[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
TANGLED IN RED TAPE: NEW CHALLENGES FOR
SMALL MANUFACTURERS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MARCH 18, 2015
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-006
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
TOM RICE, South Carolina
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAAZQUEZ, New York, Ranking Member
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
Kevin Fitzpatrick, Staff Director
Stephen Dennis, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velaazquez............................................ 2
WITNESSES
Ms. Cynthia Reichard, Executive Vice President, Arylessence,
Inc., Marietta, GA, testifying on behalf of the International
Fragrance Association of North America......................... 5
Ms. Janis Herschkowitz, President & CEO, PRL, Inc., Cornwall, PA,
testifying on behalf of the American Foundry Society........... 6
Mr. Viktor Anderson, P.E., Director of Engineering, Structural
Concepts, Muskegon, MI, testifying on behalf of the Air-
Conditioning, Hearing nd Refrigeration Institute............... 8
Mr. James Goodwin, Senior Policy Analyst, The Center for
Progressive Reform, The Center for Progressive Reform,
Washington, DC................................................. 10
APPENDIX
Prepared Statements:
Ms. Cynthia Reichard, Executive Vice President, Arylessence,
Inc., Marietta, GA, testifying on behalf of the
International Fragrance Association of North America....... 29
Ms. Janis Herschkowitz, President & CEO, PRL, Inc., Cornwall,
PA, testifying on behalf of the American Foundry Society... 36
Mr. Viktor Anderson, P.E., Director of Engineering,
Structural Concepts, Muskegon, MI, testifying on behalf of
the Air-Conditioning, Hearing and Refrigeration Institute.. 51
Mr. James Goodwin, Senior Policy Analyst, The Center for
Progressive Reform, Washington, DC......................... 56
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
TANGLED IN RED TAPE: NEW CHALLENGES FOR SMALL MANUFACTURERS
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WEDNESDAY, MARCH 18, 2015
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Huelskamp, Hardy,
Radewagen, Velaazquez, Huizenga, Adams and Lawrence.
Chairman CHABOT. Good morning. The hearing will come to
order.
Over the next hour or so, we are going to talk about
federal regulations and our small manufacturers. Regulations
are not just words on paper; they impact the way millions of
Americans try to earn a living every day. We have always been a
nation of makers and builders. That is why American
manufacturers, including, and especially small manufacturers,
are critically important to the American economy. The term
``Made in the USA'' is a source of pride for so many people. It
is a reminder that if we want, we can build our own future.
These days, unfortunately, a lot of people feel they cannot
build their own future. It is not for lack of ideas; it is
oftentimes because of the burden of federal regulations. I look
forward to hearings like this one because it gives us the
chance to hear from real people about the real life impact of
regulations.
In a survey by the National Association of Manufacturers
last year, 88 percent of manufacturers said federal regulations
were a significant challenge. When the National Federation of
Independent Business (NFIB) surveyed its members, they
overwhelmingly responded that ``government requirements and red
tape are the biggest problems they face.'' These are
regulations that came out of the Federal Government in the last
month alone. February. The shortest month of the year. How can
we expect our small businesses to focus on creating jobs and
bringing new ideas to life when odds are something in these
pages will have a substantially negative impact on them? And
even worse, they likely had no input at all in what these
regulations say.
Let me say at the outset, I am not against all federal
regulations. I am against dumb federal regulations. That is,
for example, why I hope the Senate will soon take up the Small
Business Regulatory Flexibility Improvements Act. We passed
that bill in the House recently to bring our regulatory system
into the 21st century and stop putting small businesses at a
competitive disadvantage. The regulatory burdens currently fall
most heavily on small businesses, particularly manufacturers
like those who are with us today because they have to pay for
compliance costs just like their larger competitors but with
only a fraction of the resources. The Small Business Regulatory
Flexibility Improvements Act would give small businesses the
input in the regulatory process they should have had all along.
That input cannot come soon enough.
One of the best things about being a member of Congress is
that we get to see many perspectives. We talk to small business
owners and employees like our witnesses today and we get to see
how other countries approach their regulatory process. While
many of our international economic competitors are making way
for innovative cutting-edge reforms, the United States has
changed little about the way it regulates since the 1980s. If
we want to remain a global economic leader, we have to
modernize. We have to make the small businesses that provide
livelihoods for about half of all American families a part of
the solution, not the biggest loser in an economy that
desperately needs them to succeed.
Ms. Reichard, Ms. Herschkowitz, and Mr. Anderson, thank you
for taking what I know is very valuable time away from your
workplaces today to share your stories with us, and Mr.
Goodwin, I look forward to hearing your thoughts on the
difficulties your fellow witnesses face.
With that, I yield to the ranking member, Ms. Velaazquez.
Ms. VELAAZQUEZ. Thank you, Mr. Chairman. And welcome to all
the witnesses.
Recent economic data makes clear that small businesses
continue to be a driving force in our economy. Small firms
added 191,000 workers to their payrolls in the first two months
of this year. We must continue fostering this type of growth.
The regulatory process is important to our nation's small
businesses in many ways. How regulations are formulated and
approved can affect entrepreneurs' bottom lines very directly.
This is especially true in the manufacturing sector, which is
the focus of many worker protection, environmental, and energy
regulations authorized by Congress. Did you hear me well? Those
regulations are authorized by Congress. It is not a cabinet
member who is sitting there and out of the air decides to enact
regulation. We, members of Congress, we pass legislation, and
that is the basis of those regulations.
In that regard, this committee has taken an active role in
ensuring more companies' needs are taken into account during
the federal rulemaking process. I think it would be safe to say
that in some instances, agencies have endeavored to examine how
new regulations impact small firms. Unfortunately, in other
cases, agencies have sidestepped their statutory responsibility
to weigh how new rules will impact small entities and consider
policy alternatives that might prevent economic harm. It is
important we continue our work to ensure agencies pay close
attention to small companies' needs. Lacking the economies of
scale enjoyed by the larger competitors, small businesses often
face higher compliance costs. Overall, when it comes to the
regulatory environment, the challenge is balancing the benefits
of important worker protections, environmental safeguards, and
consumer safety measures against economic consequences. Too
often, this debate is framed in a strictly either/or context,
meaning we must choose between harming small businesses and
preserving important protections that keep workers and
consumers safe. Instead of taking that tact, it seems a better
option is focusing on regulating in a thoughtful manner that is
sensitive to the burden imposed on small companies.
The regulatory review process that Congress and the
president have updated is meant to achieve that goal, taking
small firms' needs into account. In that regard, it is my hope
we can learn more about how mechanisms, like regulatory
flexibility and the Small Business Regulatory Enforcement Act
are minimizing the regulatory impact on small companies.
Likewise, there may be other ways that federal agencies can
lessen small business compliance costs. Whether it is through
technical assistance, legal advice or other steps, I would hope
this sort of proactive thinking can also be part of the
discussion.
All of us share the goals of protecting workers, preserving
our environment, and keeping consumers safe. Additionally, none
of us want these protections to hurt small companies or impede
job growth, and by working together, I think we can achieve
both goals.
With that, I yield back the balance of my time and again, I
welcome all the witnesses, and I thank you for being here.
Chairman CHABOT. Thank you very much.
If Committee members have an opening statement prepared, I
would ask that they be submitted for the record.
And I will take just a moment to refer to our timing and
lighting system here. Each witness gets five minutes, as I am
sure you know. The green light will be on for four minutes. The
yellow light will come on to let you know you have got a minute
to kind of wrap up. The red light will come on and we would ask
you to wrap up your testimony as close to that time as
possible. We will give you a little bit of flexibility but not
a whole not.
And I would now like to introduce our panel, or at least
portions of it, and a couple other members will also introduce
other members.
Our first witness is Cynthia Reichard. She is executive
vice president of Arylessence. I want to make sure I pronounce
it. Arylessence. And it is a flavor and fragrance company in
Marietta, Georgia. Arylessence was founded by Ms. Reichard's
uncle in 1977, and it is a family-owned and operated small
business. She leads the company's teams of perfumers,
evaluators, and marketing experts to develop innovative ideas
for signature fragrances. Ms. Reichard is actively involved in
several industry trade associations and is testifying on behalf
of the International Fragrance Association of North America,
and we welcome you here this morning.
Our next witness will be Janis Herschkowitz. She is the
president and CEO of PRL, Inc., in Lebanon County,
Pennsylvania. PRL makes and supplies high quality metal
castings for the defense, nuclear, and petrochemical
industries. PRL was founded in 1972, when Ms. Herschkowitz's
father purchased a small company with 13 employees. She became
the president of PRL in 1989. Ms. Herschkowitz is testifying on
behalf of the American Foundry Society, and we thank you for
being here today as well.
I would now like to turn to my colleague from Michigan, Mr.
Huizenga, to introduce our next witness. I do that all the
time, and I apologize.
Mr. HUIZENGA. That is all right, Mr. Chairman. Well, we
know that everybody from Ohio has got a thing against Michigan
anyway. We will see what happens in the tournament here.
Well, I do deeply appreciate the opportunity to come here
and be here with this Committee today, and I appreciate you
holding this important hearing. Additionally, I appreciate you
allowing me to introduce my friend, Viktor Anderson, who is an
engineer with a company called Structural Concepts, which is
located in Norton Shores, Muskegon area, in my district, along
Lake Michigan.
Structural Concepts is an innovative manufacturer that has
been operating for 43 years. I have had a number of chances,
opportunities to go in and meet with them and kind of keep
appraised of what is going on. And Structural Concepts is a
market leader in energy-efficient, temperature-controlled food
cases for florists, supermarkets, and food service retailers.
Little companies you may have heard of, like one from Seattle
called Starbucks, they are main suppliers for them. They have
developed the industry's most energy-efficient and lowest life-
cycle cost refrigerated food display cases, and I know that we
have all seen and experienced and interacted with their
products or the products of someone like them.
And because of newly proposed regulations, actually, not
legislation implemented by Congress or passed by Congress, but
in fact, regulations proposed and developed by EPA and the DOE,
which are in conflict with each other, Structural Concepts'
ability to produce their most self-contained equipment is in
jeopardy.
I look forward to having Viktor and the other witnesses
share more about the challenges facing small businesses as they
are holding Washington, D.C. bureaucrats accountable so
employers like Structural Concepts and the others can grow,
thrive, and create jobs in communities across this country. So
again, Mr. Chairman, I appreciate the opportunity to be here
with you, and Viktor, welcome.
Chairman CHABOT. Thank you very much.
Now I will yield to the ranking member so she can introduce
our next witness.
Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
I present to the committee Mr. James Goodwin. He is a
senior policy analyst for the Center for Progressive Reform
where he provides counsel on regulatory matters with a focus on
environmental and energy policy. Prior to joining the center in
2008, he worked at the Environmental Law Institute. He is a
published author with articles on environmental law and policy,
appearing in the Michigan Journal of Public Affairs and the New
England Law Review. He graduated Magnum Cum Laude from the
University of Maryland School of Law, and also the University
of Maryland School of Public Policy where he graduated as
valedictorian.
Welcome, and thank you for being here today.
Chairman CHABOT. Thank you very much for that introduction.
And we will now go to our witnesses and we will begin with
you, Ms. Reichard, and you are recognized for five minutes.
STATEMENTS OF CYNTHIA REICHARD, EXECUTIVE VICE PRESIDENT,
ARYLESSENCE, INC.; JANIS HERSCHKOWITZ, PRESIDENT & CEO, PRL,
INC.; VIKTOR ANDERSON, P.E. DIRECTOR OF ENGINEERING, STRUCTURAL
CONCEPTS; JAMES GOODWIN, SENIOR POLICY ANALYST, THE CENTER FOR
PROGRESSIVE REFORM
STATEMENT OF CYNTHIA REICHARD
Ms. REICHARD. Thank you. Good morning. My thanks to
Chairman Chabot, Ranking Member Velaazquez, and the members of
the Small Business Committee for inviting me to testify.
My name is Cynthia Reichard. I am the executive vice
president of Arylessence, and we are a Georgia-based
manufacturer that works in partnership with consumer product
companies to develop fragrances that transform products into
winning brands and consumers into passionate fans.
I can unequivocally state that Arylessence is hindered by
increasing regulatory burdens. Today, I will focus on one in
particular administered by OSHA. I am proud to say that we are
a family-owned and operated small business. As you said, my
uncle founded Arylessence in 1997. He had a dream. He borrowed
against everything he owned and opened with three employees. We
now have 120, supplying 1,000 manufacturers in the U.S. and
abroad. We care deeply about our employees. We train and
promote from within. We provide excellent benefits, tuition
reimbursement, and offer onsite educational and fitness
programs.
I am also proud to speak for the International Fragrance
Association North America (IFANA), which represents the
fragrance supplier industry in the U.S. Like all IFANA members,
Arylessence sources ingredients from around the globe and
crafts unique formulations incorporated into everything from
perfumes and lotions to candles and cleaning products. In the
U.S., IFANA's members market more than 90 percent of all
scents, and support more than 240,000 American small
businesses.
Creating a fragrance is a marriage of art and science. We
work with thousands of ingredients, like natural essential
oils, such as lavender and rose, and manmade ingredients
developed from sustainable raw materials. We, and our clients,
face extensive regulations across agencies, including EPA,
OSHA, FDA, DEA, DOT, and FAA. Plus, all of the state and local
regulations. We have the equivalent of six full-time employees
who are dedicated solely to regulatory compliance. Ever-
increasing burdens raise the cost of doing business in the
U.S., limiting reimbursement in our company and our employees.
In 2008, we planed to expand by building a large R&D facility
and hiring 50 more. Due to the economy, the effect of increased
taxes and costly compliance with regulations, we have delayed
many of these plans.
Today, I want to share our experiences in complying with
OSHA's hazard communications standard, OSHA's interpretation of
the globally-harmonized system for classification and labeling
of chemicals or GHS. It began as a U.N. harmonization
initiative billed as a cost-saving device that would provide
consistency and ensure workers clearly understand the materials
they are in contact with. In 2011, the Obama administration
estimated it would realize 585 million in annualized savings
for employers.
In truth, GHS is the opposite. It is neither global, nor
harmonized. And it has taken us three years to implement and
cost us over half a million hard dollars in untold labor hours,
all without safety benefits to employees.
Complying is complex and requires extensive operational
changes. Manufacturers and distributors must identify and
classify chemicals based on a complicated GHS hierarchy. All of
this information must be included on safety data sheets (SDS)
and labels which must be affixed to workplace products. Labels
must include color pictograms, and informational symbols, and
signal words, and lengthy hazard statements.
OSHA's different treatment of samples is problematic for
industry. Canada and the EU allowed for small package
exemptions. Despite pleas from manufacturers, OSHA did not,
resulting in a costly and incredibly burdensome process.
When asked to create a rose sence--I think, Arylessence
typically sends two to five samples to a potential client, all
containing different ingredients. Unlike industries that ship
in large sample quantities, ours sends extremely small half-
ounce bottles. Now, rather than requiring a SDS only on
products purchased, each small sample must include the complex
labeling and safety data communications. Arylessence sends
10,000 samples per year, requiring thousands of safety data
sheets and labels for half-ounce samples that may never be
sold.
