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Hardwood Federation September 2018 Newsletter

 From the Executive Director:  2018 Fly-In … WHOA!

As a regular reader of the Hardwood Federation Newsletter, you know how important the Fly-In to Washington D.C. is to our efforts on behalf of the industry in our nation’s capital.  And you may have considered joining us. This year industry leaders showed up in record numbers!  Hurricane Florence did not stop the Hardwood Federation from hosting our biggest Fly-In to Washington D.C. in our nearly 20 year history. Although we proceeded as planned, we very much kept in mind the devastation so many of our friends and peers in coastal areas suffered during and after Florence.  We continue to keep them in our thoughts and prayers.

Despite the threatening weather, the Fly-In brought hardwood industry leaders from across the country to Washington to tell their stories and relate the industry’s message directly to the Members of Congress that draft and vote on legislation impacting their bottom line.  This year, 83 hardwood representatives attended events held from September 11th through the 13th – far and away our largest number of attendees ever.  Our participants were a great mix of knowledgeable Fly-In veterans and eager new faces highlighted by a great turnout from the Hardwood Manufacturers Association’s Next Gen Council and the National Wood Flooring Association’s Emerging Leaders groups.  Together we stormed the Hill in small groups and visited as many congressional offices as possible to make a real difference!


Attendance wasn’t the only record to fall.  Fly-In participants attended a record 123 meetings with Members of Congress and staff, as well as important Administration meetings with U.S. Department of Agriculture Secretary Sonny Perdue, senior staff and advisors at the Department of Commerce, and the Chief Economist to Vice President Mike Pence.  In total our groups met with 45 Senate offices – nearly half of the entire Senate – and almost a fifth of all Representatives…quite an impressive showing!



As in years past, the Hardwood Federation PAC sponsored social events for Republicans and Democrats during the Fly-in.  This year saw even more record numbers at these events.  Thirty-five (35) Republican Members attended our Wednesday evening reception – and in a room with more than 80 industry folks the walls could barely hold us in! The next morning seventeen Democrats joined us for breakfast.  In total HFPAC contributed $101,000 to deserving Members of Congress during the events.  These numbers, and the effort by Members of Congress to attend the events, continue to prove that Hardwood Federation and the HFPAC maintain a solid reputation and significant clout on Capitol Hill.  These events also provide us with an outstanding opportunity to reconnect with friends on the Hill and establish new relationships.



Participation in this year’s Fly-In was clearly driven by concerns surrounding the ongoing U.S. trade dispute with China and the resulting tariffs on both Chinese imports and U.S. exports, most importantly to us, the tariffs on U.S. hardwood exports to China.  Also of high importance is the reauthorization of the Farm Bill which not only contains programs supporting export promotion, but also essential forest management reform efforts.  This year’s Fly-In was all about Trade and the Farm Bill. 

Our message on trade was simple:  Trade is having a devastating impact on hardwood sawmills and we asked that the Trump Administration return to the negotiating table as soon as possible. The hardwood industry relies on export markets for its survival. In 2017, U.S. hardwood producers shipped $4.04 billion worth of U.S. products to global markets; $2.09 billion to Greater China.  China, the NAFTA countries and the E.U. make up 82% of hardwood exports.  In 2017, the U.S. had a trade surplus of $1.475 billion in hardwood lumber, up from $1.1 billion in 2015. 

The 10-25% retaliatory tariffs by China on U.S. hardwood exports hurts U.S. hardwood companies, workers and consumers and causes long term damage to international markets.  If this downward spiral continues, countless jobs will be lost, companies closed, and local economies dependent on hardwood mill operations will erode. We asked that the Trump Administration return to active, high level negotiations with the Chinese government and work towards swift resolution of differences and a return to certainty and stability in the global marketplace and pursue stringent enforcement of existing safeguards against unfair trade practices.

The Farm Bill is an equally complicated issues.  The Hardwood Federation supports re-authorization of the Farm Bill by September 30 and advocates for the following Farm Bill programs:

  • HF strongly supports full funding for the Market Access Program (MAP) and Foreign Market Development (FMD) program in the 2018 Farm Bill;
  • Federation supports new categorical exclusions from NEPA in the House bill that will facilitate federal forest management;
  • HF supports the Timber Innovation Act provisions in the Farm Bill to develop new markets for wood products using Cross Laminated Timber.

We hope everyone enjoyed their time on the Hill, learned something new, and came away with a new appreciation of how their engagement can make a difference on public policies made in Washington.  I encourage everyone reading this to join us for next year’s Fly-In so we can reach more offices, be even more effective, and set even more new records!  We hope you can join us!


For more information on the Fly-In, issues discussed, or to find out about participating in Fly-in 2017, contact the Hardwood Federation at (202) 463-2705.

Issues

Trade

Late in the evening on Tuesday September 19th the Chinese government announced they would proceed with retaliatory tariffs on U.S. products in response to the Trump Administration’s imposition of 10% tariffs on $200 billion worth of Chinese imports, including a variety of hardwood and hardwood products.  Retaliatory tariffs were be imposed on $60 billion worth of U.S. exports at either a 5 percent or a 10 percent rate, and began the same day – Monday, September 24, 2018 at 12:01 a.m.  HF received a list translated from Chinese of the logs and lumber we intend will be those affected that has since been confirmed by US hardwood people on the ground in China.

