Policy and Legal

The Environmental Protection Agency’s final formaldehyde analysis—issued in August and set to inform future regulations—risks “creat[ing] an unachievable standard and a de facto ban” on an essential manufacturing material, the NAM said.

What’s going on: On Aug. 20, the EPA’s research office issued its conclusions about the “amount of the chemical that could be harmful” to humans, saying that “[s]mall amounts … can increase people’s risk of [health] problems” (Bloomberg Law, subscription).

• Though the report itself does not mandate any new restrictions on the industry, the EPA is likely to use the findings to take the next step in the regulatory process—a final risk evaluation—by the end of 2024 (The Hill).
• The assessment maintains the formaldehyde threshold of 11 parts per billion proposed by the agency in 2022. That’s 30 times lower than Europe’s recently updated worker-exposure limit of 300 parts per billion and “lower than what can be found in homes or even background levels for outdoor air,” the NAM told the EPA.

Why it’s a problem: Formaldehyde is used widely across industries to produce numerous everyday items, including plastics, lubricants, automotive parts, fertilizers, adhesives and more.

• The final analysis, which was released without review by the EPA’s own Science Advisory Committee on Chemicals, fails to account for “the highly developed safety procedures, protocols and [personal protective equipment] used throughout [the manufacturing] industry.”
• A severe restriction on the allowable workplace threshold of formaldehyde “could wreak havoc on domestic supply chains,” according to the NAM.

What should be done: The EPA should reissue its risk evaluation to give the SACC an opportunity to review it and provide comments—“and allow for additional public comment after the SACC review is complete,” the NAM concluded.

Manufacturers are counting on Congress to preserve tax reforms that acted as “a shot in the arm” but are now at risk of expiring, Sukup Manufacturing Co. President and CEO Steve Sukup told the House Ways and Means Committee recently.

What’s going on: The committee held a field hearing at the Iowa State Fair in Des Moines last month to hear from local companies about the impact of the 2017 Tax Cuts and Jobs Act on their businesses.

• At Sukup—the world’s largest family-owned and -operated maker of grain storage, drying and handling equipment—tax reform is credited as the single biggest driver of growth in recent years.
• “Sukup has grown over the past several decades, but nothing compares to when the Tax Cuts and Jobs Act was signed into law,” Sukup told committee members. “For example, thanks to the lowering of the corporate rate to 21%, Sukup grew our workforce by a third, adding roughly 200 well-paying manufacturing jobs to our community.”

A business boon: The 61-year-old company was able to make several key investments thanks to tax reform.

• Among these is Sukup’s Safe T Homes, quick-assembly houses made from the company’s grain bins and created after the 2010 earthquake in Haiti to provide people with much-needed shelter. One of the homes was on display at the fairgrounds.
• Another undertaking made possible by tax reform was the world’s largest free-span grain bin, two corn storage containers made for an ethanol plant in Mason City, Iowa. Each bin has a record-breaking capacity of 2.2 million bushels.
• Tax reform’s accelerated depreciation schedule allowed the business to go “from roughly $5 million in capital spending to almost $15 million,” Sukup told committee members.

What’s in jeopardy: The expiration of key tax provisions in 2022 and 2023—with more tax increases scheduled for the end of next year—has made it far more difficult for Sukup to put money back into the business.

• For example, tax reform’s pro-growth interest deductibility standard expired in 2022, making debt financing more expensive. “An accountant once told me, if you don’t have debt, that means you’re not coming up with new ideas,” Sukup said. “Many manufacturers like us borrow funds to finance essential long-term investments,” which are now more costly.
• Sukup is also monitoring looming changes to the estate tax. He called on Congress to protect family-owned manufacturers from the estate tax “so that I can ensure the third and fourth generations of Sukups can continue in our family business.”

Keep it going: Sukup ended his testimony by reiterating the advantages tax reform brought to his business and emphasizing the need for Congress to preserve tax reform in full.

• “Because of these policies, we’ve been able to not only maintain our business, but to provide a great living, health benefits and soon expanded child care for our employees and the community—even as we aid those in need around the globe,” he concluded.
• “I urge you to help us keep that growth streak going. Maintaining the 21% corporate rate, as well as the tax provisions I just described, is so important to manufacturers everywhere.”