In addition, OSHA has issued no guidance as to how labels
are to be affixed to small packaging. Without this label
attached to this bottle, we are going to be subjected to severe
OSHA fines. This is just one example of how small businesses
like ours continue to struggle due to the increasing costs of
unnecessary regulations. Regulation without representation
needs to be replaced with clear understanding of the impacts
and proactive solutions that do not unfairly disadvantage small
firms.
Thank you for the opportunity to testify.
Chairman CHABOT. Thank you very much.
Ms. Herschkowitz, you are recognized for five minutes.
STATEMENT OF JANIS HERSCHKOWITZ
Ms. HERSCHKOWITZ. Thank you, Chairman Chabot, Ranking
Member Velaazquez, and members of the Committee. Thank you for
the opportunity to testify before you to discuss regulatory
burdens impacting the U.S. metal casting industry.
I am Jan Herschkowitz, president of PRL, Inc., which is a
holding company of a foundry and upgrading facility and two
machine shops. My family moved to the States from Bolivia in
1971 to live the American dream. In 1972, my father purchased a
small company with 13 employees, which he quickly expanded.
After leaving Zenith Electronics, I became president following
his death in 1989. PRL currently has four manufacturing
locations and is a proud supplier of high specification
castings for the military, nuclear, and energy sectors. Our
foundry, which is our smallest company, only has 13 employees.
I am very proud of our highly-skilled workforce who play a
critical role in our nation's defense and their dedication to
quality is reflected in our customer base which includes
Northrop Grumman, Curtis Wright, and PSE&G. I am testifying
before you today as upcoming proposed regulations, although
well intended, are so threatening that I fear it may jeopardize
the future of the U.S. foundry industry.
I am here on behalf of the American Foundry Society, our
industry's trade association, comprised of more than 7,500
members, over 80 percent of U.S. metal casters and small
businesses employing 100 workers or less. Again, over 80
percent of foundries employee 100 workers or less, with Ohio
having the most foundries in the country. Over 90 percent of
all manufactured goods and capital equipment are in some way
dependent on castings. Our military utilizes metal castings in
all sectors, including submarines, tanks, and other components,
making the need for domestic production vital for our national
defense.
Metal casters are the world's original recyclers as we make
new castings by remelting scrap metal and recycling the
majority of the sand that we use. AFS members are highly
committed to protecting their employees and implementing sound
safety policies. PRL's culture is one of safety first as the
risks of pouring molten metal are taken very seriously by every
coworker, and we continually invest in safety equipment,
consultants, and training.
I will only discuss a few regulations that will impact us
as my submitted testimony reviews the regulations in detail.
Our biggest concern is OSHA's proposed crystalline silica rule,
which would create a massive and complicated new regulatory
structure for the control of silica. Under this ``one size fits
all'' rule, it would ban dry sweeping and compressed air usage.
Like all foundries, we manually clean out all of our mold using
a small compressed air hose and we use dry vacs to keep our
foundry clean. This is standard practice. Under this proposal,
we would no longer be allowed to use dry sweeping and our only
alternative would be to use wet vacuuming. As a foundry person,
you know you never, ever want to introduce water into a foundry
environment as an explosion could occur and lives would be at
stake, yet this regulation requires it. It dismisses the use of
personal protective equipment as a primary approach to
protecting employees. Many employers have invested in clean air
respirators, which are utilized where there is a substantial
increased risk of silica exposure. Unfortunately, OSHA's
proposal measures the air outside of the respirator, which is
not indicative of what the coworker is inhaling.
Expected cost of compliance for just the dust collection
systems required are estimated at million dollars. This does
not even include the cost of engineering time; obtaining new
permits, which may not even be granted; administrative costs;
and new ventilation and cleaning systems. Under this
regulation, there is also no guarantee that the lower standard
can be met, and there is uncertainty that it can even be
properly measured. The estimated cost of this regulation by
OSHA for the foundry industry is 43 million, while outside
analysts estimate the cost to be over 2.2 billion annually.
Obviously, the impact on small business was not properly taken
into account.
Foundries are also concerned with new regulations that the
EPA is imposing on utilities. In order to compete in a global
marketplace, U.S. foundries need adequate and affordable
electric power. EPA has proposed two regulations to limit
carbon emissions on new and existing power plants and have
proposed an ozone regulation that could be the most expensive
rule ever imposed. Our concern is that these costly regulations
will hit foundries the hardest, increasing our energy costs and
driving us offshore. We would like to see the OMB and other
federal agencies also take into account the cumulative impact
of all the regulations.
In closing, keep in mind that the United States has the
cleanest, safest, and most efficient foundries in the world.
Adding more regulations which may not be verifiable and perhaps
cost prohibitive will force some of our foundries to shut down
and products will be taken offshore. This will have the
unintended consequences of increasing world pollution,
rewarding countries with unsafe work practices at the expense
of diminishing our country's own economic growth and putting
our national defense at stake.
Thank you again for this opportunity, and I would gladly
answer any questions.
Chairman CHABOT. Thank you very much.
Mr. Anderson, you are recognized for five minutes.
STATEMENT OF VIKTOR ANDERSON
Mr. ANDERSON. Thank you, Congressman Huizenga for that kind
introduction, and thank you, Chairman Chabot, Ranking Member
Velaazquez, and members of this Committee. I appreciate the
opportunity to testify today on behalf of Structural Concepts
Corporation and the HRI.
Structural Concepts was founded in 1972 and is located in
Muskegon, Michigan. We manufacture commercial refrigerated
equipment. Basically, we make the refrigerated merchandiser or
display that you would find at your local grocery store or
restaurant. Our products ensure that food is stored safely and
is accessible in all corners of our country, from mom and pop
shops to the largest supermarket chains.
Like so many small businesses across the country,
Structural Concepts is deeply rooted in our community. Our
friends, our neighbors, and our town depend on jobs we provide.
Unfortunately, small businesses like ours are facing
significant new regulatory burdens from federal agencies, and
that is why I am here today.
First, it is important for me to tell you that my company
is not anti-regulation. Like many of our fellow HRI members, we
consider ourselves to be concerned citizens, responsible
neighbors, and leading innovators. We have complied fully with
previous regulations, and even exceeded our obligations. What I
am here to talk about, however, is the burden of conflicting
regulations on businesses like mine and the need for regulatory
certainty. President Obama talked about this burden in
Executive Order 13563 when he required federal agencies to
tailor regulations to impose the least burden on society,
taking into account among other things the cost of cumulative
regulations. My hope is that this hearing can help illuminate
the need for federal agencies to live up to this obligation.
In 2009, DOE finalized energy efficiency standards for
commercial refrigeration equipment. Our industry was required
to come into compliance in 2012. Over those three years, we
developed energy-efficient solutions, engineered them into 400-
plus refrigerated display cases, and tested them for energy
consumption while still upholding our most important
regulations pertaining to food and product safety. To
accomplish all this, we had to dedicate thousands of
engineering and testing hours that would otherwise be used for
customization or developing products to increase sales and grow
our company. We had to increase our capacity, accuracy, and
throughput of our test labs. We had to develop new
manufacturing processes and supply chains to produce our own
condenser units. In the end, we reduced the carbon footprint of
our entire self-contained product offering by approximately 50
percent. We felt proud of this fact that we complied with the
new DOE energy levels, and in most cases, went above and
beyond.
Unfortunately, we soon found out that was not enough. Last
year, only two years after the compliance deadline for the old
rules, DOE again updated its standard with more stringent
energy efficiency criteria. The new standards, which have to be
met by 2017, obviate many of the investments that were made to
comply with the 2012 rule. Quite simply, after making huge
investments based on regulatory reality, DOE moved the
goalposts.
To make matters worse, the EPA proposed a rule last year
that will take away the current refrigerant used in all of our
self-contained refrigerated systems on January 1, 2016. That is
only nine months away. The alternative refrigerants EPA
proposed were either too flammable and limited the amount of
refrigerant we could use in each system, or they increased the
energy consumption in our application. If finalized, EPA's
proposal would have significantly raised energy consumption of
all of our products and violated the new DOE energy
regulations.
After we submitted comments to the EPA, the agencies
offered up alternative refrigerant we could use, our 450A.
Although this is much better than the previous alternatives, it
still has its challenges. Production of the new refrigerant and
regulatory approval of compressors can take years to implement.
All of our systems will again need to be redesigned and tested
to see how the new refrigerant impacts energy efficiency.
Here is our primary problem. DOE is requiring us to comply
with new energy standards on January 1, 2017. EPA is proposing
compliance with their new rule on January 1, 2016. While it is
possible the EPA's compliance date will slip, DOE is mandated
to review energy levels every five years. This means that in
2022, we may have to review our product yet again.
My point is this. If DOE and EPA do not coordinate their
efforts, we could potentially be redesigning our product every
two to three years for 12 or more years in a row at great
expense. Combining the compliance burdens associated with these
two rules could devastate our industry.
My purpose today is to draw the Committee's attention to
the regulatory burdens faced by small businesses everywhere.
The regulations I just described both specifically designed to
address the commercial refrigeration industry will not only
increase our costs but will force Structural Concepts to reduce
the number of products manufactured, throw uncertainty into the
current and future products offered, and overall result in
reduced employment. We are not a large corporation with a
plethora of resources to redirect towards the review, testing,
and compliance of new rules. We are a small, innovative
manufacturer that makes refrigerated display cases, hardly the
nexus point of the nation's energy and environmental policy
battles.
Our company and thousands of companies like ours across the
nation make a big difference in the stability of the economic
recovery which has only just begun to take hold. Again, we are
not anti-regulation. We are simply asking federal agencies to
consider the impacts of cumulative regulations on businesses
like ours and live up to the guidelines articulated in
President Obama's executive order.
Thank you very much for the opportunity to be here today,
and I look forward to answering questions.
Chairman CHABOT. Thank you very much.
Mr. Goodwin, you are recognized for five minutes.
STATEMENT OF JAMES GOODWIN
Mr. GOODWIN. Thank you.
Mr. Chairman, Ranking Member Velaazquez, and members of
this Committee, I appreciate the opportunity to testify today
on why ensuring a robust regulatory system is both necessary to
and consistent with a strong economy in which smaller
manufacturers can thrive and prosper.
In my testimony today I will make three points. One,
regulations are essential for safeguarding the public. Two,
regulations can and do provide important economic benefits for
smaller businesses, including those in the manufacturing
sector. And three, the SBA Office of Advocacy appears to be
working against the interests of smaller businesses and
requires enhanced oversight from this Committee.
Based on these three points, I will conclude by proposing
an alternative approach to balancing strong public safeguards
with the unique interests of real smaller businesses.
Point one. Over the past four decades, U.S. regulatory
agencies have achieved remarkable success in establishing
safeguards that protect people and the environment against
unacceptable risks, but serious hazard remain. By addressing
these hazards, Americans would be even better protected.
A case in point is OSHA's pending rule to protect workers
against harmful silica exposures. Roughly two million U.S.
workers toil in workplaces with silica levels high enough to
threaten their health. OSHA estimates that thousands of workers
die every year because of silica exposures that are within the
current legal limits which were set more than 40 years ago.
These workers suffer just the same whether they work for
smaller businesses or larger ones. Once in place, OSHA's
pending silica rule is expected to save up to 700 lives and
prevent up to 1,600 cases of a deadly lung disease called
silicosis every year. And these protections cannot come a
moment too soon.
This rulemaking has been in the works for over 18 years
now, and the cost of these unnecessary delays has been
thousands of deaths and debilitating illnesses that were not
prevented but should have been.
Point two. The economic benefits of regulation of
businesses can be significant but are all too often overlooked.
Here are just four types of these benefits. First and foremost,
smaller businesses receive a significant productivity dividend
when their workers and their workers' families are healthy and
safe. Second, regulations can help to create new markets and
opportunities for entrepreneurs. Third, regulations can even
spur businesses to revolutionize their production processes in
ways that lead to greater productivity and profitability. In my
written testimony, I discuss in detail how OSHA's 1978 cotton
dust rule has precisely this kind of effect. Fourth, as recent
episodes illustrate, when industrial-scale catastrophe results
from a failure to regulate adequately, the attendant costs tend
to fall disproportionately on smaller businesses.
Here I can speak from personal experience. My uncle in
Alabama has struggled to keep the doors open to our family's
decades-old restaurant supply company after the 2010 BP oil
spill as the resulting downturn in tourism has obliterated much
of the company's customer base. Stronger regulations that are
necessary for preventing these catastrophes or for minimizing
their harmful effects with us deliver particularly large
benefits to many small businesses like his that might otherwise
be caught in harm's way.
Point three. In a recent GAO report, the GAO raised serious
concerns about the Office of Advocacy's job performance. Among
other things, the report describes how the GAO could find no
evidence that the Office of Advocacy ever interacts with
smaller businesses in the course of conducting its duties, such
as developing comment letters on pending rulemakings. Yet,
investigative work by my organization and by the Center for
Effective Government has found copious evidence of
communications between the Office of Advocacy staff and large
trade associations that are dominated by their large business
members. The bottom line is that smaller businesses continue to
lack a voice in government, while the larger businesses they
compete against have their already large voice amplified on the
taxpayers' dime.
In the brief time I have remaining, I would like to make a
modest plea that we hit the target on this ongoing regulatory
debate so that we can chart a new path forward. Moving forward
means finding ways to help smaller businesses meet the
regulatory obligations and to do so in ways that will not
undermine their ability to compete with larger firms in their
industry.
Over the years, Congress has taken some small steps towards
enhanced compliance assistance for smaller businesses. With
some creative thinking, these efforts can and should be
expanded. I will highlight just a few potential creative
solutions here. First, providing monetary assistance in the
form of grants or subsidized loans to truly small businesses so
they can be at higher regulatory standards. Second, expanding
existing regulatory compliance assistance programs. And third,
partnering small businesses to promote beneficial synergies on
regulatory compliance.
Thank you. I would be pleased to answer any questions that
you might have.
Chairman CHABOT. Thank you very much. I appreciate your
testimony. I appreciate the testimony of all the witnesses, and
Ms. Reichard, I will go to you first, if that would be okay.
You mentioned in your testimony about Canada and the
European Union providing an exemption for labeling for small
bottles while OSHA did not. How does this put the United States
manufacturers like yourself at an economic disadvantage when
you are trying to compete in international markets?
Ms. REICHARD. Okay. From an economic disadvantage
standpoint, our competitors do not have to also provide the
same labeling. The process of producing that labeling for us
means that we have had to buy new printers that are very
expensive. We have had to make all that investment. We have to
take the labor cost to produce all of those labels. And because
OSHA gave no guidance, we have had to figure out a way to
properly attach those labels to our product. And I can show you
for us what that looks like. We have had to take our bottle,
produce our printed material--in color now--and have the labor
to fold it into four squares so that it fits into this
chemically impervious pouch and attach it, each one, 10,000 of
those products per year, and our competitors do not have to do
so.
