TORT REFORM

Industry Position

• Product liability court cases are part of a growing litigation burden on America’s small businesses. According to a 2003 study by the U.S. Chamber Institute for Legal Reform, small businesses bear 68
  percent of business tort liability costs.19 
• Therefore, the structural building components industry supports passage of the Innocent Sellers Fairness Act (ISFA H.R. 989), as it holds sellers responsible in proportion to their wrongdoing, and frees sellers from liability who have done nothing wrong.

Background

Product Liability

Current U.S. law imposes liability on manufacturers and sellers of products irrespective of responsibility or lack of wrongdoing.

The Small Business Administration estimates that defending product liability lawsuits can cost anywhere from $50,000 - $100,00020, which force many defendants to pursue a settlement, regardless of the merits of a case.

Product liability lawsuits are increasingly impacting lumber and building material dealers, an industry closely affiliated with the structural building components industry. A winter 2005 survey of dealers found that more than 1 in 4 has been the subject of product liability lawsuits within the past five years; 65 percent of those have been involved in more than one.

Since 1986, only a small number of states have enacted product liability laws that include limits liability for product sellers. While state reforms are positive steps, federal action is important to ensure uniformity for building material dealers and component manufacturers who operate in multiple states.

Innocent Sellers Fairness Act (H.R. 989)

ISFA is necessary because current law imposes liability without wrongdoing by sellers, and exposes them to all of the damages allegedly suffered by a plaintiff, even though other defendants may have played a much greater role in causing the damages.

According to the 2004 WTCA Financial Performance Survey, the sale of non-manufactured products, such as lumber, engineered wood products and other building materials, accounted for up to ten percent of overall sales volume.

IMMIGRATION & LABOR

Industry Position

• A skilled and productive workforce is a critical factor in maintaining competitiveness in the manufacturing sector. Companies that manufacture structural building components are finding the pool of qualified job candidates is shrinking. 
• Qualified entry level workers, operators, assembly line workers and technical staff are all difficult to find. As Congress seeks to tighten and secure our nation’s borders, it is important to remain aware of the significant impacts any action may have on the workforce of American business. 
• Having safe and secure borders should be a top priority. However, the strong foundations of this nation have always depended on a vibrant immigrant population. In order for our industry to continue contributing to affordable home construction, there must continue to be a legal way for our industry to hire immigrant workers.
• The structural building components industry does not support immigration reforms focused solely on enforcement and placing further regulatory burdens on business without expanding legal opportunities for immigrants to work.

Background

Immigrant Labor Relied Upon

The opportunities for young people to move up the career ladder within the structural building components industry are tremendous. Yet, according to studies done by National Association of Manufacturers (NAM), the number of youngpeople who enter the skilled trades continues to diminish.3

Young workers are not being attracted to and entering these types of manufacturing jobs. Alternatively, immigrant populations are generally eager to fill these types of jobs, perform them well, and are finding that the career opportunities are valuable to them.

According to the 2004 American Community Survey (ACS) from the U.S. Census Bureau, the two most prevalent building construction trade occupations are carpenters and construction laborers. Nearly 22 percent of all carpenters and 32 percent of all construction laborers are immigrant workers.4

Illegal Immigration a Concern 

The Census Bureau estimates a net increase of 500,000 illegal immigrants annually. For example, in 1999 Immigration and Naturalization Service (the INS has since been rolled into the Department of Homeland Security) estimated that 968,000 new illegal immigrants settled in the U.S.5

According to the Pew Hispanic Center, recent efforts to curb illegal immigration by securing our southern border with Mexico has resulted in the unintended consequence of illegal immigrants staying in the U.S. longer because it is more difficult to move back and forth across the border.

The increased availability of forged citizenship documents makes illegal immigration a more significant problem for employers because it is becoming exceedingly difficult to determine who is eligible for legal employment.