China’s latest list of retaliatory tariffs does not appear to be changed from the proposed list released in early August.  You may view the list of agricultural products included in both lists Here.  Forest product numbers begin with 44 and start on page 11. Initial review indicates that tariffs will be applied as follows:

A 10 percent rate would apply to products originally slated for tariffs of 20% and 25%

A 5 percent rate would apply to products originally slated for tariffs 10% tariff and 5 %

Poplar, Walnut lumber                                     5%

Hard maple lumber                                         5%

Oak logs and lumber                                      10%

Cherry lumber                                                 10%

White Ash lumber                                           10%

Ash, Poplar, Walnut logs                                 10%

Hickory, Cherry, Basswood, Maple logs        10%

The Chinese government’s announcement did not clearly indicate if the Chinese tariffs will increase on January 1, 2019 to match U.S. planned rate increase from 10% to 25%.  However, separate statements indicate that “if the United States insists on further increasing its tariff rate, the Chinese side will respond accordingly, with related matters released separately,” perhaps hinting that China will increase rates on these products back to the levels proposed in the August 3 draft if the U.S. moves forward with increases.

Trade negotiations that were initially proposed to take place late in September were cancelled by the Chinese in light of the imposition of the latest round of tariffs.  Unfortunately, no future talks have been mentioned.  We will continue to monitor the situation and push for negotiations to begin.

Farm Bill

The current Farm Bill expires on September 30.  While House and Senate conferees have been negotiating, they have not finalized a deal on a conference report to send to the President.  With the House expected to leave town today until after the November election, leadership in the House and Senate have indicated that they are not contemplating an extension and that they will allow for a lapse in authorization. 

This development will affect different programs in different ways.  Some programs have mandatory funding and are unaffected at least through the end of the year.  Others, like the Foreign Market Development (FMD) program, lapse and will have to run on unused reserves and carry-over funding until a new Farm Bill is signed.  Expectations are that a Farm Bill agreement will be forged and signed into law after the election.  

The Hardwood Federation team has been meeting with House and Senate Agriculture Committee leaders as well as various conferees and House and Senate leadership about the importance of this program for our sector.  There is strong support for FMD in both chambers, but the program is unfortunately one of 39 Farm Bill programs left without funding in instances where the Farm Bill lapses.   If Congress does not act in a timely manner to reauthorize or extend the current Farm Bill, farm policy will revert to what is known as “permanent law,” a statute enacted in 1949 that would force all manner of drastic, and largely problematic, changes to current farm policy. 

The bottom line is that there is strong impetus for Congress to act, but the situation does not become dire for the major commodities that drive the Farm Bill—namely dairy and row crops—until December.   We are continually reminding legislators about the urgency of our situation with FMD and imploring them to pass a Farm Bill as soon as possible when they reconvene for a Lame Duck session in November.

Endangered Species Act

On Thursday, the House Natural Resources Committee approved several bills to amend the decades-old Endangered Species Act.  One of the bills titled the Endangered Species Reasonableness and Transparency Act is sponsored by Rep. Tom McClintock(R-CA).  It directs the Department of Interior to prioritize science from local and state governments when considering endangered species protections and caps attorneys’ fees that groups can recoup from suing over ESA decisions.

Another bill known as the Ensuring Meaningful Petition Outreach While Enhancing Rights of States Act of 2018, or EMPOWERS Act, from Rep. Steve Pearce (R-NM), would require Interior to consult with every state and county in a species’ habitat before making a listing decision.

In addition, the committee approved the Providing ESA Timing Improvements That Increase Opportunities for Non-listing Act of 2018, or PETITION Act, from Rep. Bruce Westerman (R-AR).   The legislation would expedite the clearing of a backlog of Endangered Species Act petitions that bill proponents claim are being used by special interest groups to manipulate the listing process.  

While these bills were reported from committee, they will not be taken up by the full House until after the election.  Chances of action in the Senate are remote, but similar legislation has been drafted in the upper house.

Tax Reform 2.0

The full House took action this week on a few bills that comprise what House Ways & Means Committee Chairman Kevin Brady has dubbed Tax Reform 2.0.  The package would make permanent certain provisions in the Tax Cuts and Jobs Act including the special rate for pass through income.  

The centerpiece of Tax Reform 2.0 is legislation sponsored by Rep. Rodney Davis (R-IL) titled Protecting Family and Small Business Tax Cuts Act.  The bill would extend in perpetuity the 20 percent non-wage income deduction for S-Corps and other pass-through tax structure popular in the hardwood sector.   The bill would also make permanent lower rates for individuals and the expanded child tax credit and standard deduction.  Those rates are set to snap back to their pre-Tax Cuts and Jobs Act levels after 2025.  The bill would also keep in place the mortgage interest deduction for new mortgages up to $750,000 along with the grandfathered deduction for mortgages that existed prior to tax reform taking effect.  That bill is expected to pass the House later today

Two other bills in the package—the Family Savings Act and the American Innovation Act—authorize improved educational savings opportunities for tax payers and new provisions to promote start-up businesses among other many other items.  Those two bills passed the House late Thursday

The package is largely viewed as a pre-election messaging platform and will not be taken up by the Senate this year.    