Chairman CHABOT. Thank you.
Ms. REICHARD. It is a complete disadvantage for us.
Chairman CHABOT. Thank you very much.
Ms. Herschkowitz, let me return to you. You talked about
the silica rule. If that rule were finalized--you mentioned
about the significant cost to you and the fact that it is
arguable whether safety would be improved; in fact, in many
instances, it might be just the opposite effect. If that rule
went into effect, how would that impact your ability to grow,
create more jobs? And I also noted, when Mr. Goodwin was
talking about the silica rule, you seemed to cringe a little
bit. And so if you would like to comment on that I would be
happy to hear your----
Ms. HERSCHKOWITZ. Absolutely. And again, this is a ``one
size fits all'' rule. And we have 13 employees in our foundry.
We pour one heat a day, and we are now being lumped in with the
Bethlehem Steels of the world and all those other companies to
be able to have to comply. We currently have three dust
collection systems--one over our furnaces and we have what is
called an AOD refining vessel which collects all the dust. We
are also putting in a heat exchanger, which is going to get rid
of some of the small fines and also get us a better quality
casting.
So we have a very strong safety program. We have employees
internally. We have a Safety Committee. We have safety leaders.
Anybody can stop a heat at any time if they feel that it is
unsafe. They have OSHA masks that are qualified. We also have a
clean air mask at the cost of, I think it was $10,000 in the
powder burning area to be able to do that. So I do feel that
our foundry environment is very, very safe and there is very
little risk of silicosis. But realize that it is still a
foundry. And if we were to implement this, if the four dust
collection systems that we have already invested in, whether or
not you can get a used one because foundry dust collection
systems have to be much stronger. So if we could get a used
one, maybe we would be looking at half a million dollars. And
if not, it would be up to a million dollars.
Now, realize this is a 13-person foundry with revenue of
just over $4 million. So it becomes very, very difficult. And
introducing water into a foundry process is terrible. As soon
as you put water into molten metal you get a huge explosion. So
if this regulation is passed, I am going to face the conundrum
of whether or not we even adhere to it. Are you better off
risking the lives of your employees to meet a regulation? I do
not think so. I am very proud of our employees. They are very
highly skilled, and I just very much fear that it could also
not impact the foundry, but the foundry provides castings for
our other employees. We have a total of 150 employees and all
their jobs would be in jeopardy.
Chairman CHABOT. Thank you. And the government should not
put you in that position, in my opinion.
Ms. HERSCHKOWITZ. Thank you.
Chairman CHABOT. I have got little more than half a minute
left. So Mr. Anderson, let me turn to you quickly.
Do you have an estimate of how much time and money it will
take for your company to reengineer its products to comply with
the new energy conservation standard? And did anybody from the
Department of Energy reach out to you to find out how it was
going to affect a business like yours?
Mr. ANDERSON. Yes. We were reached out to by a consulting
company called Navigant Consulting early on. What we have
invested, we probably--we have had thousands of manhours into
it. So four engineers, four technicians working for nine months
to comply with the 2009 rule. The 2017 rule is going to be
slightly different where it is somewhat less of a leap since
the last rule, but the problem lies in that we are gridlocked
because the EPA now is requiring a new refrigerant. Or they
actually took our refrigerant away. So we actually have no
certainty on whether or not or what to engineer. So as far as
how much will it cost, I guess it depends on--we might not even
have the opportunity to do it.
Chairman CHABOT. For what it is worth, that is the same
thing I have been hearing from the heating and air conditioning
folks in my district as well, and they are very concerned about
it.
My time is expired. I will now yield to the ranking member
for five minutes.
Ms. VELAAZQUEZ. Thank you, Mr. Chairman.
Mr. Goodwin, many observers have noted the massive amount
of statutory and presidentially-issued requirements and hurdles
that agencies are subject to in the regulatory process. Some
have even suggested that this has resulted in the ossification
of the rulemaking process. To this point, research had found
that it takes an average of 10 years for OSHA to develop and
promulgate a health or safety standard. Do you believe that the
regulatory process itself has become so overly burdened that it
is in effect ossified?
Mr. GOODWIN. Yes, I do share that view. Agencies do work
under a large welter of procedural requirements that they have
to satisfy during the rule-making process. I think a lot of
these sprouted from good ideas but they have reached this point
where they become duplicative and ultimately counterproductive
so that they distract agencies from considering what is really
important when developing a rulemaking and sort of send them
off on these wild goose chases that ultimately do not lead to
better regulatory solutions for the folks they are trying to
protect or the small businesses that are ultimately subject to
them.
Ms. VELAAZQUEZ. Can you please explain how many
regulations, and you mentioned it in your statement, benefit
businesses, both big and small, especially when it comes to
increasing the productivity of their employees? Can you
elaborate on that?
Mr. GOODWIN. Sure. You know, I think one of the best
examples I have seen is a couple of years ago I was looking at
the Regulatory Flexibility Act reviews that OSHA does on its
existing regulations and there was this really interesting case
study about OSHA's cotton dust rule. And what it found was that
this rule directed the textile industry to institute new
processes in manufacturing, and it reduced the workers'
instances of this lung disease called brown lung disease. But
what they also found--by 99 percent. It was by all accounts
just a huge public health victory. But what they also found was
this really interesting economic side benefit. Prior to the
rule's implementation, the industry's productivity gain was
increasing year over year by 2.5 percent. After the rule's
implementation, their productivity gains were increasing by 3.5
percent, and that was because this rule largely led these
industries to sort of revolutionize their manufacturing
processes and it was a win-win for workers. It was a win for
the manufacturers and their productivity gains led to more
profitability and increased employment rates.
Ms. VELAAZQUEZ. Can you discuss your perspective as to how
fuel standard regulations have been a real driver when it comes
to the development of advanced technologies, energy
technologies, and how have rules such as these contributed to
the U.S. standing globally?
Mr. GOODWIN. Sure. You know, as we tackle climate change,
one of the simplest ways, the cheapest ways of reducing our
global climate footprint is to adopt energy-efficient products.
It is unavoidable. And what regulation can do is sort of help
us move along that path in a more predictable, ultimately
cheaper way I would say because the process will be smoother.
And I think energy efficiency regulations in particular can
help there by specifying clear rules of the road for everybody.
And the manufacturers in the U.S. that are subject to them will
ultimately be better positioned to manufacture the best,
cheapest, most effective energy-efficient products, not only
for folks at home, but also, ultimately, for markets abroad.
And you know the manufacturers of these products in China and
stuff, they are working hard on developing these products and
they want to sell them to us.
Ms. VELAAZQUEZ. Thank you.
Mr. GOODWIN. I think we should sell them to them.
Ms. VELAAZQUEZ. Mr. Anderson, the Department of Energy
estimated that the commercial refrigeration rule will result in
substantial energy savings to customers, many of which include
small businesses, like restaurants, grocers, and convenience
stores. However, there are significant costs on the other side
of the equation to small manufacturers like yourself, as well
as transitional costs to consumers. How do you propose that we
best balance these costs and benefits in the rule-making
process?
Mr. ANDERSON. Well, as far as balancing the costs, for
small manufacturers, I would like to ask DOE--I would like to
have DOE make some changes as far as the 2017 rule and ask
Congress to create a bill to actually remove the 2017
restrictions, change the timeframe in between the intervals for
when we have to redesign our product. Right now we have to
redesign every five years. That does not give us any breathing
room.
Now there are cumulative regulations with the EPA. So the
EPA is throwing in that we have to change our refrigerants. I
am not off the subject. So we have to take into account what
the energy efficiency will be with a new refrigerant. So they
need to have a coordinated effort at some point in time. Right
now we will be out of business if we are supposed to use R450A
on January 1, 2016.
What I suggest is that some type of bill be written so that
in 2022, when the DOE needs to have their next revision of the
standards, that they couple that with the EPA's proposal, and
whatever refrigerant they may come up in between then, that way
we can work on a supply chain, we can work on all the new
innovations within the same amount of timeframe that we can
have a good efficient product.
Chairman CHABOT. Thank you.
Ms. VELAAZQUEZ. Thank you.
Chairman CHABOT. Thank you. The gentlelady's time is
expired.
If the ranking member is okay with it, I am going to yield
to the gentleman from Michigan who is not on this Committee,
but we would extend the same courtesy to members on the
democratic side if you would like to do that in the future.
The gentleman from Michigan is recognized for five minutes.
Mr. HUIZENGA. Mr. Chairman, I deeply appreciate that, and
my other colleagues that are on the Committee, allowing me to
sneak out of our other hearing and come here.
I just want to get this straight. We just heard that in
battling our climate footprint, having regulations in conflict
like this, help move along in a more predictable and cheaper
way American business, there are clear rules of the road, and
that your employees have become more productive as you have
been trying to build your businesses. I am just curious what
your response is to that. And if we can start with Ms.
Reichard.
Ms. REICHARD. Okay. So we are more productive at less cost,
et cetera. I do not think regulations actually accomplish that.
Let me say that we support strong health and safety regulations
based on sound science that protect consumers.
Mr. HUIZENGA. And by the way, if I can just jump in.
Ms. REICHARD. Yeah, sure.
Mr. HUIZENGA. It is kind of sad that everybody----
Ms. REICHARD. I know. It is sarcasm.
Mr. HUIZENGA.--has to put this disclaimer in.
Okay. You are looking at the grandson of a man who was part
of the original sit-down strikes with Oldsmobile in Flint,
Michigan. All right? My family is directly tied to those first
needs of safety and concern for employees. We are well beyond
the discussion about safety for employees when we are talking
about the EPA and DOE not getting on the same sheet of music
here and as you are dealing with your regulations. But please,
quickly go ahead.
Ms. REICHARD. Right. So we are not asking for regulations
to be eased in regard to health and safety; we are asking for
them to be worked on in partnership with industry so that they
do not end up being unnecessarily burdensome and complex. A
more complex program does not always compute to a better
program, understanding that nothing has changed in regard to
the materials that we are delivering or that our workers are
handling. It is simply more complicated, and now they have to
be trained. They have got a lot more training. They have to be
using different systems. We have taken perfectly good printers,
and I am a huge advocate for sustainability, and we have had to
throw them away. They have been obsolete.
Mr. HUIZENGA. There is a little bit of irony there.
Ms. REICHARD. So nothing good has come out of this
particular regulation as far as health and safety goes.
Mr. HUIZENGA. Ms. Herschkowitz?
Ms. HERSCHKOWITZ. Congressman, first, I would submit to you
that we never would have won World War II had we had--I will
start over. Congressman, I would submit to you we never would
have won World War II had we had half these regulations in
place.
But having said that, we are in a global marketplace. A
friend of mine was recently in a foundry in China and they were
pouring molten metal without shoes. And he asked them, ``How
can they not have on safety equipment?'' And the response was,
``There are 20 people that want that particular job.'' So we
have to absorb that. We have to----
Mr. HUIZENGA. It is an unlevel playing field.
Ms. HERSCHKOWITZ. It is a very unlevel playing field. And
what we are doing is we are pushing jobs to China. We are
pushing jobs to India where they do not have these regulations.
Mr. HUIZENGA. And Mr. Anderson, I am assuming that hiring
consultants to figure out the labyrinth of new federal
regulations is not exactly viewed as job growth; correct?
Mr. ANDERSON. No, it is not. We wear many hats in our
company. I wear a lot of hats myself. It is not easy reading
through 6,000 pages of regulatory rules of that stack over
there.
Mr. HUIZENGA. And again, this was just February. And by the
way, February, there was a federal holiday, so thank the Lord,
because there would be another stack on top of here.
Mr. ANDERSON. Yeah, we absorb all the cost of regulatory,
so as far as reducing the costs or making us more competitive,
regulations do not do that for Structural Concepts. And to
increase energy efficiency in our product, we typically have to
go to the next technical component. Take it from a fluorescent
light to an LED light, and we have to wait for that lifecycle
curve for the cost to come down. And with the speed at which
all this stuff is coming at us, that lifecycle cost gets pushed
into our product. It will come down and it has come down, but
we still have to absorb a lot of that cost in the meantime.
Mr. HUIZENGA. Mr. Chairman, coming from industrial states
like Ohio and Michigan, and even that little place called
Indiana down below us I think, the states and the people that
come from states that build things understand what it means to
have a supply chain. And I think so often these regulations do
not reflect that reality. And I am sure all three of you have
dealt with that.
And I know, going to Structural Concepts, that has been
expressed explicitly. It is not just good enough to have a
product to use; you then have to have people that are going to
manufacture it. You are then going to have the people that are
going to be supplying it. And you have to have critical mass on
it. You have to then reengineer all of your equipment. Is that
not, and maybe just in closing you can touch on that. And
again, thank you.
Mr. ANDERSON. Yeah, for 2017, or even the EPA, we will have
to go through and look at every single refrigeration component
in each of our 400--or actually, probably 600 models now. That
is no small chore. Machine-size compartments can change. The
physical cabinets inside can change dimensions, so we will have
to change the whole product structure potentially. It is not an
easy task to accomplish this.
Chairman CHABOT. Thank you very much. The gentleman's time
is expired.
The gentlelady from North Carolina, Ms. Adams, is
recognized for five minutes.
Ms. ADAMS. Thank you, Mr. Chair. And thank you to all of
you who testified today.
Mr. Goodwin, during your testimony you touched on some very
troubling tales regarding the Small Business Administration's
Office of Advocacy Works and the apparent lack of input from
actual small businesses in the decisions that are made. This
office is meant to serve as a voice for small businesses within
the Federal Government, and obviously it is necessary to ensure
that the office carries out this directive. But more
importantly, we must ensure that small businesses have adequate
representation. In your opinion, what are some steps that can
be taken to ensure that the SBA Office of Advocacy Works is
listening and speaking for real small businesses?
Mr. GOODWIN. Well, I would echo a lot of the
recommendations that were made in the GAO report, and they
called upon the Office of Advocacy to do a better job
documenting their outreach efforts in developing
recommendations that they include in their comment letters. So
I think just greater transparency would go a long way because
if people know who they are talking to, then they will be much
more strongly encouraged to talk to small businesses. So I
think that is a big part of it.
I think a big part of it would be certain agencies have to
do something known as--or I call them SBREFA panels. Under
SBREFA, they have to do panels where they discuss rules before
they are formally proposed, and they could take steps to make
sure that actual small businesses are participating in those
panels rather than representatives of large trade associations.
Ms. ADAMS. Okay. And do you think it is important to see
that not only small businesses have a voice but also that small
communities within small businesses, such as black, women,
minority-owned business, have guaranteed representation within
this office?
Mr. GOODWIN. You know, I have not really thought about
minority representation but it certainly would make sense. I
think it is important to have, I mean, in particular to have
small businesses. I mean, if their statutory mission is to
serve as a voice of small businesses, then they should at least
be listening to the voices of small businesses. And from what I
have seen and from what the GAO has seen, that is just not
happening. Instead what we are seeing is emails between the
Office of Advocacy staff and these lobbyists for large trade
associations. At the very minimum, that needs to change.