Support Immigration Reform

The structural building components industry supports streamlining current immigration programs and/or creating new employment-based programs that allow component manufacturers to hire foreign nationals when U.S.workers are not available to fill jobs.

Our industry believes the U.S. Department of Homeland Security should receive additional funding for the purposes of increasing border security, providing more extensive criminal and background checks on visa applicants, and identifying undocumented workers and foreign individuals living in the United States.

Further, our industry believes Congress should appropriate funds to more effectively track foreign workers and implement “counterfeit-resistant” work authorization cards so employers are not subjected to risk when hiring immigrant workers.

Need Guest Worker Program

Our industry pays competitive living wages, provides benefits to its employees, and presents many opportunities for career advancement and long-term job security.

Our industry is an integral part of the building construction industry, and we provide efficiently-built, cost-effective structural solutions for builders. Without a viable workforce we will be unable to assist builders in meeting the public demand for housing and commercial construction.

In order to help develop a sustainable workforce for the structural building components industry, WTCA is continuing to expand and strengthen education and training opportunities for America’s workers and increase access to employee benefits in order to attract and retain skilled labor in a competitive job market.

For example, WTCA offers an innovative and comprehensive online training program (http://www.wtcatko.com/index.php) and a new Work Force Development website (http://wfd.sbcindustry.com/index.php) to connect job seekers to employers in the industry.

However, these efforts by themselves are not enough. It is essential that employers in the structural building components industry be able to legally hire immigrant workers to ease the nationwide manufacturing and building construction labor shortage.

TAXES

Industry Position

• The structural building components industry does not support any efforts to place a cap on mortgage interest tax-deductions, eliminate the deduction for state and local property tax, or any other tax reform that hinders home ownership. 
• The structural building components industry supports permanent repeal of the estate tax because it will dramatically reduce the time, money and energy spent by family business owners on estate planning. In turn, it will preserve and expand employment opportunities while ensuring the continued success and vibrancy of small businesses in America. 
• The current U.S. tax code puts the U.S. timber industry at a distinct disadvantage against international competition. Therefore, our industry supports current tax reform efforts to improve competitiveness and help insure the future availability of wood fiber, encourage domestic investment in forestry, and yield a more abundant supply of the wood building materials. 
• Our industry also supports legislation that will simplify the entire Federal tax system, which is confusing, complex, and overly burdensome. However, any significant changes to the whole tax system must continue to recognize the importance of housing to the economy and to individual households’ financial stability.

Background

Home Ownership

Federal tax policies currently create both incentives and obstacles for affordable housing and home financing. The breadth and quantity of current tax incentives in these areas indicate how important the housing industry is to the national economy.

Homeowners receive incentives through the deductibility of mortgage interest and real estate taxes, making it easier and more attractive to buy than to rent.

Low- and moderate-income renters and new families are encouraged to buy their first home through mortgages with below-market interest rates that are supported by federal tax-exempt bonds, referred to as mortgage revenue bonds.

As a consequence of both recent low interest rates and existing current tax incentives, homeownership surged to over 69 percent in 200415, the highest level since the Census Bureau started recording this rate in 1965.

However, efforts to overhaul the federal tax system that included a significant cap on mortgage interest tax-deductions and an elimination of the deduction for state and local property tax would signify a radical departure from America’s traditional commitment to support tax policies that promotes home ownership.

In turn, not only would the tax burden for current homeowners increase, but the tax incentive of owning a home would plummet at a time when interest rates are on the rise and home appreciation is slowing.

As a consequence, current home values will also decrease, which may have a significant impact on our nation’s economy.

Estate Tax

In 2011, the repeal of the estate tax created under the Economic Growth and Tax Relief Reconciliation Act of 2001, H.R. 1836, will sunset and the rates will revert to their tax structure prior to the enactment of legislation.

The temporary nature of these provisions further complicates an already overly-complex tax code. The uncertainty surrounding repeal requires business owners to continue with estate-planning strategies that are costly, cumbersome and time consuming.

