First Name | Michael |
---|---|
Last Name | Zimmerman |
Email Address | mzimmerman@sauder.com |
Affiliation | Sauder Woodworking Co. |
Subject | Proposed ATCM Composite Wood Regulation |
Comment | To the Board of California Air Resources Board (CARB) Thank you for the opportunity to share some of our concerns regarding the proposed CARB measure. Sauder fully supports CARB’s efforts to ensure that participants in the furniture and composite panel industry are responsible stewards of the environment. However, the keys are to do so in a way that maintains a level playing field for all competitors, and in a way that does not materially damage the overall furniture industry. With these goals in mind, we are asking CARB to consider a number of significant concerns regarding the proposed formaldehyde emission regulations. Testing: Our first concern is in the area of testing. Furniture Emission Testing in laboratories has shown high error rates in measuring low emissions of formaldehyde. In fact studies have shown a 30% error rate within a single lab, and around 45% between labs (Howard-Reed & Nabinger ASTM report 2006; Zhang BIFMA 2007 see attached documents). Given these error rates, an enforcement action based on a single test result would be meaningless and arbitrary. Realistically, the only way to have any level of confidence that a component is in compliance with the regulation would be to run a series of tests on the same component and look for a correlation within the results. These error rates highlight the difficulty in detecting and measuring low levels of formaldehyde. The measurement issue is further complicated by the fact that formaldehyde can be found in many finishes for engineered wood panels. When the composite panel acts as a “sink” and absorbs formaldehyde from the finish, it becomes virtually impossible to determine whether a non-compliant test result was due to the board or the finish. It concerns us that no correlation work has been done on removing various finishes from a panel and comparing that to the raw substrate. The scientific foundation for determining whether a non-compliant finding is due to the composite panel or due to any of a number of other sources of formaldehyde has not been firmly established. Enforcement: Although we recognize that CARB has tried to maintain a level playing field, we have grave concerns about the measurement and enforcement of the proposed regulation. The sheer volume of products and increasingly global nature of the furniture industry creates daunting challenges for enforcement. Producers and users of composite panels represent a multi-billion dollar, global industry with literally tens of thousands of participants. Even if reliable test methods were available, the sheer volume of products and sources would make effective auditing and enforcement extremely difficult. Without effective test methods, enforcement becomes an insurmountable challenge. This challenge is further complicated by the fact that most furniture manufacturers use a variety of board specifications from a variety of sources. In Sauder’s case, it is not uncommon for a single furniture item to have material from five or more mills. It is entirely possible that a piece of furniture that is compliant as a whole could have individual components that are non-compliant. Full compliance testing would require testing each individual component on each piece of furniture. In addition, creating a piece of furniture often requires a complex mix of technologies. It is common, especially in Asian companies, to employ a network of sub-suppliers each producing certain components that are then assembled into the finished product. Trying to police and certify such a vast network of industry participants does not seem feasible given the test methods and associated costs. Compliance Cost: When regulations can be met through cost neutral methods, testing and enforcement concerns are dramatically reduced. Essentially, when the cost of compliance is minimal, there is no incentive to “get around the system”. The ethical companies who strive for full compliance are not at a competitive disadvantage to those who “game” the system for their personal advantage. Unfortunately, the proposed CARB regulations have a significant cost impact for the furniture industry. Phase I: Although more stringent than the current Composite Panel Association’s Environmentally Preferred Product (EPP) standards, the Phase I emission limits appear reasonable. In all likelihood these levels can be reached with known technology and without a meaningful impact on prices or overall competitiveness of the U.S. furniture industry. Implementing Phase I regulations will, however, entail a range of hidden costs including lot traceability, testing, and third party certification. Fortunately, due to the largely cost-neutral nature of achieving the Phase I emissions, we believe that most competitors will voluntarily comply with this regulation. Phase II, however, is a different story. Phase II: Meeting Phase II emission levels will require radically different resin systems and processing methods. Unfortunately, all known processes for achieving Phase II emission levels are significantly more expensive than current processes, and some will require large capital investments to retrofit mills. CARB acknowledged that there would be a cost increase at the panel manufacturing level as well as the product manufacturing, and retail levels as a result of the proposed regulations. However, CARB did not accurately reflect the cost build-up and ultimate impact on the increased cost at the consumer or retail level. In order to fully appreciate the impact of the anticipated cost increases, allow us to illustrate the cost build-up from the cost of panels to the ultimate retail sales price. The following example uses a conservative 25% increase in manufacturer’s panel costs. It also includes typical margin percentages at the various levels of the supply chain. Phase II Cost Multiplier Effect 25% Increase in board cost: Current Phase II Cost Supply Chain Element: Assumptions Cost Cost Increase Panel Raw Material Cost 25% PII cost $20.00 $25.00 $5.00 Invoice to Sauder 30% board mill $28.57 $35.71 $7.14 Total Unit Cost 50% board cost $57.14 $64.28 $7.14 Net Selling Price 35% Sauder $87.91 $98.89 $10.98 Customer Invoice 10% program $97.68 $109.88 $12.20 Consumer Retail Price 45% retailer $177.60 $199.78 $22.18 The fact is that the manufacturer's increased cost is not just added on the top as the CARB staff report suggests. In reality, there is a multiplier effect. As you can see from the table above, a 25% or $5.00 increase in the cost of the composite panel becomes roughly a $22.18 (13 %) increase to the consumer at retail. The cost increase of 30% for particleboard and 40% for MDF, as projected by CARB, would lead to a proportionately higher cost to the consumer. Even if all industry participants comply with the proposed regulation and CARB is somehow able to create a level playing field, the proposed regulation would have a dramatic impact on the furniture industry. Basic economics tells us that when prices go up, demand goes down. While it is impossible to accurately predict the price elasticity of consumers, there is no doubt that there will be a negative impact on sales volume. The result of higher retail prices will be a contraction within the industry and a significant net loss of jobs. And, let’s not forget about the consumer. He or she will pay a significant price to reduce the trace emissions of this naturally occurring substance. While the economic impact of effectively enforced formaldehyde emissions regulation is dramatic, the impact of ineffective enforcement is devastating. Problematic testing and ineffective enforcement will significantly tilt the playing field. Companies that comply voluntarily will be at a significant disadvantage to those who are able to “get around the system”. In an industry where successful sales can hinge on pennies, much less dollars, this all-too-likely outcome would have devastating implications for the already struggling domestic furniture industry. Conclusion: The preceding factors – test error, the effect of surface finishes, industry size, mixed sources of supply, third party certification, etc. – combine to make the proposed CARB formaldehyde emissions regulation virtually unenforceable. While well intentioned, this regulation will fail to create the environmentally responsible, level playing field that CARB intended. Unfortunately, whether enforceable or not, the cost penalty for Phase II compliance creates an adverse industry outcome. Sincerely, Michael Zimmerman Senior R&D Chemist Sauder Woodworking Co. mzimmerman@sauder.com |
Attachment | www.arb.ca.gov/lists/compwood07/33-carb_documents.zip |
Original File Name | CARB documents.zip |
Date and Time Comment Was Submitted | 2007-04-23 06:31:24 |
If you have any questions or comments please contact Clerk of the Board at (916) 322-5594.