Ms. ADAMS. All right, the black and the minority-owned
business voices matter as well. Thank you for our comment.
Mr. GOODWIN. I do not disagree.
Ms. ADAMS. You spoke of some ways that we can avoid an
either/or mentality when it comes to protecting the public and
empowering small businesses. One was to partner small
businesses to promote beneficial synergies on regulatory
compliance. So can you expand just a little bit upon what it
would look like and how it would benefit small businesses in
meeting regulation standards?
Mr. GOODWIN. Sure. You know, I was just trying to think of
creative solutions for how regulatory compliance, you know,
which nobody likes, could be turned into a plus for folks. And
I know that the Small Business Administration, which is
distinct from the Office of Advocacy, runs contract programs in
connection with government services. So building off those
contracting programs, perhaps a program could be designed where
the SBA would identify the kinds of small businesses that might
provide compliance assistance, so things like small law firms,
small accounting firms, that sort of thing, engineering
consultant firms, that sort of thing. And then they could be
partnered up with small businesses in this way where, you know,
one small business's compliance provides business for another
small business. Everybody wins.
Ms. ADAMS. Okay. You also spoke about how regulatory
benefits exceed regulatory costs by almost eight to one,
reducing the burden to not only small businesses but the
American public in general. So can you speak more to the
savings that can be achieved by regulatory regulation
compliance, for instance, lost workdays, less hospital visits,
et cetera?
Mr. GOODWIN. Sure. One thing that is worth emphasizing on
that eight-to-one cost benefit analysis is that it is highly
skewed away from benefits and in favor of costs. So that
probably understates it a great deal. But taking on your
question, one of the big costs that the Clean Air Act has been
able to address over the last 20 years or so is reducing missed
workdays, reduced activity days, missed school days. If a kid
is sick, his parents have to take time off. All these sorts of
things are important benefits of these public health
regulations that save society a lot of money and do a lot of
good for business as well.
Ms. ADAMS. Thank you. I think I am just about out of time.
I yield back.
Chairman CHABOT. Thank you. The gentlelady yields back.
I will now yield five minutes to the gentleman from Kansas,
Mr. Huelskamp.
Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate your
technical language. It was either stupid or dumb regulation.
Chairman CHABOT. Dumb.
Mr. HUELSKAMP. Dumb. And for the record, with unanimous
consent, I am opposed to ``dumb'' regulations as well.
But ma'am, if I might, can you hold up your bottle and the
big sheet? And as you understand the regulations, these are
coming--and I did not catch, which agency is requiring this?
Ms. REICHARD. This is the GSH regulation out of OSHA.
Mr. HUELSKAMP. Okay. OSHA is requiring that. How did they
tell you to wrap that around the bottle?
Ms. REICHARD. That is an excellent question. There is
actually no guidance given from OSHA in regard to applying this
label to this bottle.
Mr. HUELSKAMP. Okay.
Ms. REICHARD. So every single company has had to adopt
their own avenue for accomplishing that. Some companies wrap--
Mr. HUELSKAMP. And what would OSHA--what would they fine
you if you did not comply with some mysterious regulation?
Ms. REICHARD. Well, OSHA files--I cannot answer that
question because OSHA files are typically done on a basis where
they do an analysis of each individual time that it happened
and how many times you shipped. It would be a lot of money.
Mr. HUELSKAMP. And what is toxic in that bottle?
Ms. REICHARD. Pardon me?
Mr. HUELSKAMP. What is toxic in that bottle?
Ms. REICHARD. There is nothing toxic in that bottle.
Mr. HUELSKAMP. There is nothing toxic in that bottle?
Ms. REICHARD. No, there is nothing toxic in this bottle.
Mr. HUELSKAMP. Okay. I want to clarify that.
I had a letter from a manufacturer, National Association of
Manufacturers member. I was at, at least in their community
last week and they had an OSHA inspection, and this is a little
sticker on a shift knob on a forklift, and it is a $1.41
sticker, and they received about an $800 fine, multiplied by
two. But OSHA had been by the facility numerous times and they
did not see it missing, I guess, until this time. Before they
left the facility, OSHA had--they had actually put the sticker
on the gearshift, but that was not good enough. So I would take
an exception with Mr. Goodwin's comment that nobody likes
regulatory compliance. From what I understand for OSHA, they
love regulatory compliance.
Ms. REICHARD. Yes.
Mr. HUELSKAMP. And from what I hear from my manufacturers
and the other businesses subjected to this compliance, to quote
my manufacturers, ``I have never been through an inspection
when issued citations were directly related to the actual
hazards we work with.''
Ms. REICHARD. Exactly.
Mr. HUELSKAMP. And the whole issue here is to reduce
hazards. From what I hear from OSHA and other numerous
agencies, it is not about the hazards; it is about the
enforcement.
Ms. REICHARD. Yes.
Mr. HUELSKAMP. And so you run in these crazy situations
where you have the administration as you indicated, going after
raising our costs of electricity, and the end result is we
drive your business offshores. And we drive them to other
countries, like China, that have a much lower standard. And so
no new coal-fired power plants, but they build them every day
in China. The end result is we worry about global pollution
supposedly, but the end result is we make that happen.
But I wanted to ask Mr. Goodwin, if I could, an issue is
the Waters of the U.S. Rule, and I see the Center for
Progressive Reform has been strongly in favor of that rule. Is
that still your position?
Mr. GOODWIN. Yes, sir.
Mr. HUELSKAMP. Okay. And I would say I totally disagree
with that position. If you want to create uncertainty in the
agricultural industries, small manufacturing industries,
construction industry, the industries here, every industry is
using some type of water. It is going to be devastating, not
because of the impact but because we do not know what it is. No
one knows. And it might create tremendous jobs in Washington,
D.C., and creates jobs for think tanks, but at the end of the
day, you folks have to comply.
Who here--and Mr. Anderson might read the Federal Register.
I am sorry you have to do that, but what about you two ladies?
Who regularly reads the Federal Register in your shops?
Ms. REICHARD. We cannot actually spend the time reading the
Federal Register. Our company spends over $750,000 a year
belonging to different trade associations. I heard some
comments in regard to trade associations should not be able to
call on SBA, and I thoroughly disagree with that. Small
businesses lack resources. We have to band together in order to
be able to afford the cost to analyze all of these bills that
are coming out of Washington, D.C., and we have to band
together to have the bandwidth, for lack of a better word, to
approach Washington, D.C., to try to work with the agencies, to
create better regulations that are not too complex, that
actually improve safety and health and wellness of the
employees they are working for every day.
Mr. HUELSKAMP. Yes, Janis?
Ms. HERSCHKOWITZ. We rely on our trade association, the
American Foundry Society. We also have an outside safety
consultant who is available 24/7 that we can call at any time
if any of our plants have a concern.
Mr. HUELSKAMP. Is he paid for by the government, I guess?
Of course not. Of course not. And that is my concern because
these regulations--I think Mr. Goodwin even agreed with that--
they hit harder on small businesses than the big guys.
Ms. HERSCHKOWITZ. Oh, my gosh, yes.
Mr. HUELSKAMP. And you will see many of the larger
companies, they actually lobby in favor of these regulations
because they fear competition from the small businesses.
Ms. HERSCHKOWITZ. Interesting.
Mr. HUELSKAMP. And I have seen that again and again. And so
I appreciate your testimony, and continue to do that. I would
also appreciate you, if based on your testimony, you do get
harassment back from your regulatory agencies. I am certain the
chairman--I definitely would like to know about that. I have
members, I have constituents that are afraid to tell me and let
me make public about outrageous actions by agencies because
they fear the harassment and regulatory retaliation. And there
is no room for that. So I yield back, Mr. Chairman.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
The gentlelady from Michigan, Ms. Lawrence, is recognized
for five minutes.
Ms. LAWRENCE. Thank you, Chairman, and Ranking Member.
I wanted to say hello to Mr. Anderson. I am from Michigan,
and I am really glad to see a Michigander her.
As you know, I represent the state of Michigan, which ranks
among the top five states in manufacturing employment. I
strongly believe that manufacturers are the backbone of this
nation's economy. And as we grow manufacturing, we always see
an uptick in our economy.
But I also strongly believe in the efficient use of energy
and reducing waste. Both of these efforts have generated
billions of dollars in savings for Michiganders. So what I want
to talk to you about is the Department of Energy, the DOE's
revision of energy conservation standards for commercial
refrigeration equipment, which is your industry; correct?
Mr. ANDERSON. Correct.
Ms. LAWRENCE. Can you briefly walk me through and make me
understand or explain the real impact your company obtained by
complying with the 2012 DOE rule, and then secondly, the impact
that the DOE's justification, or what you felt was the
justification in issuing a new rule in 2014?
Mr. ANDERSON. Yes. The 2012 rule, Structural Concepts, we
embraced that rule. We are a company that strives to make our
product more efficient. So we went above and beyond what was
required by the standards. Sometimes we went probably, in some
cases, 15 percent below what was required, maybe even more in
some equipment classes. That took us three years to do. First,
you had to develop all the concepts and components that would
achieve this energy efficiency. Then you had to review the
current product to see how you could engineer that in to each
refrigerated display case. And then you physically had to do
it. Once you got it, you had to build the case, and then you
had to test it and verify it. So there was a lot of time, a lot
of money spent on building equipment, building test labs to
achieve all that.
Self-contained, we do make the most efficient refrigeration
self-contained open display case in the U.S., we believe. So
when 2017 came along, they took another 20 percent out. In most
cases we can still achieve that energy with minimal
engineering, so it will not affect us that much. But we still
have to review every single model. We still have to go through
all the bills and review what is in it, review the energy, and
our remote units, they are self-contained, and remote is a
machine room compartment that is separated from the display
case. Remote units, those suffer the most. So to comply with
the 2017 rule, we will have to switch as a standard to across-
the-board LED lights in all of our product. So fluorescent
lights will go away in 2017 as the rule stands.
So reviewing every single, all 600 models, will put another
burden on us, and it will actually eliminate another product in
the United States of, at least for us, the fluorescent light
bulb.
Ms. LAWRENCE. Do you agree that the three years it took for
you to comply and verify that you are now realizing a reduction
in energy costs, so there has been a savings to you?
Mr. ANDERSON. There has been a savings to our customers in
terms of lifecycle costs.
Ms. LAWRENCE. But to you as an industry?
Mr. ANDERSON. To us as an industry, we as an industry have
reduced the energy costs in the United States; yes.
Ms. LAWRENCE. Okay.
Mr. Goodwin, frankly, the burden on small manufacturing
caused by overregulation is a term that we hear far outweighs
the burden that agencies face in complying with rulemaking
requirements. Do you agree with that?
Mr. GOODWIN. So the question is that the cost that
regulations impose on small businesses are greater than the
costs----
Ms. LAWRENCE. Of rulemaking?
Mr. GOODWIN. Sure. Yeah, I guess. Yeah, of course. I have
never thought about the question, but yeah, of course.
Ms. LAWRENCE. Okay.
But what are the costs to our environment, our economy in
that continually challenging current energy efficient standards
and improving them?
Chairman CHABOT. The gentlelady's time is expired but you
can answer the question.
Ms. LAWRENCE. Thank you.
Mr. GOODWIN. Thank you.
The cost of not complying with some of these regulations,
the cost of inaction or the cost of delay can be huge, you
know, in terms of regulations to address climate change,
obviously. Well, not obviously, but they are, I mean, it could
mean the difference between avoiding the worst consequences of
climate change or not. For something like a workplace health
and safety standard, the inaction on certain standards could
mean the difference between hundreds or even thousands of lives
saved or illnesses prevented every year. So, I mean, they are
huge; yeah.
Ms. LAWRENCE. Thank you, Mr. Chairman. I yield my time.
Chairman CHABOT. Thank you very much. The gentlelady's time
is expired.
The gentlelady from American Samoa, Ms. Radewagen, who is
the chair of the Subcommittee on Health and Technology, is
recognized for five minutes.
Ms. RADEWAGEN. Thank you, Mr. Chairman.
My question is for all three small manufacturer witnesses--
Ms. Reichard, Ms. Herschkowitz, and Mr. Anderson. What could
the Federal Government do to make it easier for your companies
to grow, remain competitive, and create new jobs?
Ms. REICHARD. Okay. Well, I will agree with Mr. Goodwin at
the end of the table, that a SBREFA panel would have absolutely
been beneficial in this process. The panel certainly would have
revealed the reality that there would be no cost savings in a
nonharmonized system and could have brought to life proactive
solutions that industry could have provided to actually benefit
worker safety. Some of the best ideas come from our workers or
they come from consumers. Why should industry not be at the
table?
Ms. RADEWAGEN. Ms. Herschkowitz?
Ms. HERSCHKOWITZ. I agree also, a SBREFA panel. Getting
more input upfront because this regulation with the silica
obviously you do not introduce water into that environment. As
I said earlier, you should not have ``one size fits all''
regulations. It should be consistent across the board, and it
should also look at the regulations where these jobs might be
going, which are not even close to what we are being able to do
now. And you should make sure that the existing regulations are
in place and are being adhered to before we add on more, which
I do not think is the case with the silica sand. Thank you.
Mr. ANDERSON. I kind of mentioned it before, but the EPA
for us--the EPA and the DOE need to have a coordinated front
for us to be able to efficiently move forward with energy
efficiency and environmental protection.
The other thing that could be done is a more in-depth
look--and this is specifically for the DOE--of equipment--there
are 49 equipment classes, and I am of the belief that there was
not a deep enough look or, nor they based some of their
validation on one data point. I have been in the industry for
23 years. I have grown up in test labs. I am a hands-on guy. I
do not see how the Department of Energy can come up with a
standard based on calculations and validate that with one
point. I do not care how good of an engineer you are. Yeah, it
boggles my mind.
Ms. RADEWAGEN. Thank you. I yield back. Thank you, Mr.
Chairman.
Chairman CHABOT. The gentlelady yields back.
The gentleman from Nevada, Mr. Hardy, who is chair of the
Subcommittee on Investigations, Oversight, and Regulations is
recognized for five minutes.
Mr. HARDY. Thank you, Mr. Chairman.
This conversation really gets me. I have a million
questions to ask being a former business owner myself.
I am going to go to Ms. Herschkowitz first, and talk about
the silica sand.
Ms. HERSCHKOWITZ. Okay.
Mr. HARDY. In my industry, we are unable to have a confined
space, so we have to provide a uniform any time we have to do
any sandblasting with silica sands. So we provide a uniform, do
such. But where you are having to do full intakes, do you think
it is fair that all I can do is with a uniform and there is no
shop that I am in, do you think that I should be required to do
the same that you are and all industry and have the same
requirements you do in the manufacturing end to have full-blown
evacuation systems, I guess? Or whatever you are having to do?
Ms. HERSCHKOWITZ. Well, it would be ludicrous but I think
that Congress should be able to do that to see how difficult it
is. But the one thing about the silica sand is with the
respirators, for instance, when you said about sandblasting, we
have respirators where the person--and it cost $10,000 a piece
two years ago to be able to put them in and it is $5,000 a year
to maintain--but somebody that goes into a sandblasting
facility actually puts on this respirator and they are
breathing clean air.