Rep. Earl L. “Buddy” Carter (R-GA), a staunch advocate for health care reform and a community pharmacist by profession, visited RYAM’s manufacturing facility in Jesup, Georgia, in August to discuss manufacturers’ health care and tax policy priorities.

During the visit, Rep. Carter emphasized the critical need for pharmacy benefit manager reform as well as tax policies that support manufacturers’ growth and competitiveness.

The visit: Clay Bethea, RYAM’s Jesup plant general manager and vice president of U.S. wood procurement, led Rep. Carter on a tour of the cellulose specialties manufacturer’s facility, where he observed how pulp is dried and finished into sheets and rolls. Bethea highlighted the significant challenges the company faces due to rising costs in health care, particularly those driven by PBMs, and the looming expiration of key tax provisions in 2025.

• “We are proud to be a part of this community, creating jobs and driving economic growth,” Bethea said. “However, the rising costs of health care, particularly due to PBMs, and the uncertainty around critical tax provisions like R&D expensing and accelerated depreciation, are growing concerns for both our business and our employees. Reforming PBMs and maintaining tax policies that allow us to invest for the future are crucial to our ability to remain competitive globally.”

PBM reform: Rep. Carter has long been vocal about the need to hold PBMs accountable for their role in inflating health care costs.

• “PBMs have become powerful middlemen, often driving up drug prices while squeezing independent pharmacies out of the market,” Rep. Carter said during the tour. “It’s time for Congress to bring transparency and fairness back to the system.”
• Carter has introduced and supported several pieces of legislation designed to reform PBM practices, including a bill aimed at delinking PBM compensation from drug prices, improving PBM payments to pharmacies and increasing transparency.

Tax challenges: In addition to health care, Rep. Carter addressed the pressing issue of preserving tax reform.

• “The expiration of accelerated depreciation, R&D expensing and favorable tax rates could significantly hamper the manufacturing industry’s ability to grow and remain competitive globally,” Rep. Carter warned.
• “These tax provisions have been crucial for manufacturers like RYAM, enabling them to make significant investments in their operations and workforce. Losing them would not only impact these companies’ ability to innovate but also jeopardize jobs and economic growth in communities across the country.”

NAM in action: The NAM has long advocated for both PBM reform and the preservation of essential tax policies that drive the manufacturing industry.

• “PBMs are a significant driver of the rising costs of health care, and reform is essential to ensure that manufacturers can provide affordable benefits to their workers,” said NAM Vice President of Domestic Policy Charles Crain.
• “Congress also needs to act with urgency to prevent devastating tax increases scheduled for next year that will impact manufacturers across the country.”

The state-level view: Lloyd Avram, president and CEO of the Georgia Association of Manufacturers, echoed Rep. Carter’s concerns.

• “Manufacturers across Georgia are facing unsustainable health care expenses, and the uncertainty surrounding federal tax provisions only adds to the challenges,” Avram said. “Action on PBM reform and tax policy is essential to helping our industry remain competitive and continue providing good jobs in our communities.”

The bottom line: “Reducing health care costs and increasing transparency in the PBM system are crucial steps in lowering the overall cost of doing business in the U.S.,” said Rep. Carter. “However, to truly compete in the global economy, it’s important that we preserve the policies that have empowered manufacturers to innovate, expand and sustain jobs. Otherwise, the U.S. risks becoming a less attractive place for manufacturing investment, ultimately threatening our economic leadership on the world stage.”

Washington, D.C. – Following the Environmental Protection Agency’s decision to delay the deadline for when companies must submit records dating back to 2011 on per- and polyfluoroalkyl substances, otherwise known as PFAS, National Association of Manufacturers Vice President of Domestic Policy Chris Phalen released the following statement:

“We are pleased to see the EPA delay this retroactive reporting requirement—as the NAM has called for—which will temporarily prevent an increase in the regulatory burden facing manufacturers. More broadly, today’s announcement reflects the massive administrative burden this proposal would impose on both the business community and regulators, while failing to provide insights for effective and prioritized public health efforts. We urge the agency to reverse course entirely, unless and until it has the capacity to effectively enforce the standard.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.87 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

If enacted, the broad constitutional amendments being pushed by outgoing Mexican President Andrés Manuel López Obrador would put the special U.S.–Mexico trade relationship at serious risk, according to the NAM.

