The Hardwood Federation Newsletter

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Hardwood Federation January 2020 Newsletter

From the Executive Director:  Starting the New Year off with a POP! of Good News

The start of this new decade has brought a collective sigh of relief to the greater Hardwood industry as the good news of trade deals with China and a finalized USMCA materialized late in 2019 and have now been signed into law before the end of January 2020.  There is a lot of work to be done both at home and abroad, but at least a ray of sunshine has broken through those dark, dark trade clouds. 

Of most interest to the hardwood industry was the January 15th “Phase One” signing ceremony between U.S. President Donald Trump and Chinese Vice Premier Liu.  The Hardwood Federation was pleased to see that hardwood lumber is specifically mentioned, under U.S. manufactured goods, as part of the deal in the White House fact sheet released at the signing ceremony.  The fact sheet may be viewed here.

In the trade agreement text itself, (here), hardwood lumber products are again highlighted in the table on page 6-3 under “Other Manufactured Goods.”   In addition, the table on Page 6-11 includes all of the of 400 level Harmonized System Codes for hardwood lumber.  

Broadly speaking, the agreement commits China to purchasing a total of $200 billion in U.S. goods and services over the next two years and undertake several trade reforms involving intellectual property protections, financial services, technology transfer, and dispute settlement resolutions.

What Next?  Exactly how purchases will be made by the Chinese, in all categories, is yet to be announced.  Our sources at USTR indicate it could be a combination of reduced tariffs, product exclusions and government purchases. Mike Snow, of the American Hardwood Export Council (AHEC) has also pointed out that China has obligations to all their trade partners under the World Trade Organization; how China increases purchases of U.S. goods without violating these agreements is also unknown.  And, of course, much depends on Chinese demand in what most experts agree is a slowing economy.  The Trump Administration has responded to these concerns by pointing out the monitoring and enforcement mechanisms included in the agreement.  Administration officials, including the President, have promised swift action if progress towards desired goals is not reached. 

What Can US Exporters Do?  AHEC and the Hardwood Federation have both been reaching out to contacts both here and in China to assess how Chinese purchasers are reacting to the agreement.  The Chinese New Year has put a damper on direct contact with Chinese businesses, but we have received some direction. 

According to AHEC contacts, as part of this agreement China will be re-opening its “Tariff Exclusion Process.”  This allows Chinese companies and associations to apply for an exclusion from tariffs of specific U.S. exported goods.  U.S. officials in China, USDA and USTR officials are all strongly encouraging companies that export to contact their Chinese customers and push them to make the strongest case possible to their government and regulatory authorities for exclusions from currently imposed Chinese tariffs on hardwoods.

Please note that only Chinese companies and Chinese trade associations can apply for the tariff exclusions, and it is important that US hardwood exporters communicate with their Chinese customers in order to encourage as many Chinese entities as possible to push for tariff exclusions on US hardwood.

The USDA report (here) contains step by step instructions on how your customers can apply, who is eligible, and what information is required as well as links to the Chinese State Council Customs Tariff Commission who will be reviewing the applications.  As stated in the original Chinese document, applicants need to show the tariffs on US goods impact their business in one or more of the following ways:  1) the Chinese importer faces challenges seeking alternative sources of supply; 2) the tariffs cause serious economic damage to the applicant; 3) the tariffs cause major negative structural impacts on the relevant industries or lead to serious social consequences.

We understand that several Chinese companies did apply in the first round last June but to our knowledge none were approved.  The US embassy believes that in light of the Phase 1 commitments the Chinese government may look more favorably on applications this time around.

The Hardwood Federation will be tracking progress very carefully…particularly reports from the industry about hoped for increased orders from China. 

The bottom line is that while it was essential that hardwoods be explicitly included in this initial trade agreement, the real benefits to the industry are yet to be determined. But, at least now we have an opportunity and some guidance about what actions can be taken to have an impact.

US-Mexico Canada Trade Agreement:  In other trade news, the Senate approved the USMCA agreement by a vote of 89-10 in a rare show of bipartisanship. The President signed the legislation on Wednesday January 29th.  Canada and Mexico are in the top four trading partners for U.S. hardwoods.  Finalizing this agreement will provide much needed certainty to these markets. As part of the process, the U.S. and Mexico have negotiated a separate Environment Cooperation and Customs Verification Agreement that intends to increase efforts to combat illegal trade, including that of timber.

Mexico has also ratified the revised agreement. Canada is expected to consider final passage of USMCA in the early months of 2020.  Analysists expect the Canadians to approve USMCA, but it may take a few months given Canadian political dynamics.

The Hardwood Federation will focus on the implementation process for both of these agreements as well as on Phase Two negotiations between the U.S. and China.

Issues

NEPA – Trump Administration Announces Proposed Updates

Earlier in January, the Council on Environmental Quality (CEQ) announced a notice of proposed rulemaking (NPRM) titled “Update to the Regulations Implementing the Procedural Provisions of the National Environmental Policy Act.”  Through this regulatory action, CEQ is proposing to modernize its National Environmental Policy Act (NEPA) regulations. In its supporting documentation, CEQ asserts that environmental impact statements (EIS) for Federal highway projects have averaged over 7 years to complete and many reviews have taken a decade or more. CEQ’s proposed rule would modernize and clarify the CEQ regulations to facilitate more efficient, effective, and timely NEPA reviews by simplifying and clarifying regulatory requirements, codifying certain case law and CEQ guidance, updating the regulations to reflect current technologies and agency practices, eliminating obsolete provisions, and improving the format and readability of the regulations. The proposed rule seeks to reduce unnecessary paperwork and delays, and to promote better decision-making consistent with NEPA’s statutory requirements.