Mr. HARDY. I will interrupt you right there. I understand
where you are at.
What I am trying to get to with this situation, there are
different applications all over this country of how we do it.
Ms. HERSCHKOWITZ. Right.
Mr. HARDY. We do bridges, all kinds of projects. Before you
can pour concrete, you have to evacuate any rust on that, which
you have to go through that system.
Ms. HERSCHKOWITZ. Sure. Sure.
Mr. HARDY. Or we have heavy-duty equipment. We have to
clean parts. It cannot be done in a shop, so you are out in the
desert.
So my comment is, when regulators come up with these
ideals, the desert southwest, which is California, Nevada,
Utah, New Mexico, Arizona. You can go on and on and on. Major
pockets of recreation areas that are nothing more than silica
sand. We play on them. We go to our beaches. We play on them.
Ms. HERSCHKOWITZ. Correct.
Mr. HARDY. Should there be a regulation there to force
people to have to stay off that? Because I believe that silica
sand is probably more dangerous from the environmental side,
from our use of recreation, than it is----
Ms. HERSCHKOWITZ. Yeah, it would be ludicrous. Absolutely
not.
Mr. HARDY. So let us force all our businesses back down to
California or down to New Mexico or Mexico or someplace else.
Is that not what you feel like is happening to you sometimes?
Ms. HERSCHKOWITZ. Exactly. We get our wedron sand out of
the Midwest, which is the cleanest, roundest sand that you can
have, and that is what we utilize.
Mr. HARDY. All over the desert southwest. Sand dunes just
drift.
Ms. HERSCHKOWITZ. Absolutely.
Mr. HARDY. From spot to spot.
Ms. HERSCHKOWITZ. And we have this better sand trucked in
from Chicago area.
Mr. HARDY. I want to hurry and change gears before I lose
my time.
Ms. HERSCHKOWITZ. Okay.
Mr. HARDY. Okay. As a small businessperson, I have found
over the years that what made my success as a business
competing against another was utilizing my employees to come up
with a better mousetrap, to constantly talk about safety issues
and things like that, and try to implement those OSHA
regulations, but also make sure that we were even safer than
what OSHA did. Would you say that most businesses strive to do
that because that is a competitive environment; we do it
naturally on our own?
Ms. HERSCHKOWITZ. Absolutely.
Mr. HARDY. All three of you can answer that.
Ms. HERSCHKOWITZ. You want to protect the welfare of your
employees. And we have huddles. We can bring up safety ideas.
We have safety committees with managers and hourlies. Yes.
Mr. HARDY. Anybody else want to address that?
Mr. ANDERSON. Yes. We are a continuously-improving
environment, and we look for innovation, and we are fierce
competitors when it comes to reducing energy and complying to
regulatory.
Mr. HARDY. Thank you. And I think that is the way things
should be done. And we just talked about it just a second ago.
Thank Ms. Radewagen for that comment. But that is what I
believe needs to happen from the Federal Government side. The
Federal Government continues to try to grow its overreach of us
instead of working with the departments or the businesses to
find out how they can do a better job. I think business would
like to work to make sure it is a safe environment, but do you
believe you also continue to have accidents no matter how many
safety regulations you have got? What my comment is there is
can we regulate people against their own stupidity, so to
speak?
Ms. HERSCHKOWITZ. No, you cannot.
Mr. HARDY. Thank you very much. I yield back.
Chairman CHABOT. Okay. The gentleman yields back.
We will go to a brief second round, and I will yield to the
ranking member if she has any questions.
Ms. VELAAZQUEZ. I take offense when people say that it is
stupidity. I can't look in the eyes of the children of my
sister-in-law who is dying of asbestos exposure and tell her
that regulations are stupid or are dumb. Even if it means
saving one life. When you look at West Virginia, or the BP oil
spill and the impact that it had----
So Ms. Reichard----
Chairman CHABOT. Will the gentlelady yield for just one
second?
Ms. VELAAZQUEZ. Sure.
Chairman CHABOT. Okay. I think just to clarify on behalf of
a number of my colleagues, I think what we were referring to is
we are not against regulations; we are against dumb
regulations.
Ms. VELAAZQUEZ. I understand.
Chairman CHABOT. That does not mean all regulations are
dumb. Thank you for yielding.
Ms. VELAAZQUEZ. But what I am saying is the lessons that we
have learned from the past have told us that even when it means
saving one life--and let me just say that I am very proud that
workers in America wear shoes and masks.
Ms. HERSCHKOWITZ. So am I.
Ms. VELAAZQUEZ. I do not want them like in China.
Ms. HERSCHKOWITZ. I agree.
If I could just----
Ms. VELAAZQUEZ. Ms. Reichard?
Ms. REICHARD. Sure.
Ms. VELAAZQUEZ. I am at that age where I get prescription
drugs almost every month, and I am very happy when I go to the
pharmacy to get my prescription drugs and see prints or
instructions or do's and dont's that are written in a label or
papers because the print does not fit the small package, the
small bottle. So what is the difference between that? When you
go to the pharmacy, you would like to get as much information
as you need to have in order to make sure that you follow the
prescription instructions. What is the difference between what
is required from pharma or the pharmacy industry and the fact
that you need to add that label to your little bottle?
Ms. REICHARD. Sure.
Well, first and foremost, the difference between
pharmaceuticals and fragrance ingredients is extreme.
Ms. VELAAZQUEZ. Yeah, but the fact is that the label and
the information that is required because it does not fit on the
label, it has to be printed.
Ms. REICHARD. Before we had the new GHS program, we were
already providing appropriate labeling information our
products. What I am saying is now the information that we are
providing is much more complex, and that complexity is
unnecessary in our particular case. You know, there is a crisis
of misinformation and scientific misunderstanding in this
country regarding chemicals and toxicity, and the chemicals
that we have, as they are being used, are not toxic. So having
to provide this extensive toxicity information is just
distracting. It does not provide for additional health and
safety information.
Ms. VELAAZUEZ. And so you have the scientific information
that says that none of the ingredients or elements in that
little bottle could cause reactions, allergy reactions?
Ms. REICHARD. Let me expand on that. It is important to
know that everything is made of chemicals, and anything can be
toxic at a certain level. But as we use them, they are not
toxic. Oxygen and water can be--either if you do not have
enough of them it is a problem; if you have too much of them it
can be deadly. In order for an ingredient to affect a human or
its toxicity to be determined. You cannot just look at the
presence of a chemical. So labeling based just upon a
presence----
Ms. VELAAZQUEZ. I hear you. I hear you, and I do not have
much time.
Ms. REICHARD.--is not beneficial.
Ms. VELAAZQUEZ. All I can say is that I have not heard
anyone saying that they are allergic to water or oxygen.
I yield back. Thank you, Mr. Chairman.
Chairman CHABOT. Thank you. The gentlelady yields back.
As far as, the ranking member is clearly very passionate
about safety, and I would agree with her on that, and I think
we all are on this Committee on both sides of the aisle. Mr.
Huizenga mentioned that his grandfather had been one of the
strikers on one of the issues on the auto lines when they were
striking relative to safety issues, and so I think we all feel
that way.
Just to give some of the panel members an opportunity to
respond to some of the concerns that were raised, I would ask
Ms. Herschkowitz first if you would like to----
Ms. HERSCHKOWITZ. Yeah. I appreciate that, Mr. Chairman.
I just wanted to clarify. Our company is not advocating
that we do not wear shoes or protective masks. We spend over
$100,000 a year on safety to make sure that our employees are
safe. We are always looking for ways to improve upon. My intent
on saying that was only to give an analogy as to the other
countries that we are competing against. But it is safety first
at our place, and I just wanted to make that clarification. I
care very much about our employees.
Chairman CHABOT. Thank you very much.
Ms. HERSCHKOWITZ. Thank you.
Chairman CHABOT. Ms. Reichard?
Ms. REICHARD. In addition, I would like to respond and say
that the fragrance industry absolutely provides all the
information regarding potential fragrance allergies and that is
part of our process. So that information is included within our
information.
Chairman CHABOT. Thank you very much.
I want to thank all the witnesses for their participation
today.
I have a couple more to respond. Mr. Goodwin, did you want
to say something? Go ahead, and then I will go to Mr. Anderson.
I am going to give this side the opportunity to close.
Go ahead, Mr. Goodwin.
Mr. GOODWIN. You know, I guess just building off what was
just discussed, that is why we like small businesses, because
they do--one of the many great things that they do is they are
closer to their customers, they are closer to their employees.
So ultimately, they are the ones that are in compliance. They
are the ones that are going above and beyond what regulations
as of them, and that is great. And, you know, there is nothing
you can criticize about that, obviously.
What I would say is that what regulations can do is they
level the playing field. They make sure that those businesses
that are not so upstanding can be held to account, and they
ultimately level the playing field. You know, I think that is
just one of the additional benefits that regulations can
provide for small businesses.
Chairman CHABOT. Thank you.
Mr. Anderson?
Mr. ANDERSON. Yes. Safety is our primary concern at
Structural Concepts. I do not think that anybody in this room
would want to pull a tuna fish sandwich out of one of our cases
that were made so energy-efficient that it could not hold
temperature anymore. So what would Structural Concepts do? We
would have to obsolete that product.
I failed to mention that we comply to the FDA food code for
41 degrees. We use regulatory UL standards to make sure that
our product is mechanically and electrically safe so our
customers do not get shocked, do not have shelves fall on them,
so on and so forth. Now the DOE is obviously pushing for
energy, so we have to balance that, and the EPA is pushing for
new refrigerants. We have to balance that as well. So we have
four regulations that we have to comply to on our product and
balance all of those. And safety is the highest.
Chairman CHABOT. Thank you very much.
And I am almost out of time myself. I would just conclude
that mention that we, certainly on both sides, we have heard
the testimony of all the witnesses. I think all four of you did
a very commendable job, and thank you for coming and telling us
what you are dealing with.
We passed legislation in the House recently, the Regulatory
Flexibility Improvements Act, and in general, what that would
do is it would require when the federal regulators, the
agencies that write all these regulations that one month down
there, when they write these regulations, they have to reach
out to small businesses who are going to be dramatically
impacted by these regulations, and get some input. You know,
how they might adversely, both directly and indirectly, impact
your businesses because you are, after all, the job creators.
You create seven out of 10 jobs in the new economy, and we
ought not to be making your ability to grow and prosper and
creates jobs for more people more difficult. And I think that
is evidence down there that oftentimes we do. And that is not
to say there are not important safety regulations that you
should have to follow. My analysis is that in general, the vast
majority of businesses do try to follow the regulations. You
look out for your safety. You are not the bad guys.
So anyway, all members will have five legislative days
should they want to revise or extend their remarks.
And if there is no further business to come before the
Committee, we are adjourned. Thank you very much.
[Whereupon, at 12:35 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Good Morning. My thanks to Chairman Chabot, Ranking Member
Velaazquez and the members of the Small Business Committee for
inviting me to testify today on the regulatory challenges that
small businesses like mine face.
My name is Cynthia Reichard, and I am the Executive Vice
President of Arylessence. Arylessence is a leading and
creatively driven U.S.-based fragrance and flavor company. We
work in close partnership with our clients which include major
consumer product and cosmetic companies to develop
strategically inspired fragrances and flavors that transform
our client's products into winning brands and consumers into
passionate, loyal fans.
On behalf of Arylessence, I commend the efforts made by the
Committee to alleviate burdensome regulations that
significantly hinder innovation and growth, particularly for
small businesses.
Mr. Chairman and members of the committee, I can
unequivocally say that Arylessence has been hindered by
unintended regulatory burdens. I would like to discuss a few of
these with you today and focus on one in particular that my
company and other fragrance houses continue to struggle with
that is administered by the Occupational Safety & Health
Administration (OSHA).
First, let me provide some background information on our
company and the broader fragrance industry. Arylessence is a
flavor and fragrance company that was founded in 1977 by my
uncle. I am proud to say that we, like the majority of
companies within our industry, are a family-owned and operated
small business. When my uncle founded the company thirty eight
years ago, he had a dream. He took out a mortgage on his house
and a loan on his car, borrowed money from friends, and opened
up shop with three employees. I am proud to say that
Arylessence now has 120 full-time employees, 3 part-time
employees and many contract employees at our headquarters in
Marietta, Georgia. We develop and ship fragrances to over 1000
different manufacturers in the U.S. and across the globe. As a
family-owned company, Arylessence cares deeply about its
employees: we train and promote from within, offer excellent
benefit programs at minimal costs, provide tuition
reimbursement, and offer financial education, nutrition
education, and on-site exercise programs.
I am proud to be here representing not only my company, but
also the International Fragrance Association of North America
or IFRA North America. IFRA North America is the principal
trade association for the fragrance supplier industry in the
U.S. and Canada. Like all IFRA North America members,
Arylessence sources ingredients from around the globe and
crafts unique fragrance formulations that are incorporated into
a variety of consumer products including fine fragrances,
personal care products such as lotions, soaps and shampoos,
household and institutional cleaning products, and home care
products including candles and air fresheners, just to name a
few. Collectively, IFRA's North America's members comprise a
$1.6 billion industry responsible for more than 90 percent of
all scents marketed in the U.S. and Canada. The fragrance
industry directly supports more than 720,000 jobs and an
additional 240,000 small businesses in the U.S. alone.
You may not have ever thought about how scent plays an
important role in the purchase of products, however, 75 percent
of human emotions can be triggered by our sense of smell. Our
sense of smell is critical to our well-being, and scent alone
is a key consumer purchase driver.
Creating a fragrance requires a marriage of art and
science. We deal extensively with thousands of different
ingredients including natural materials such as essential oils
like lavender and rose oils as well as man-made materials
developed in laboratories and sourced from a variety of
sustainable raw materials. As such, we--and our clients--face
extensive regulations across several agencies including EPA,
OSHA, FDA, DEA, DOT, and FAA. It's important to point out that
these are just the federal regulations and that this list of
acronyms does not include the myriad of extensive state and
municipal regulations of which we must be prepared to comply.
The impact of complying with these regulations continues to
raise the cost of doing business in the United States. Quite
frankly, the cost associated with complying with the current
regulatory landscape can effectively bar new companies from
entering our industry today. These ever increasing burdens
limit our reinvestment in our company and our ability to take
even better care of our employees who have worked so hard to
help us be where we are today.
Arylessence employs the equivalent of six full-time
employees whose job functions are dedicated solely to
regulatory and compliance issues. In addition, we are currently
in the process of hiring an additional regulatory professional
to ensure our ability to track and comply with all of the
different regulations our industry and our clients industries
face.
When the state of Georgia's unemployment rate more than
doubled to over 10%, we worked hard to ensure that we did not
have to lay off a single person within our workforce. Although
it meant making difficult choices for our business, we are
proud of the job security that we were able to afford our
employees and their families.