According to a recent survey conducted by the National Association of Manufacturers (NAM), respondents from small- and medium-sized manufacturing facilities said that the estate tax is the second greatest tax burden on their companies, exceeded only by income tax.16

According to the same survey, small- and medium-sized manufacturers spend an average of $32,000 annually on death tax planning, and nearly one-third of respondents indicated that their planning costs had significantly increased—some as much as 100 percent—since the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001.

Efforts to further reform the estate tax will only lead to a more complex code, which means family businesses will spend even more money on estate lawyers, accountants and life insurance policies.

Approximately 75 percent of the structural building components industry is made up of small business owners who average less than $5 million in annual sales and have less than 50 employees. Only full repeal of the estate tax will protect these family business owners who want to pass their businesses on to the next generation.

Timber Tax

The structural building components industry relies on American private landowners to supply a significant portion of the timber our industry uses in structural components. Unfortunately, the U.S. forest products industry is facing significant overseas competition and increased risk of loss of jobs.

U.S. tax policy should provide an internationally competitive foundation for all industries. However, the U.S. corporate timber and forest products industry is subject to significantly higher income tax than their overseas competitors.

A recent PricewaterhouseCoopers study showed the U.S. domestic corporate forestry tax burden to be second highest compared with its seven major competitor nations—16 percentage points higher than the median of the other countries.

The structural building components industry believes internationally uncompetitive tax polices have the unintended consequence of raising the cost of timber and, therefore causing downstream products like our structural components to cost more.

Federal Tax System Reform

The income-tax system began in 1913 as a two-page form backed by 14 pages of law. Today, American citizens and businesses struggle with 742 different forms and 254 separate publications, backed by more than 17,000 pages of law totaling close to six million words.

Increases in the tax law’s complexity have added roughly 1 billion hours in annual paperwork over the last ten years.17

According to former IRS Commissioner Charles Rossotti, Americans spent $80 billion per year in 2002 complying with federal tax laws alone. A University of Michigan study put the cost of enforcing and complying with federal personal and corporate income taxes at around $115 billion per year.18

According to Rossotti, this complexity encourages cheating and provides “a worthy challenge” to “pursue simplification to the maximum extent possible.”

TRADE

Industry Position

• The structural components industry supports efforts to promote free trade. This includes, but is not limited to: legislation that would limit the definition of foreign subsidies and dumping; changes in government policy to eliminate quotas, tariffs, export taxes, and other barriers to the importation of building materials. 
• The structural building components industry supports legislation requiring consideration of the effects on downstream product buyers’ economics when establishing trade policies. 
• The structural components industry supports efforts to maintain the current softwood lumber agreement between the U.S. and Canada, and work toward securing an enduring solution. 
• The structural building components industry supports efforts to secure adequate sources of foreign steel in combination with domestic sources to ensure a more constant and predicable supply to meet ever-increasing domestic demand.

Background

Free Trade

U.S. trade policies should encourage free trade that increases resource availability, free-market based costing and increased quality of imported materials. This approach will provide the best overall value for the product buyer of manufactured products.

Products from foreign countries deemed subsidizing or dumping their exports to the U.S. are subject to countervailing (CVD) and anti-dumping (AD) duties. The criteria used to define and measure “subsidies” and “dumping” needs to be applied in concert with our international agreements, U.S. law and common sense.

An unfortunate aspect of current U.S. trade policy is, in the two cases that affect our industry — steel and lumber — countervailing and anti-dumping duties were imposed with no consideration of the adverse impact on us as consumers or on the overall housing market of which we are a part.

The structural building components industry uses a number of products that are imported from other countries. Canadian lumber is the most prominent. Our industry should always be able to purchase quality raw materials from any supplier that best meets our needs.

Our industry believes Congress should enhance current U.S. trade law to require an analysis of the total impact of any decision on the overall economy. In particular an analysis should always be performed that addresses “downstream” market impact and does its best to predict and resolve unintended consequences.