In sum, the proposal accelerates the NEPA review process so that it will take no more than two years for completion of environmental impact statements (EISs) and one year for completion of environmental assessments (EAs).    The rule would also strengthen the role of the lead agency and requires senior agency officials to timely resolve disputes to avoid delays.  Moreover, it would provide direction regarding the threshold consideration of whether NEPA applies to a particular action. 

This proposal represents the first comprehensive revision of NEPA since 1978 and should fit in with NEPA reform measures that are currently under development at the Forest Service

WOTUS – Trump Administration Also Unveils New Clean Water Regulations

On January 23, 2020, the U.S. Environmental Protection Agency (EPA) and the Department of the Army finalized the Navigable Waters Protection Rule to define what water bodies are and are not  “Waters of the United States (WOTUS)” which triggers  federal regulatory jurisdiction under the Clean Water Act.   The rule narrows the WOTUS definition so that it includes four simple categories of jurisdictional waters and provides clear exclusions for many water features that traditionally have not been regulated.  Landowners, farmers, homebuilders and other groups have long contended that the federal Clean Water Act applies only to navigable water bodies and waters like wetlands and ponds that have a direct connection to them.  As the rule’s name suggests, the Navigable Waters Protection Rule regulates navigable waters and the core tributary systems that provide perennial or intermittent flow into them.

Under the final rule, four categories of waters are federally regulated:

  • The territorial seas and traditional navigable waters,
  • Perennial and intermittent tributaries to those waters,
  • Certain lakes, ponds, and impoundments, and
  • Wetlands adjacent to jurisdictional waters

The final rule also specifies 12 categories water features that are not “waters of the United States,” such as wet areas that only contain water in direct response to rainfall (e.g., ephemeral streams); groundwater; ditches; prior converted cropland; and waste treatment systems.

Climate Change--Rep. Bruce Westerman Bill

Rep. Bruce Westerman (R-AR-4) is developing legislation that seeks to strengthen the Republican narrative on greenhouse gas reduction by focusing on forestry and promoting demand for wood products.  Again, this bill is under construction, but we understand that it will include incentives for landowners to plant trees by modifying existing farm conservation programs.  The legislation will also have a federal forest reform component to expedite thinning projects on our federal forestlands to make them more resilient and resistant to catastrophic wildfire events.  Finally, the bill will include several incentives to promote demand for wood products.  One of these is a sustainable building tax credit that would reward use of building materials like wood that store carbon and are energy efficient.  Another component would fund additional research into wood energy and wood feedstock technology to identify innovative uses and markets for wood fiber.  And finally, Westerman’s bill would include a fix to the federal Renewable Fuels Standard to allow for a larger universe of woody biomass to qualify for the mandate.   

Staff indicate that the legislation will be finalized in the next couple of months for introduction.   The Hardwood Federation team has reached out to the Westerman office to offer our assistance.

Promotion

The Real American Hardwood Promotion Coalition (RAHPC), comprised of over 25 hardwood related association and interest groups, is continuing to make good progress towards doing research to understand consumer attitudes towards hardwood products, using this information to develop an overarching brand statement that encompasses the entire spectrum of hardwood products and formulating effective strategies to build positive consumer opinions of hardwood.

Representatives of the RAHPC will be presenting updates on our progress and insight into what we are learning at a number of industry meetings in the next few months.  Our next presentation will be at the Indiana Hardwood Lumbermen’s Association meeting in Indianapolis (February 4-6).  Coalition members hope to see you there and hear your ideas, thoughts, concerns and input.  Additional sessions will be held at the Appalachian Hardwood Manufacturers Annual Meeting, the Ohio Forestry Association Annual Meeting, the Kentucky Forest Industries Association Meeting, and the Hardwood Manufacturers Association’s National Conference – and more sessions are being added!  Email hardwoodpromotion@gmail.com if you have questions or are interested in having the Coalition present at your meeting.

Happening in the Hardwood World

New Project Learning Tree Curriculum

Project Learning Tree has expanded its resources in Green Jobs to “help youth ages 12-25 explore green careers in forestry and conservation.”  To find out more please click the link below:

https://www.plt.org/news/new-plt-curriculum-introduces-youth-to-green-careers/

Mass Timber in the News

The Mass Timber and CLT news continues to boom as an increased focus and interest on sustainability gains traction in domestic construction.  Here is a great Forbes article on the latest:

https://www.forbes.com/sites/jimvinoski/2019/12/20/is-mass-timber-the-path-to-sustainable-construction/#6b47248b71d2

A Weird and Wild Wood Flooring Video from Germany

Well placed HF spies discovered this interesting video on the “experience” of wood flooring vs. plastic/vinyl flooring that looks like wood while traversing the floor of the DOMOTEX show in Germany.

https://www.youtube.com/watch?v=SP0kUqZu2TI&feature=youtu.be



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