While I can give you many examples of how existing laws and
regulations have impacted our operations I will focus on one in
particular. In 2008 we planned to purchase land and expand our
operations by building a large new facility for research and
development and hiring an additional 50 employees. As a result
of the economic downturn and further exacerbated by costly
compliance with new laws and regulations taking effect, we have
delayed many of those plans for several years. Despite an
improving economy, regulatory and compliance costs continue to
limit our capital resources, and, unfortunately, our
expansionary plans have been reduced and many of them remain in
the planning stage today. Just think about how many jobs would
have been created by that expansion and how this is happening
across the USA.
The bottom line is that there are far too many regulations
that impose far too heavy a burden on American small businesses
like Arylessence.
In the last five years, our company has been facing some of
the most economically significant laws and regulations. In
particular we have faced rising health insurance premiums under
the Affordable Care Act, higher income taxation rates and a
variety of rules and regulations administered by the
Occupational Safety & Health Agency (OSHA).
Impact of the Affordable Care Act
Ninety-six percent of small businesses have faced rising
health insurance premiums in the wake of the Affordable Care
Act, and Arylessence is no different. Between 2012 and 2014 we
experienced an average 13.6% annual increase in our health
insurance premiums. For 2015, our provider has given us a
premium increase of 41 percent. These increases have been
discouraging and are detrimental to our bottom line. We are
continuing to look at options and regrettably we are now in the
position of having to pass some of these additional costs on to
our employees.
Rising Income Tax Rates
Also like many small businesses, Arylessence has had to pay
higher taxes. We are an S-Corporation and our income tax rate
was raised from 35% to 39.6% to fund the Affordable Care Act.
In 2014, our Federal tax bill alone increased exponentially.
Think about how many people that would employ or how much
equipment that would buy.
OSHA & The Globally Harmonized System of Classification &
Labeling
Today I would like to focus my testimony and share our
experience in complying with the OSHA's regulation known as the
Hazard Communication Standard. This standard is OSHA's
interpretation of the Globally Harmonized System of
Classification and Labeling of Chemicals (GHS). An experience,
that serves as an example of a burdensome regulation that has
not resulted in safer workplaces. In fact, it has caused
significant cost increases for our company.
GHS began as an international initiative to standardize the
labeling and classification of hazardous chemicals in the
workplace. GHS was billed and sold to the industry as a cost
saving device that would make it easier for companies to
exchange information globally. But the truth is the exact
opposite: it has cost Arylessence significant amounts of money
without adding any safety to consumers or employees.
In order to comply with GHS, a manufacturer or distributor
must identify the chemicals present in their product shipments,
and classify the risk of those chemicals based on a hierarchy
established by GHS.
All of this information must be included on safety data
sheets or ``SDSs'' and labels which must be affixed to product
containers in the workplace. The labels must include color
pictograms and a number of other informational elements
including symbols, signal words, and lengthy hazard statements.
This is a complicated set of forms that required us to
adjust our operations to comply.
Prior to GHS, most countries had their own individual
regulations addressing the handling of chemicals in the
workplace. With the increase in global commerce, the United
Nations began a new initiative, known as GHS, which aimed to
ensure consistency and predictability for all companies that
were operating globally and so that workers would have a clear
understanding of what materials they were in contact with. The
objective behind the regulation was reflected in its name; a
Globally Harmonized System of the classification and labeling
of chemicals.
OSHA adopted GHS in March of 2012 and unfortunately, like
many other countries, interpreted the regulation in a unique
way resulting in nonconformity with the global system. OSHA is
currently in the latter part of the implementation phase.
Though there are many examples where OSHA deviated from
GHS, one of the most difficult issues for my company, and the
fragrance industry in particular, is the treatment of small or
sample sized products. Despite the pleas of manufacturers to
OSHA and even though other jurisdictions including Canada and
the European Union allowed for an exemption for small bottles,
OSHA elected to not give any special consideration. The result
is a new, arduous, costly and incredibly burdensome process
that has not increased safety and has hindered commerce.
In creating a fragrance for a customer, such as a
honeysuckle scent for a hand lotion, Arylessence may ship a
batch of 2-5 samples of honeysuckle fragrances to a potential
customer. Each fragrance will be unique and contain different
ingredients.
Unlike many industries that ship samples of chemical
products in large containers, the fragrance industry typically
deals in extremely small quantities. For example, the sample
fragrances that are shipped generally measure 0.5-1.0 ounces
and are contained in small vials.
Now, under the new GHS regulation, rather than requiring a
safety data sheets on only those products purchased, each
individual sample, no matter how small, must include a label
and safety data sheet in order to comply with GHS.
On average, Arylessence sends out 10,000 samples per year,
each of them a unique mixture of ingredients. And now, under
the new regulation, on an annual basis we need to create 10,000
unique safety data sheets and labels for even half ounce
samples of fragrances. And since the research and development
of scents is done for no cost to our clients in the hopes of
securing a production contract--this represents added cost that
cannot be directly passed on to our customers.
Adding to these new costs is the fact that OSHA has issued
no guidance in regard to how the labels must be affixed to
small packaging or containers. We must fasten these labels to
half and one-ounce bottles. The practicality of this is almost
impossible and we have received no guidance from OSHA other
than it must be done. Despite our pleas, OSHA has not provided
an exemption on this issue like other jurisdictions. If we do
not affix the label on this vial we will be out of compliance
and are subject to facing severe fines from OSHA.
Additionally, there are significant implementation problems
that OSHA has refused to address.
The computer technology to comply with this law did not
exist when the implementation dates were announced. The
industry is required to comply with GHS by June 1st of this
year. By not phasing in the requirements, Arylessence has had
to develop and implement new computer systems, purchase and
install new printing devices, and must simultaneously get
information from suppliers, complete the analysis to fill out
the datasheets and labels, and send it along to our customers
who also have the same compliance date.
GHS was sold to the industry as a cost savings initiative.
In 2011, the Obama Administration estimated that GHS
implementation would realize $585 million in annualized savings
for employers. In our experience, compliance with GHS has thus
far taken us three years to implement and cost our small
business well over $500,000 and untold labor hours to
implement.
The new GHS data sheet requirements have forced us to
purchase databases of chemical ingredients. However, the
information in these databases was not compatible with GHS
formatting and so we had to marry the databases with our own
proprietary software, which required a $200,000 investment.
In addition, we had had to retool all of our hardware and
documentation to meet the new GHS formats. Labeling has been a
long-standing requirement for companies who deal with
chemicals, and Arylessence previously invested in the requisite
printing equipment, training, and supplies. Our equipment was
effectively obsolete when the new regulations forced us to
purchase new printers with enhanced color capabilities. The
average cost of one of these industry-grade printers--capable
of thousands of GHS labels per year is over $20,000. We require
five. This is happening across the country.
Arylessence and other members of IFRA North America have
invested significant time and money literally reinventing the
wheel to comply with GHS regulations, and yet, there is no
clear solution in sight for many U.S. manufacturers with a
looming implementation deadline of June 1, 2015.
Conclusion
Mr. Chairman, members of the committee, over the past eight
years I have witnessed a shift in our industry. Associations
like IFRA North America used to focus more resources on
building business opportunities, networking, and raising
awareness of this unique industry, but today they must largely
focus on regulatory and policy issues.
Small businesses like ours continue to struggle despite a
more positive economic outlook. This is largely due to the cost
of increasing regulations: regulations like GHS that do not, in
fact, result in safer workplaces, harmonized communications nor
enhanced commerce.
U.S. manufacturers simply need an environment conducive to
growing and creating jobs. We need economic stability,
certainty and predictability and common-sense regulations that
don't unfairly disadvantaged small firms.
Arylessence along with all IFRA North America members
follow the highest safety and environmental standards for
fragrance manufacturing and fragrance ingredients. We are proud
of this commitment and we are happy to comply with common sense
regulations that ensure the safety of the environment, our
employees, and our customers.
Arylessence and IFRANA stand ready to work with you in
helping to support legislation that insures regulation without
representation is replaced with understanding of impacts and
proactive solutions.
Thank you again for this opportunity to share my
experiences with the committee; I am happy to answer any
questions you may have.
About Arylessence
Arylessence develops, creates and manufactures flavors and
fragrances for a vast array of products including perfume and
cologne, cleaning products, candles, shampoos, detergents, and
lip balms. Our inventions are not sold directly to the
consumer, but rather to an institutional or consumer product
company where they are incorporated into the final product.
Arylessence was founded in 1977 and is a family-owned and
operated small business. We have 120 full-time employees at our
headquarters in Marietta, Georgia, and we provide products to
over 1000 different customers in the U.S. and worldwide.
About IFRA North America
IFRA North America represents over 90% of all fragrances
developed and sold in the United States and Canada. Their
member companies create and manufacture fragrances and scents
for home care, personal care, home design and industrial and
institutional products, all of which are marketed by consumer
goods companies. IFRA North America also represents companies
that supply fragrance ingredients, such as essential oils and
other raw materials, used in perfumery and fragrance mixtures.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Chabot, Ranking Member Velaazquez and members of
the Committee, thank you for the opportunity to testify before
you today to discuss significant concerns regarding growing
regulatory burdens and a mounting wave of upcoming regulations
that will face my company and the U.S. metalcasting industry.
As you know, the burden of regulation falls disproportionately
on manufacturers, particularly on small manufacturers because
compliance costs typically are not affected by economies of
scale.
My name is Janis Herschkowitz, President and CEO of PRL
Inc. PRL is a holding company for three subsidiaries, which
includes a foundry, an upgrading facility and two machine
shops. I am a second generation Pennsylvania small business
metalcaster employing over 150 team members in Lebanon County,
Pennsylvania. My mom, sister, and I are the sole owners of our
business.
Metal castings have applications in virtually every capital
and consumer good and are truly the foundation for all other
manufacturing. I am testifying on behalf of the American
Foundry Society (AFS), our industry's major trade and technical
association, which is comprised of more than 7,500 individual
members in every state in the country. Our industry is
dominated by small businesses, with over 80 percent of U.S.
metalcasters employing 100 workers or less. In fact, many are
still family-owned, like mine, and oftentimes, simply don't
have the sales revenue or resources to implement a whole host
of new regulations.
My family moved to the States from Bolivia in 1971 for
political reasons to live the American dream. In 1972, my
father purchased a small company with 13 employees whose
primary function was to x-ray and upgrade castings for the
nuclear power industry. He expanded the core of his business
and purchased two machine shops. Following his death in 1989, I
became President and went on to open a new company, which was a
foundry. This was considered a bold decision at the time,
particularly since the number of foundries in the U.S. has been
steadily declining. The foundry was the final piece of the
puzzle which allowed PRL to provide our customers with full
vertical integration capabilities.
Today our foundry pours both ferrous and non-ferrous alloys
to product metal castings ranging in weight from 10 to 12,000
pounds for the military, nuclear, energy, petro-chemical and
commercial sectors.
Due to size limitations, I was unable to bring any of the
castings we produce. However, I have several pictures which are
attached to my written testimony [Attachment A]. I also brought
a small valve block that we machined out of a piece of bar
stock for the military. Our companies are proud suppliers of
high specification castings for many industries. As an example
we manufacture high specification finished machined pump and
valve bodies used in nuclear submarines and power plants around
the world. We have a highly skilled workforce, and we play a
critical role in our nation's defense. Our team's dedication to
quality is reflected in our customer base which includes such
important suppliers as Northrop-Grumman, Curtiss-Wright,
Electric Boat, and PSEG.
Under my leadership PRL has overcome many challenges
including opening a foundry, being highly leveraged while
losing the majority of our customers due to defense cuts, and
surviving the onslaught of foreign out sourcing. I know
firsthand the challenges of trying to meet a payroll and the
stress of having to borrow money to keep the doors open.
In order to compete in the global marketplace, our
companies have continually invested in our employees, and in
new equipment and technology. We provide good paying life
sustaining jobs and a strong benefit plan to our employees, who
are highly skilled in their craft and are the main reason PRL
is successful today.
As an increasingly critical and growing supplier for our
national defense, we are cautiously looking to expand our
operations for the future. The fact is there are very few
foundries remaining in the U.S. who are able to meet the high
specifications standards required by our nation's military.
However, we are reluctant to invest too much in our businesses,
given our concerns over new and upcoming costly federal
regulations which I highlight below.
We are already trying to cope with a significant increase
in health care costs and now we are looking at additional
regulations, which if imposed could easily cost us over one and
half million dollars to implement with absolutely no guarantee
that it will be effective. Of particular concern is our small
foundry which only employs 13 people. The bulk of the
regulations would hit our small foundry the hardest, and to put
it bluntly as a small business owner we would need to determine
if it is even worth the cost of compliance. This is tragic. Our
company operates off of a credit line, and in order try to be
in compliance we would have to attain a capital equipment loan,
which we would much rather invest in purchasing new production
equipment, which would create new jobs.
U.S. Foundry Industry is Critical to the U.S. Economy
The U.S. metalcasting industry is the sixth largest
industry in America and the second largest supplier of castings
in the world, after China. U.S. metalcasters ship cast products
valued at more than $20 billion annually and directly employ
over 200,000 people.
Today, there are 1,965 operating casting facilities, which
is down from 2,170 five years ago and, 3,200 plants in 1991.
This reduction can be attributed to the recession,
technological advances, foreign competition and tightening of
federal, state and local regulations. Nearly 600 foundries
produce iron and steel castings, while another 1,400 make
aluminum, brass and bronze castings.
More than 90% of all manufactured goods and capital
equipment use metal castings as engineered components or rely
on castings for their manufacture. The industry produces both
simple and complex components of infinite variety. From key
components for aircraft carriers and automobiles to home
appliances and surgical equipment, cast metal products are
integral to our economy and our way of life.
The foundry industry is vital to the automotive and
transportation sectors. In fact, automobiles, trucks, rail
cars, and other transportation equipment utilize 38% of all
castings produced in the U.S. These types of castings include
engine blocks, crankshafts, camshafts, cylinder heads, brake
drums or calipers, intake manifolds, transmission housings,
differential casings, U-joints, suspension parts, flywheels,
engine mount brackets, front-wheel steering knuckles, hydraulic
valves, and a multitude of other castings.
Foundries are also the mainstay of national defense. All
sectors of the U.S. military are reliant on metal castings for
submarines, jet fighters, ships, tanks, trucks, weapon systems
and other vital components.
The industry is widely dispersed throughout the country,
with the highest geographic concentration of facilities located
in Ohio, Alabama, Pennsylvania, Indiana, Illinois, Michigan,
California, Texas, and Wisconsin. In fact, Ohio is the leading
metalcasting state in the nation.
Metalcasters are experts in making new, engineered
components by re-melting old ones. Discarded appliances, sewer
grates, water meters, automobiles, and other metal objects once
destined for the landfill are valuable materials to our
industry. In fact, our industry uses scrap metal for 85% of its
feedstock for iron and steel castings. This practice results in
the diversion of 15 to 20 million tons of material from
disposal in domestic landfills every year.
Challenges Confronting PRL Inc & US Foundries
Manufacturers rely on a stable, balanced and common-sense
regulatory environment to create jobs and fuel economic growth.
