want to be excluded from estate taxes as much as possible.
We are still waiting to see what emerges. We do expect some language to start to come forward here in the fall. We are going to try to reform the tax. I don’t think we are going to be able to completely get it removed.
Pallet Enterprise: After the recent election, Congress has moved even more to the left. With Democrats firmly in control of Congress, what is the likelihood of estate tax relief?
Hawkinson: I think we have a chance for reform, especially for small businesses. Any kind of tax reform is going to be tough because of the economy and the deficit. Trying to work things through where the government gets less money from taxes is going to be tough. But I do think that Congress is going to try to be fair to keep estate tax policy from being too burdensome on small businesses, especially in rural areas where these businesses are crucial for the livelihood of their communities. But any kind of tax reform limiting federal revenue right now is going to be challenged.
Pallet Enterprise: President Obama has been in office for several months. What kind of grade should he get from the forest products industry?
Hawkinson: We always try to work with whoever gets elected. We generally are fortunate to find some fair minded people who are willing to consider what we have to say. That’s the approach that we are taking.
Pallet Enterprise: A major issue for the hardwood industry has been illegal logging and lumber products coming into the country. What is the status of this legislation and enforcement of existing standards?
Hawkinson: The law has passed. And now it is illegal to bring illegally harvested lumber and wood products into the United States. The part that we continue to work is around the declaration. Some have confused that. They think the declaration is what determines the legality of the product. But the declaration is just a tool to support the law. The law is in place. If someone is caught bringing in an illegal product, the declaration is irrelevant.
If the government has proof that someone knowingly has brought an illegal wood product into the country, the government can move forward without a declaration for that product having been implemented yet.
We have worked hard with a broad coalition to help the federal agencies implement that law. We just have some challenges that we are working through. A lot of that involves the agencies having the resources to have the right kind of database for electronic filing of this information and staff to monitor it. We have all agreed to a timeline to gradually phase in the system so that it gets where we all want it to be.
The original exemption for wood packaging materials, such as pallets, still holds true.
Pallet Enterprise: I heard that the House recently developed a Health Forest Caucus. Are issues important to the forest products industry gaining exposure in Congress? What about the industry as a whole?
Hawkinson: There is a great awareness in Congress of the importance of the U.S. forest products industry. The renewable energy debate has brought even more attention. It has highlighted how the industry can play a key role to solve some of those renewable energy challenges.
These caucuses are important. We are looking at the group of members of Congress that helped us with House Resolution 81. We want to get them involved with that caucus. It is all part of the education that needs to be done on the differences in the forest products industry. There are softwoods and hardwoods, and the groups can have different key concerns. We are doing our part to educate members of Congress about the hardwood industry. I think the caucuses are a really good thing to help us be a resource on issues affecting the hardwood industry.
Pallet Enterprise: Some in Congress have floated some changes to the Clean Water Act. What are these changes and why is the Hardwood Federation concerned?
Hawkinson: AF&PA has really been the lead on that issue. We support their efforts. I know that we are concerned with the definition of “navigable waters” and what that would mean, especially that the bill sights small puddles of water where the language gets beyond whatever the law was intended to do. It turns into a bureaucratic nightmare for our industry. Particularly concerning is that use of the term “waters of the U.S.” could mean any puddle, ephemeral stream or drainage basin.
It is a priority issue for us and one we will be monitoring.
Pallet Enterprise: What key transportation issues are currently being discussed in Congress? I know that truck weights are a concern. Please explain why this issue is important.
Hawkinson: The two transportation issues we are seeing right now on the Hill are on rail and truck weights limits. Trucking has been the issue that we have been most engaged with. We have been participating with a grassroots coalition of interests. We favor increasing the national truck weight limits from 80,000 lbs. to 97,000 lbs. with a sixth axle for the federal interstate.
It has been a good opportunity to educate Congress on how our highway system works. There is a shortage of transportation capacity that affects our industry. We believe by increasing these weights there will be many benefits. There will be less congestion, decreased emissions, improved global competitiveness, improved highway safety, efficiency. It is an issue we continue to work.
Congressman Oberstar has some concerns with bridges and other safety issues. Safety is the biggest thing we have to tackle. We have to get that message across that this proposed change is a safe way to go. There are different studies that have been done that promote increasing truck weight limits. It certainly fits the country’s goal of trying to use less fuel.
Pallet Enterprise: What else have I missed?
Hawkinson: The other issue that we focus on a lot is the fee imposed by the U.S Animal Plant Health Inspection Service (APHIS) for phytosanitary certificates on lumber and logs. The industry needs these certificates to export into certain countries.
We were notified that the fee for phytosanitary certificates was going to increase 100%. It is scheduled to go into place October 1 with a gradual increase over time. We have been trying to get APHIS and the House/Senate Agriculture and Appropriations Committees to put pressure on the USDA to encourage countries like China to accept kiln drying in lieu of a phytosanitary certificate. For example, the National Hardwood Lumber Association dry kiln service is accepted by USDA. Federal authorities have been trying to work with foreign governments to accept this treatment instead of requiring a phytosanitary certificate. These certificates will probably still be very cost competitive for smaller exporters. But for large exporters, it is going to be a hefty increase. We have done some surveys to show that options like the NHLA program can bring about some key savings. We are trying to open up that market so that our industry can have an option.
When countries bring their products into the United States, we do accept their industry dry kiln processes. We don’t require a phytosanitary certificate for non-living plants. We are looking at that and asking if there are opportunities to improve the system.
Pallet Enterprise: Another issue that has been a problem for small businesses is the application of renewable energy tax credits. What needs to be changed about those laws?
Hawkinson: I think that you are talking about the Section 45 tax credit. The way that law is written if you sell energy that you produce to a third party, you get a tax credit for that. If you make all of your own energy to run your mill and don’t sell it to a third party, you can’t get a tax credit for that. We are looking to amend Section 45 so that any company that produces its own renewable energy can get a credit for that without having to sell to a third party.
This issue has been addressed by two bills in Congress. H.R. 622 and S. 870, introduced by Congressman Mike Michaud (D-ME) and Senator Blanche Lincoln (D-AR) respectively, repeals the third party sale rule for renewable energy tax credits.