What’s going on: Last week, Obrador froze Mexico’s relationships with U.S. and Canadian embassies following concerns voiced by those countries’ ambassadors about the proposed reforms, which include sweeping changes to the Mexican judiciary and the elimination of several important state regulatory and oversight agencies.

• Mexico is America’s largest trading partner, with the volume of trade between the two nations coming in at $900 billion last year.
• Obrador’s proposed revisions led investment bank Morgan Stanley to issue an “effective ‘sell’ recommendation on Mexico” late last month (Reuters, subscription).

Why it’s a problem: “We’re concerned that some of the reforms as proposed could harm Mexico’s standing as an attractive place to do business,” NAM Vice President of International Policy Andrea Durkin said on the “Imagen Empresarial” (“Corporate Image”) podcast last week. “Manufacturers pay attention to how banks are factoring these potential changes to the constitution into Mexico’s risk profile.”

• Indeed, “[i]nvestors see independent judiciaries—sheltered from politics—as a sign of strong rule of law,” one emerging markets expert told The Wall Street Journal (subscription).
• Several planned revisions also appear to violate Mexico’s obligations under the U.S.–Mexico–Canada Agreement, which is due for review by all three nations in 2026. Moving forward with the reforms could jeopardize the continuation of that deal.

What’s next: Incoming Mexican President Claudia Sheinbaum, who takes office Oct. 1, “supports the judicial changes, but executing the overhaul might take up most of the energy of her new government, leaving her little bandwidth for her own agenda, which includes an expansion of social programs that need foreign investment,” according to the Journal.

Washington, D.C. – Following the Canada Industrial Relations Board’s decision ordering rail workers back to work and carriers back to operations, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“Manufacturers in the U.S. and in Canada were rightly concerned about the serious impact of a work stoppage that would harm workers, the economy and the quality of life for the many millions who depend on our products. As I discussed with Prime Minister Trudeau in July, if rail traffic were to grind to a halt, workers, small businesses and communities on both sides of our border would be hardest hit. Thankfully, the prime minister and Minister of Labour and Seniors Stephen MacKinnon heard our concerns and took decisive action to avert a significant disruption.

“The manufacturing industry is the engine of the North American economy. The conclusion of this stage of the negotiations means that this engine will continue humming. It is welcome news to manufacturers of all sizes, who count on tens of billions of dollars in cross-border trade between the U.S. and Canada—and the supply chains that make it possible to create life-saving products for hundreds of millions of people.”

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The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.89 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org

 The Interior Department is seeking to close hundreds of thousands of acres of land in Wyoming to traditional and renewable energy development, a plan that would cut crucial natural resource development off at the knees (POLITICO Pro, subscription).

What’s going on: Though the Bureau of Land Management’s plan, released Thursday, scales back from previous iterations the acreage recommended for conservation, it still considerably “throttles back how much of the federally administered area’s 3.6 million acres is in play for different forms of energy development.”

• The final announcement, part of the BLM’s proposed Resource Management Plan for the Rock Springs Field Office, is tantamount to “pushing Wyoming off an economic cliff with nothing more than a tattered parachute,” said John Barrasso (R-WY), ranking member of the Senate Committee on Energy and Natural Resources. “This plan isn’t designed to manage Wyoming’s natural resources. It is designed to suffocate them. … [It] directly jeopardizes Wyoming’s economy and our way of life.”

What it would do: If approved, the blueprint would replace its 27-year-old predecessor document and prohibit drilling on nearly 1.08 million acres—almost twice the number currently off-limits to new oil leases.

• It would “also [exclude] 494,350 acres from wind and solar power development and [close] 536,018 acres for geothermal power projects.”

Why it’s important: The plan could reduce economic activity in Wyoming’s oil and gas sector by some $907 million each year and cost the state nearly 3,000 jobs, according to estimates by several energy groups (Cowboy State Daily).

The NAM says: “This latest move by the Interior Department undermines U.S. energy security by needlessly restricting access to available domestic sources of critical natural resources as part of an all-of-the-above energy future,” said NAM Director of Energy and Resources Policy Michael Davin. “We urge the agency to reexamine and revise its plan.”

The Federal Trade Commission does not have the authority to enact the sweeping noncompete ban it finalized in April, a federal judge ruled Tuesday (The Wall Street Journal, subscription).