However, the burden of unnecessarily costly rules weighs
heavily on their ability to grow and create jobs. Federal
regulation is estimated to cost more than $2 trillion annually.
The burden of regulation falls disproportionately on small
businesses and manufacturers. Dollars spent by manufacturers on
regulatory compliance for unnecessarily cumbersome or
duplicative regulations are dollars not spent on capital
investment or hiring new employees.
Today, the metalcasting industry continues to face major
roadblocks--by both the most intense global competition in our
history and the increasing costs associated with new and
upcoming federal regulations and other actions, including
executive orders, by our government. American metalcasters need
sound policies in taxation, energy, labor, trade, health care,
education, infrastructure and, most certainly, regulation.
Highlighted below are some upcoming regulations that will
significantly impact PRL and the foundry industry:
U.S. Department of Labor--Occupational Safety & Health
Administration
AFS members, including our company, are highly committed to
protecting their employees and developing and implementing
sound policies that advance health and safety. AFS provides
critical information and tools for its members to continuously
improve their safety performance including in-plant
consultation and safety courses. AFS publishes over 60 Health
and Safety guides specific to the foundry industry. In
addition, the association conducts an annual Safety Boot Camp
and Environmental, Health and Safety Conference, as well as
webinars on a variety of key foundry safety topics.
Our culture is one of ``SAFETY FIRST''. PRL has a Safety
Manager as well as Safety Leaders at each location. The provide
safety and health training for all employees on an ongoing
bases. We have a safety committee, which is certified by the
State of Pennsylvania, with representatives from every level of
our organization, recommendations are encouraged and taken
seriously, and more experienced workers are tasked with
mentoring our younger co-workers. We send our personnel to
outside safety conferences, including AFS' Safety Boot Camp,
and have a contract with an outside safety consultant who is
available 24/7 to answer any questions which may arise. PRL has
also brings in outside safety consultants as needed, including
experts from Indiana University of Pennsylvania.
However, of significant concern to the foundry industry is
the Occupational Safety and Health Administration's (OSHA)
proposed crystalline silica rulemaking.\1\ In 2013, OSHA
proposed a comprehensive and complicated new regulatory
structure for the control of crystalline silica. Silica
(quartz), one of the most common minerals on earth, has a
critical role in a wide spectrum of the economy, including
construction, energy, foundries and manufacturing, consumer
goods, agriculture, transportation, and technology. The U.S.
foundry industry uses and recycles millions of tons of silica
sand per year to produce critical metal castings.
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\1\ U.S. Occupational Safety and Health Administration's proposed
rule Occupational Exposure to Respirable Crystalline Silica, Sept. 13,
2013, Docket No. OSHA-2010-0034.
The proposed rule is potentially the most far-reaching
regulatory initiative ever proposed. It would sharply reduce,
by half, the existing permissible exposure limit (PEL) for
crystalline silica. Not only will this require most foundries
to spend an estimated million dollars on additional dust
collection systems, but there is no guarantee that this
standard can even be met. In addition to the significantly
reduced PEL, OSHA's proposal includes requirements for
regulated areas or written access control plans, prohibitions
on work practices, medical surveillance, mandates extensive and
costly engineering controls respiratory protection, training
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and hazard communication, and recordkeeping.
Key Foundry Concerns with OSHA's Proposed Silica
Rulemaking:
Prohibits Certain Work Practices Which Contradicts
Existing Industry Safety Practices.
OSHA bands dry sweeping, compressed air and
employee rotation as control methods. For many
foundries, compressed air is the only feasible method
to clean complex castings, particularly when the parts
are going to support our nation's defense. Wet
vacuuming can damage equipment and create a significant
explosion, which risks lives. Every foundry person
knows you never introduce water in to a foundry
environment, and yet this regulation requires it!
Dismisses the use of personal protective equipment
(PPE) as a primary approach to protecting employees;
instead, relies on the outdated ``hierarchy of
controls'' that emphasizes much more costly,
disruptive, and often less effective, engineering and
work practice controls.
Underestimates and/or Completely Omits Cost of
Equipment & Processes.
A number of pieces of equipment and system costs, such as a
new dust collector, which can easily run over $1 million to
install, were not accounted for by OSHA. Other examples
include:
Cleaning--professional cleaning
would cost $1 per square foot of facility, plus
$400 million a year for downtime.
Ventilation--OSHA calculates annual
cost of ventilation at $5.33 per cubic feet per
minute (CFM) vs. the foundry experience of more
than $20 per CFM, and completely omits
engineering, air modeling and permitting costs.
OSHA failed to consider the effects of compliance
on current EPA regulations. Many foundries will be
forced to redesign and install new ventilation systems.
This will trigger a large number of foundries to make
changes to their air permits, which can take at least a
year to obtain from their states. OSHA's proposal
provides just one year to come into compliance with the
rule. In the case of PRL, if the permit cannot be
attained we could conceivably be forced to shut down
and over 150 hardworking co-workers would lose their
jobs.
Is Not Technologically or Economically Feasible.
Dust control, especially at the low exposure levels
OSHA is recommending, is challenging and complex. The
sharply reduced PEL presents enormous feasibility
challenges. Foundries will have to exhaust all feasible
engineering and work practice controls to meet the new
reduced PEL. There is not a one-size-fits all solution
that is guaranteed to work. Some foundries may spend
millions of dollars retrofitting and/or rebuilding in
order to implement the various types of engineering
controls (essentially trial and error) while attempting
to comply with the standard. [Currently, protective
equipment (e.g., respirators) or other measure may be
used to keep workers' exposure below the PEL whenever
engineering controls are not feasible.]
There are certain operations, such as grinding and
knock-off/sorting, where no matter how much is spent on
controls, consistent compliance will not be achieved.
Utilizes Outdated SBREFA Report.
OSHA declined to conduct a second small business
panel review under the Small Business Regulatory
Enforcement Fairness Act (SBREFA), choosing to let
stand the outdated 2003 report. Reliance on a report
that solicited input on a different proposal a decade
ago is simply not adequate outreach to the affected
stakeholders. Furthermore, it raises serious concerns
that OSHA has not used the best available data or
techniques to quantify the costs and/or benefits of the
rulemaking. As a member of both AFS and National
Federation of Independent Business, I worked hard to
get this law passed, and now to see its original intent
being totally disregarded is disheartening at best.
Fails to Examine the Adequacy of the Supply of
Occupational Health Professionals.
There will be a need for a large number of
industrial hygienists and labs in order for the
impacted sectors to comply with the proposed
regulation. There is a significant risk that the lack
of available service providers or the resulting
escalation in cost of their services will render
compliance with the proposed rule within the schedule
proposed by OSHA technically and economically
infeasible. OSHA's proposal would require employers to
achieve complete compliance with the proposed PEL
within one year of the effective date of a final rule.
Exposure assessment would be required within six months
of the effective date despite the fact that OSHA's
proposed laboratory testing standards have two years to
come into compliance.
Drastically Understates Costs to Comply--Exceeds
9% of Foundry Industry's Revenue.
OSHA's estimated cost of the engineering/ancillary
costs for the foundry industry is $43 million. Economic
analysts estimate the cost to be more than $2.2 billion
annually. This represents 9.9% of the foundry
industry's revenue and 276% of its profits.
Assumes the cost to comply with a new 50 PEL is the
same as it is to reach the current 100 PEL. At these
lower levels, it will be even more challenging and
costly.
Economic impact will disproportionately affect
small foundries, since the majority of the industry
employs less than 100 employees.
These substantial costs for this rule alone make
the foundry industry one of the most heavily impacted
industry sectors among all those affected by the rule.
As currently proposed, OSHA's rule will likely force
some foundries to close, shift production offshore, and
impact the long-term productivity, profitability and
competitive structure of the metalcasting industry.
An economic analysis performed by engineering and economic
experts estimate that the annual compliance costs of the rule
will likely reach over $5.5 billion for all industry sectors--
manufacturing, construction, transportation, defense, and high-
tech industries. Before moving to impose billions in costs on
critical U.S. economic sectors, which OSHA estimates to employ
about two million people, OSHA should significantly revise or
abandon this rulemaking in favor of a more logical, data driven
approach to OSHA's goals. Significant progress has been made in
preventing silica-related diseases under existing regulations,
making proposed changes unnecessary.
OSHA has two immediate, effective means, to improve upon
current protective practices, which it dismisses in the
proposed regulation: (1) providing compliance assistance for
current exposure limits, for which OSHA documents a roughly 30%
non-compliance rate across all impacted industries; and, (2)
supporting new technology and policies favoring effective,
comfortable, respirators and clean filtered air helmets, which
provide full protection but are not favored by OSHA's outdated
``hierarchy of control'' policy. Unfortunately, the Agency
prejudged this issue by announcing in the Federal Register that
it would not consider changing that policy, no matter how
effective, efficient and economical the protective devices.\2\
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\2\ 78 FR 56274, 78: ``OSHA would like to draw attention to one
possible modification to the proposed rule, involving methods of
compliance, that the Agency would not consider to be a legitimate
regulatory alternative: To permit the use of respiratory protection as
an alternative to engineering and work practice controls as a primary
means to achieve the PEL.''
The Regulatory Flexibility Act (RFA) requires federal
agencies take into account the small business economic impact
during the rulemaking process. The goal of the RFA was to
create a process by which the needs and priorities of small
business are better taken into account early in the rulemaking
process in an effort to eliminate a one-size-fits-all approach
in drafting new regulations. It is clear that OSHA has
disregarded the RFA's requirements as Congress intended and
issued a one-size-fits-all silica proposal and failed to
consider the costs of this comprehensive rulemaking on small
business. AFS strongly supports the chairman's bill, the Small
Business Regulatory Flexibility Improvements Act of 2015 (HR
527), which would close these RFA loopholes and ensure that all
federal agencies appropriately consider the impact of their
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rules on small businesses.
There are number of other U.S. Department of Labor and OSHA
regulations that have been issued recently which I highlight in
Attachment B which will impact foundries and other key industry
sectors.
U.S. Environmental Protection Agency
We are alarmed by a wave of new regulations that the U.S.
Environmental Protection Agency (EPA) is imposing on the
utility sector, despite greenhouse-gas emissions falling
significantly in the U.S. As an energy-intensive industry,
metalcasters are troubled by the increased electricity costs
and reliability issues that will likely result from these new
regulations.
U.S. foundries cannot produce castings without adequate and
affordable supplies of natural gas and electricity. For many
metalcasters, energy is a key expense, only behind raw
materials and labor in terms of costs of doing business.
Melting is the most energy-intensive operation in metal casting
operations, accounting for about 55% of the total energy use.
Compared to other foundry sectors, energy costs are highest in
iron foundries, since the melt temperature is much higher for
this metal.
Continued access to affordable energy sources help
foundries better compete against growing global competition and
allow us to keep and create more jobs.
Unfortunately, over the last two years, there are numerous
specific examples of regulations and proposed rules by EPA that
have a particularly burdensome impact on our industry, with
little regard for their impact on job creation and the
manufacturing supply chain. There also seems to be no
recognition of the cumulative impact of these regulations. I
have highlighted just three EPA proposed regulations in my
testimony, but have attached a much more detailed list of the
regulations developed by EPA in recent years that will directly
or indirectly impact the foundry industry, as well as the
entire manufacturing sector. [See Attachment B.]
In June of 2013, President Obama issued an executive
memorandum directing the EPA to promulgate regulations to limit
carbon emissions from both new and existing power plants. The
memorandum called for the EPA to propose two regulations: a
regulation for new power plants, and a similar regulation for
existing power plants.
These proposed regulations are the first among a suite of
follow-on rules that would impact many industries twice--both
as electricity customers and as industries next in line for
subsequent regulations. It is critical that the Obama
Administration adopt a more reasonable approach, promoting
policies that support a true all-of-the-above energy strategy
and allow manufacturers the flexibility to continue unlocking
solutions for a sustainable economy and environment.
EPA's Proposed Rule for New Power Plants
The proposed regulation bans the construction of new coal-
fired power plants unless they are equipped with a technology
known as carbon capture and sequestration (CCS). CCS is a
promising system that would capture, transport and then store
carbon underground. However, CCS is prohibitively expensive and
not in use at a single commercial-scale power plant in the
country. Given this restriction, the practical impact of the
EPA's proposed regulation for new power plants will be to block
construction of coal-fired power plants in this country. A
final regulation is expected this summer.
EPA's Proposed Clean Power Plan
In June 2014, EPA proposed a new rule to cut carbon dioxide
emissions by a total of 30% from existing power plants by 2030
compared with 2005 levels. Unlike the new power plants
regulation, the existing power plants regulation will impact
plants that are already supplying electricity to homes and
businesses throughout the country. The United States relies on
fossil fuels for about 68 percent of the electricity that keeps
the lights on in our homes and businesses. Quite simply, our
country cannot operate without electricity from fossil fuels.
Yet, this regulation threatens to shut down many of the plants
that produce this low-cost, reliable electricity. For
consumers, foundries and other manufacturers that could mean
sharply higher electricity prices for everyone. Second, the
steady stream of electricity that we depend on will be
threatened.
Since state laws allow the electric providers to pass all
energy and environmental compliance costs through to the
consumer, we expect our energy prices to increase
substantially. Even a $0.01/kWh increase in the cost of
electricity imposes additional costs of nearly $9 billion per
year on domestic manufacturing facilities. A final regulation
is expected to be issued in the summer of 2015 and will require
states to issue implementation plans to meet the EPA's
requirements by 2016.
These GHG regulations have great potential to be
devastating economically, increasing energy costs for every
sector of the economy, and driving up the costs of goods and
services.
EPA's Ozone National Ambient Air Quality Standards
The other proposed rule I want to mention is EPA's National
Ambient Air Quality Standard (NAAQS) for ground-level ozone. In
March 2008, the EPA lowered the 8-hour primary NAAQS for ozone
to its current level of 75 parts per billion (ppb). In November
2014, the EPA proposed lowering the ozone standard to a range
between 65 to 70 ppb. By court order, the Agency must finalize
the standard by October 1, 2015.
Key Problems with the Proposed Ozone Rule:
1. Will Affect Much of the Country - Lowering the standard
from 75 ppb to a range of 65 to 70 ppb could cause large parts
of the country to fall into nonattainment. Counties and areas
classified as nonattainment can suffer stringent penalties;
including: (a) EPA overriding states on permitting decisions;
(b) new facilities and major modifications having to install
the most effective emission reduction technologies without
consideration of cost; and (c) federally supported highway and
transportation projects being suspended.
2. Has Significant Economic Consequences - According to a
February 2015 economic study undertaken by the National
Association of Manufacturers, a 65 ppb standard could reduce
U.S. GDP by $140 billion, result in 1.4 million fewer jobs, and
cost the average U.S. household $830 in lost consumption - each
year from 2017 to 2040. That would mean a total of $1.7
trillion in lost U.S. GDP during that time period.