In addition, any changes to U.S. trade law should allow industrial consumers of a product to have an equal standing with domestic producers and importers in trade cases.

We believe these steps are necessary to ensure downstream consumers of manufactured products are not negatively impacted by trade decisions made without their input.

Softwood Lumber

U.S. softwood lumber producers alone cannot meet current domestic demand. Today, Canadian softwood lumber imports account for 36 percent of the entire supply available in the U.S. As a raw material, lumber makes up 40 to 50 percent of the cost of a manufactured structural building component.22

The structural building components industry applauds the efforts of U.S. trade representatives in reaching the current 5-year agreement with the Canadian government.

However, once this agreement ends, there will once again be marketplace uncertainty if no enduring resolution is created in the meantime. Only a long-term solution will allow U.S. companies, including U.S. wood structural component manufacturers, the ability to compete in their marketplaces on a completely fair and equitable basis.

Steel

Companies in the structural building components industry manufacture trusses, which are built with either wood (assembled from wood members and metal connector plates manufactured from light gauge, galvanized steel), or cold formed steel.

Based on industry financial performance statistics23, combined with a study done by the International Trade Commission (ITC), the structural building component industry’s annual steel purchases are approximately $700 million for truss plates, $250 million for related connectors and $275 million for cold formed steel components. This translates into approximately 425,000 tons of steel in truss plates and an additional 120,000 tons in connectors.

Since early 2004, connector plate prices have escalated on average 50 percent, just to cover the rising cost of steel, and by as much as 200 percent for some specialty products. The continued increasing and erratic change in the price of steel has made it difficult to conduct business in the structural component industry.

Therefore, the structural building components industry believes the federal government should do everything within its authority to secure adequate sources of foreign steel and zinc in combination with domestic sources to ensure a more constant and predicable supply to meet ever-increasing domestic demand.

RAIL TRANSPORTATION

Industry Position

• From a bulk commodity perspective, shipping lumber via rail is generally the most economically efficient alternative. In a recent industry survey21, two-thirds of respondents indicated they utilize rail for their lumber shipments—just over 50 percent said they own and use their own rail spur.
• The structural building components industry supports legislation like the Capacity Expansion Act of 2006, which would provide tax incentives to railroad companies to purchase land and construct additional rail infrastructure and intermodal transportation facilities. 
• Our industry also supports legislation like the Railroad Competition and Reauthorization Act of 2005, which would create greater efficiency in rail transportation through increased competitiveness and responsiveness to rail customers.

Background

Lack of Infrastructure

From 1950 to 1992, total rail miles decreased almost 40 percent to a little over 136,000 operational miles. Component manufacturers, as well as many other rail shipment receivers, are currently feeling that pinch.

The declining national reliance on rail has created a host of interrelated problems that are having an impact on component manufacturers utilizing rail. One half of the equation is infrastructure—not enough track or railcars to meet current demand—the other half is how the railroads have addressed this problem—consolidation, constructive placement and demurrage fees.

The increasing need for lumber shipments and other commodities to growing population centers has created horrible congestion on the tracks. To make matters worse, many companies have fled the railcar manufacturing and/or leasing business, creating an overall shortage of cars to carry the goods. The result has been slow or unreliable rail delivery service.

Lack of Competition

As of 1978, there were 41 Class I railroad companies operating in the U.S.; today there are eight. This consolidation, which was particularly heavy in the 1990s, has left most markets with only one railroad company to choose from.

This lack of competing rail companies effectively takes market-based competition—a cornerstone of our economy— out of the equation. To that end, component manufacturers are effectively left with two choices: accept the terms, conduct and demands of the available railroad company, or use trucks.

The lack of choice is evident in the component manufacturing industry; over eighty percent of the respondents to that same WTCA survey indicated they use rail for lumber shipments and are serviced by only one Class I railroad company.