Government Funding/Appropriations/Biomass

The full House passed a Fiscal Year 2019 spending package that covers the Departments of Defense, Labor, Health and Human Services and Education and includes a stopgap measure that will keep other agencies funded through Dec. 7 to avert any partial government shutdown.  The President announced he would sign the measure.  

Omitted from this package are a few appropriations measures, including an FY 2019 Interior Appropriations bill which funds EPA. This is notable as we are supporting language in the House Interior bill that makes permanent our hard won policy on biomass carbon neutrality which directs EPA, DOE and USDA to ensure that the carbon neutral nature of forest biomass fuels and energy is recognized in any federal energy or environmental rulemaking. 

This policy will continue under the current stop gap spending measure that was sent to the President, but the Hardwood Federation along, with our partners in the forestry and forest products sectors, are working toward securing “permanency” language to ensure that this policy endures year to year and Administration to Administration.  There is concern that because our carbon neutrality provision was enacted as part of a government spending bill back in 2016, that policy could expire if there is a lapse in government funding. 

The language in the FY 2019 House Interior appropriations measure specifies that the biomass carbon neutrality directive applies to FY 2019 and each fiscal year thereafter.  The issue is expected to be debated in the Lame Duck session following the election in November.

Ports News

Good news was reported out Thursday September 6th as the International Longshoremen’s Association announced that members at ports from Maine to Texas “overwhelmingly” approved a new 6-year contract extension with the U.S. Maritime Alliance (USMX).  This agreement is expected to lead to increased stability and eliminate work stoppages through the duration of the contract.  More information is available here.

Sue and Settle

On Friday Sept. 7th U.S. Secretary of the Interior Ryan Zinke signed a Secretarial Order preventing the practice commonly known as “sue and settle”.  Between Jan. 1, 2012 and Jan. 9 2017 Interior agreed to enter into over 460 settlement agreements and consent decrees and agreed to pay over $4.4 billion in monetary awards. The newly signed Order promotes public engagement, transparency, and accountability in Consent Decrees and Settlement Agreements by alleviating concerns that the previous litigation process has been used to undermine Congressional procedural safeguards with a window into where the money is going.

The main points of Secretarial Order 3368 are:

  • Within 30 days, DOI will establish a publicly accessible “Litigation” webpage that is prominently linked from the Office of the Solicitor’s homepage
  • Within 90 days,  DOI will post a searchable list of final judicial and administrative consent decrees and settlement agreements that continue to govern Departmental actions, including a brief summary of each decree or agreement, a note of any attorney’s fees or costs paid, and a link to the text of the decree or agreement.
  • Any proposed consent decree or settlement agreement that commits DOI to seek a particular appropriation or budget authorization from Congress or formally reprogram appropriated funds, and/or places obligations on the Department that extend beyond five years at the top of the Litigation page, publish notice of the proposed consent decree or settlement agreement in the Federal Register, and provide a public comment period of at least 30 days.
  • DOI, including any agency or bureau thereof, will not recommend that the Department of Justice enter into a consent decree or settlement agreement that:

o    Converts into a mandatory duty the otherwise discretionary authority of the Secretary and/or his designees (including bureau and office heads) to revise, amend, or promulgate regulations.

o    Commits DOI or any of its bureaus and offices thereof to expend funds that Congress has not appropriated and that have not been budgeted for the action in question.

o    Requires DOI or any subdivision thereof to pay attorney’s fees and costs unless the plaintiff or petitioner has established a strong likelihood of obtaining such fees under the law.

o    Prohibits public disclosure of any consent decree or settlement agreement, except to the extent necessary to protect proprietary information, such as trade secrets, or otherwise mandated by law.

Happening in the Hardwood World

Where in the Hardwood World was Dana Lee Cole?

Since wrapping up the Fly-In, Dana has been on the road to Portland, Oregon for the Western Hardwood Association Meeting and to State College, Pennsylvania for a meeting of the Penn-York Club.  Thank you to both organizations for their support and warm welcome! 

HF Fly-In Participants on TV

HF Board Member Jay Reese of Penn-Sylvan Hardwoods and recent Fly-In Attendee Steve Jones of Ron Jones Hardwoods recently were featured in a news report on how the Trade War with China is effecting local businesses in PA.  The report was aired on WICU in Erie, PA.  Take a look at the news clip here.

Wooden Beer Bottles…Wait…What?

That’s right, Danish brewing giant Carlsberg is developing a green alternative to glass bottles made with wood fiber.  The biobased prototype “green fibre” is biodegradable, will reduce plastic use by 76%, and reduces the water use and carbon footprint of the mega-brewer.  Check it out here.

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