3. May Be Impossible to Achieve Compliance - According to
EPA's Clean Air Scientific Advisory Committee (CASAC), EPA ``is
not clear as to how background estimates might impact the
primary and secondary standards and whether these impacts may
differ regionally. Also, EPA does not consider the impact of
international border pollution; ozone and other pollutants are
transported to the U.S. from other countries, thereby causing
states and counties to be nonattainment.
4. Current Standard Not Fully Implemented - EPA's 2008
ozone standard (75 ppb) still has not been fully implemented.
States did not even find out which of their counties would be
designated as nonattainment under the 2008 standard until April
2012. Additionally, EPA did not finalize the necessary
implementation regulations and guidance for the 2008 standard
until just recently in February 2015. States are committing
time and money to meet the 2008 ozone standard. Yet if EPA
moves forward with its proposal to further reduce the ozone
standard it fails to give states a chance to meet the current
ozone where states already have limited resources for
implantation. At this time, AFS believes EPA should retain the
current standard. Yet EPA now wants to move the goal posts in
the middle of the game.
Regulatory Reform Needed
AFS believes there is an appropriate role for regulation,
but regulations promulgated without an analysis of the impact
on the economy, in particular small businesses, and the impact
on jobs, including how multiple regulations compound those
impacts, can have quite the opposite effect. If manufacturing
is to continue to make a significant contribution to the
economic recovery, including the creation and maintenance of
well-paying jobs, it is imperative that we have an accurate
understanding of the impact of these proposed regulations. The
full regulatory burden on any particular sector can only be
known if that cumulative impact is assessed.
The lack of cumulative-impact assessments is a fundamental
shortcoming in the way government agencies develop and evaluate
proposed rules. That shortcoming creates regulatory tunnel
vision. It puts innovation, investment, and jobs at risk.
AFS and its members have a keen interest in getting
regulations right. So the compounding effect of those
compliance costs diminish the resources available to make
meaningful long-term investments that create jobs, promote
innovation, and solidify our competitive position.
The Federal regulatory process and analysis of regulations
can be improved. We would like to see OMB and the individual
agencies update their respective economic impact analysis
guidance to require cumulative impact of multiple regulatory
actions, particularly on small business. We would like to see
agencies identify and catalogue the sectors impacted by a new
regulation and even extend that approach into the paperwork
burden.
Agencies should seek input from the affected regulated
community before developing a proposed regulation. It does to
the win-win that is possible from an early engagement, so that
the public, the government, and the regulated community all
benefit.
AFS would also like to see Federal agencies consider the
regulatory-induced employment changes as either a cost or a
benefit in their assessment and not consider them some indirect
cost that is not routinely assessed. If our regulatory agencies
are capable of assessing the cumulative benefit of their
regulatory programs, surely they are capable of assessing the
cumulative burden.
Conclusion
PRL understands and supports the need for reasonable
regulations to protect the environment, worker safety and
health. To continue manufacturing momentum and promote hiring,
the nation needs not just improved economic conditions, but
also government policies more attuned to the realities of
global competition. The key is to find the balance between
ensuring a safe and healthy workplace and allowing that
workplace to compete in order to be able to continue to provide
employment; that is where the current U.S. regulatory process
is lacking. My fear for the industry is that we may lack the
ability to meet many of these regulations which will force more
foundries to shut down. This will not only cost the U.S. jobs,
but could threaten our nation's military supplier base, and
would ironically cause more pollution in the world!
The cumulative burden of a variety of new and proposed
standards is nearing a tipping point. More than ever, it is
critically important that we regulate only that which requires
regulation, and only after a thorough vetting of potential
benefits, impacts and costs of that regulation on businesses,
particularly small businesses, as well as the manufacturing
supply chain. Pro-growth policies will make our nation a more
competitive place to do business.
In this current economy, it is clear that cost-ineffective
regulations and increases in taxes dampen economic growth and
will continue to hold down job creation. For some foundries, it
will be the final stake in their coffin. Thank you again for
the opportunity to appear before you today. I would be happy to
respond to any questions.
Attachment A - Example of Castings Manufactured by PRL Inc.
Attachment B - Key Regulations Impacting the Foundry
Industry
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Statement of Viktor Anderson
Structural Concepts Corporation
U.S. House Committee on Small Business
March 18, 2015
Mr. Chairman and Members of this Committee, I appreciate
the opportunity to testify today on behalf of Structural
Concepts Corporation and the Air Conditioning, Heating, and
Refrigeration Institute (AHRI). Structural Concepts was founded
in 1972, is located in Muskegon, Michigan and is a manufacturer
of both remote and self-contained commercial refrigeration
equipment. In terms that are likely more familiar to you, we
are a company that makes the refrigerated merchandiser or
display that you would find at your local grocery store or
restaurant. Our products ensure that food is stored safety and
is accessible in all corners of our country, from mom and pop
bodegas to the largest supermarket chains.
AHRI is the trade association representing manufacturers of
HVACR and water heating equipment. AHRI's 315 member companies
manufacture quality, efficient, and innovative residential and
commercial air conditioning, space heating, water heating, and
commercial refrigeration equipment and components for sale in
North America and around the world, and they account for more
than 90 percent of HVACR and water heating residential and
commercial equipment manufactured and sold in North America.
Like so many small businesses across the country,
Structural Concepts is deeply rooted in our community. Our
friends, our neighbors and our town depend on the jobs we
provide. Unfortunately, as suggested by the title of today's
hearing, small businesses like ours are facing significant new
regulatory burdens from federal agencies. The agencies often
show little regard for the impact new requirements can have on
our business' ability to stay afloat and continue creating
these quality jobs.
Today, I would like to draw the Committee's attention to
two recent regulations (one finalized, one proposed) that will
have a particularly deleterious impact on Structural Concepts
and our employees:
(1) the U.S. Department of Energy's (DOE) revision to
energy conservation standards for commercial
refrigeration equipment, and
(2) the U.S. Environmental Protection Agency's (EPA)
change of listing status for certain refrigerant
substitutes under the Significant New Alternatives
Policy (or SNAP) Program.
Taken together, these two regulations will severely impact
Structural Concepts' ability to retain our current level of
employees and to economically produce cost-effective, energy
efficient and environmentally friendly refrigeration products.
Executive Order 13563
In 2011, like other companies across the Nation, we were
heartened by President Obama's issuance of Executive Order
13563, which was designed to improve regulations and regulatory
review across the Federal government. President Obama directed
each Federal agency to ``propose or adopt a regulation only
upon a reasoned determination that its benefits justify its
costs'' and to ``tailor its regulations to impose the least
burden on society...taking into account, among other things,
``the costs of cumulative regulations''. Concurrently, he
issued a memorandum on ``Regulatory Flexibility, Small
Business, and Job Creation'' that directed agencies to comply
with an existing law, the Regulatory Flexibility Act. As you
know, the RFA requires agencies to examine the impacts of
regulations on small businesses and seriously consider how to
reduce regulatory burdens through flexible approaches such as
extending compliance deadlines, simplifying reporting and
compliance requirements, or providing different requirements
for small firms.
Unfortunately for Structural Concepts and many others,
Federal agencies have simply not abided by these extremely
important principles in their rulemakings. For example, under
the Regulatory Flexibility Act review, the final rule for
Energy Conservation Standards for Commercial Refrigeration
Equipment clearly states that ``the average small manufacturer
is expected to face capital conversion costs that are nearly
five times typical annual capital expenditures.'' While capital
conversion costs for large manufacturers are predicted to be 49
percent of annual capital expenditures, the review clearly
states, ``an average small manufacturer's conversion costs are
expected to be 278 percent of annual capital expenditures.''
Despite the resulting difficulty in obtaining credit, increases
in component costs and disadvantageous rise in sale prices, the
DOE did not truly examine any alternative approaches to reduce
the significant economic impacts on small businesses.
As a result, small businesses like ours are burdened by
multiple regulations that either contradict each other, have a
high level of difficulty or are simply physically impossible to
comply with in the given amount of time. We simply do not have
resources to mount legal challenges and are therefore largely
left to shoulder the resulting economic burden placed on our
industry.
DOE's Energy Conservation Standards for Commercial
Refrigeration Equipment
As part of its energy efficiency rulemaking program, DOE
promulgated energy conservation standards for commercial
refrigeration equipment. In 2009, DOE issued an initial set of
standards with a compliance date for industry of 2012. Between
2009 and 2012, Structural Concepts expended a significant
amount of resources to comply with DOE's rules. Thousands of
hours of research and development, engineering, testing, supply
chain and manufacturing work went into this effort. For
example, we scaled up an existing technology to eliminate 99%
of the electric condensate pans used to remove meltwater from
the defrost cycle. This alone accounted for a 30-40% energy
reduction in our self-contained equipment. We improved the
efficiency of our heat exchangers by enlarging them and using
rifled tubing. We incorporated energy efficient compressors and
motors. This all had to be developed first with initial
verification through R&D testing. Then the implementation work
began. All this new technology had to be engineered into over
400 existing models. Condensing units had to be developed for
multiple product lines. Machine compartments needed to be
either resized or reconfigured. Refrigeration systems for each
case had to be rebalanced and it doesn't stop there. The two
most important regulations to Structural Concepts had to be re-
approved for all of our products. These would be product and
food safety regulations that ensure we continue to maintain the
health and well-being of our customers and end users. This was
done through the compliance with Underwriters Laboratory and
National Sanitation Foundation standards. In addition to safety
testing, additional energy testing was also performed for DOE
compliance.
To accomplish all of this we had to dedicate several
engineers that would otherwise be customizing or developing
products to increase sales and grow our company. We had to
increase our capacity, accuracy and throughput of our test
labs. We had to develop new manufacturing processes and supply
chains to produce our own condensing units. In the end, we
reduced our energy/carbon footprint of our entire self-
contained product offering by approximately 50%. We felt proud
of the fact that we complied with the new DOE energy levels and
in most cases went above and beyond, only to find out it wasn't
enough. Last year, only two years after the compliance deadline
for the old rules, DOE again issued even more stringent energy
efficiency criteria. Unfortunately, the new standards, which
have to be met by 2017, obviate many of the investments that
were made to comply with the 2012 rule. Quite simply, DOE is
not giving small businesses the Structural Concepts time to
breathe between one rulemaking and the next.
In developing their final rule, DOE employed questionable
assumptions about the feasibility and economic viability of
several technological options that were included in the
standards-setting process. In some cases, DOE went so far as to
require energy savings in excess of Energy Star levels, which
is supposed to be a designation for products that go above-and-
beyond industry norms. They verified their new energy levels in
some cases with only a single data point. There are so many
configurations for each equipment class I don't know how they
justified this. On the other hand, we, as manufactures, are
required to have multiple data points if we want to use an
alternative efficiency determination method (AEDM) to minimize
the testing burden. DOE seems to be setting standards that
utilize all of the most efficient technology in existence all
at once, something we refer to as ``max-tech.'' Forcing our
entire industry to adopt max-tech in a few short years is an
extremely expensive way of incentivizing savings that will
probably backfire. In fact, DOE's demands are so onerous that
many industry participants have decided their best recourse is
to file a lawsuit against the agency's final rule.
To comply with DOE's new 2017 standards, Structural
Concepts will again have to re-engineer many of our product
components and cabinet designs, conduct new rounds of tests
mentioned above, and potentially revamp our manufacturing
processes. All of these activities will again sap resources
that would otherwise be used towards innovation and product
development, and will result in an increased price for our
customers.
EPA's Change of Listing for Certain Substitutes Under the
SNAP Program
The EPA's SNAP program is the agency's regulatory apparatus
for phasing out ozone-depleting chemicals. The EPA proposed a
rule last year that will take away the current refrigerant used
in all of refrigerated systems on January 1st, 2016 (9 months
from now). The alternative refrigerants they proposed are both
highly flammable and, therefore, limited in the amount useable
in each system. Ironically, many are actually less energy
inefficient when used in our applications. The result they
would have significantly raised the energy consumption and
caused noncompliance to the DOE regulations. In fact, 60
percent of the display cases that we manufacture would not have
complied with EPA's new rules until they approved a new
refrigerant. EPA approved the use of R450A, the day after
comments were due.
To make matters worse, R450A still has its challenges. The
supply chain for this refrigerant will take time to develop.
Production for the new gas will have to be scaled up.
Compressors will have to be tested for safety and reliability.
In some applications, the physical size of the compressor will
increase to achieve the same refrigeration effect. This will
require the machine compartment of each model to be reviewed
for redesign. This of course is after each refrigeration system
for all models are redesigned for balance. Again, all of the
safety testing will need to be redone along with energy usage
verification at great expense. In our response to EPA,
Structural Concepts informed EPA that the agency's proposed
rule would result in more than half of our employees being
permanently laid-off.
Herein lies a new problem. When are we supposed to do all
of this work? The DOE is requiring us to comply with the new
energy levels on January 1st, 2017. The EPA is proposing
compliance to their new rules on January 1st, 2016. (Again,
only 9 months away). Let's assume that for obvious reasons that
date will be extended out. Will we be required to comply with
the new EPA rules in 2018? 2019? Currently we need to re-
engineer our entire product offering to meet new energy levels
by 2017. Then will we need to do it all over again a year or
two later? The DOE is mandated to review energy levels every
five years. This means that in 2022 we have to review our
product yet again.
My point is, if the DOE and EPA do not coordinate their
efforts, we could potentially be redesigning our product every
two to three years for more than 12 years in a row. When DOE
determined that its new energy efficiency standards were
feasible, the agency did not account for EPA's new restrictions
on allowable refrigerants. Combined, the two rules will
devastate our industry. Agency rules, as currently finalized,
will operate at cross-purposes to one another and fail to
accomplish their aims; all while reducing economically
productive activity in our sector.
The aggregate effect of the regulatory burdens being placed
on the commercial refrigeration industry will not be limited to
damage suffered by Structural Concepts. By increasing the cost
of display cases and other refrigeration technology that so
many Americans depend on for their groceries, the
Administration risks increasingly placing fresh food out of
reach for the average consumer. Many of the grocers who use our
display cases are also small businesses, who can ill-afford the
additional cost of more expensive refrigeration units.
Furthermore if certain equipment classes are made obsolete due
to technical and timely infeasibility, the billions of dollars
of product not sold through this equipment will have a major
economic impact on both major corporations and small mom and
pop retailers.
Conclusion
My purpose here today is to draw the Committee's attention
to the undue burdens faced by small businesses everywhere by
the unrealistic rules that federal agencies promulgate without
adequate regard for practicality. The reality of these
regulations, both specifically designed to address the
commercial refrigeration industry, will not only increase our
costs, but will force Structural Concepts to reduce the number
of products manufactured, throw uncertainty into the current
and future products offered and, overall, result in reduced
employment. We are not a large corporation with a plethora of
resources to redirect towards the review, testing and
compliance of new rules. We are a small innovative manufacturer
that makes refrigerated display cases, hardly the nexus point
of the Nation's energy and environmental policy battles. Our
company and thousands of companies like ours across the Nation,
make a big difference in the stability of the nascent economic
recovery which has only just begun to take hold. With its
never-ending wave of new rules and ever-more-strigent
standards, the Administration is threatening our ability to do
business and provide critical products to American consumers.
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