What’s going on: “U.S. District Judge Ada Brown ruled that the commission’s authority to police unfair methods of competition couldn’t be used to issue substantive regulations that ban an entire category of conduct. ‘The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,’” she wrote, adding that the ban was “unreasonably overbroad without a reasonable explanation.”

• The rule—which had already caused companies’ costs to increase in anticipation of the Sept. 4 effective date—sought to prohibit noncompete agreements between employers and their employees.

The NAM’s role: In May, the NAM’s Legal Center filed an amicus brief asking Brown’s court to stay the rule on the grounds that a ban on noncompete agreements would “hamstring innovation in the manufacturing sector and damage the competitiveness of American industry.”

• Brown issued a limited stay in July. Her ruling this week—echoing the NAM’s argument that the rule is  “not reasonably explained”—prohibits enforcement of the FTC rule nationwide.
• “The NAM expressed concerns throughout the rulemaking process, and a 2023 NAM survey showed that a broad noncompete ban would disrupt most manufacturing operations in the U.S.,” NAM Director of Transportation, Infrastructure and Labor Policy Max Hyman said following Brown’s ruling this week.

What’s next: The FTC is considering an appeal of the decision, a spokeswoman told the Journal.

• But “[i]f lower courts remain split as the litigation moves through the legal system, the matter might ultimately fall to … [the] Supreme Court, [which] has taken a dim view of government agencies invoking new regulatory powers from long-ago statutes.”

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Rep. Dusty Johnson (R-SD) recently visited Smurfit Westrock’s facility in Sioux Falls, South Dakota, to speak with local business leaders and NAM representatives about the importance of maintaining pro-growth tax policies for manufacturers.

The tour: Smurfit Westrock Plant General Manager Gerald Loftin led Rep. Johnson through their state-of-the-art packaging facility, showcasing the company’s innovative solutions and highlighting its role as a major employer in the community, supporting local jobs and economic growth. Smurfit Westrock, a global leader in sustainable paper and packaging, operates in 40 countries with more than 500 packaging converting operations and 63 paper mills.

• “Smurfit Westrock’s success directly benefits the community, providing employment and contributing to the local economy,” Loftin said. “We are proud to be a part of this region and to support the growth and well-being of the area.” 

The threat: NAM Vice President of Domestic Policy Charles Crain addressed the risks posed by expiring tax provisions. “Tax reform was rocket fuel for the manufacturing sector,” Crain explained. “It led directly to record levels of both job creation and wage growth in the years following the bill being signed into law.”

• Crain also emphasized the importance of preserving tax reform in full. “Essential tax reform provisions have already begun to expire—for example, full expensing, which has been crucial for our industry’s ability to invest in new equipment and expand operations, started phasing down last year,” Crain said. “Even more devastating changes are scheduled for 2025, the combination of which will significantly hamper manufacturers’ capacity to modernize and grow, directly impacting competitiveness and job creation.”

Calling on Congress: “Manufacturers are grateful to Rep. Johnson for supporting legislation earlier this year that would have revived immediate R&D expensing, a pro-growth interest deductibility standard and full expensing for capital investments,” Crain said. “We are looking to Congress for leadership and swift action as we work to prevent the harmful tax increases in store next year.”

Listening to manufacturers: Rep. Johnson emphasized his strong support for extending key tax provisions.

• “After seeing firsthand how these tax measures have benefited Smurfit Westrock and hearing about the negative impacts of their expiration, I’m more convinced than ever that we need to act swiftly to extend them,” he said.
• “Full expensing, R&D expensing and competitive tax rates are vital for the continued growth and innovation of our manufacturing sector. I’m committed to working with my colleagues in Congress to ensure we preserve these pro-growth policies before they expire, supporting jobs and economic development here in South Dakota and across the nation.” 

The bottom line: “Extending the 2017 tax reform is not just a priority, it’s a necessity for maintaining America’s competitive edge in manufacturing,” Rep. Johnson concluded.

Get involved: Manufacturers interested in sharing their perspectives on tax reform with congressional leaders or hosting facility tours for U.S. legislators can find more information through the NAM’s “Manufacturing Wins” campaign.

Washington, D.C. – As concerns mount about a potential work stoppage around Canada’s rail network that affects the entire North American manufacturing supply chain, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“North American manufacturing supply chains depend on functioning rail links. If rail traffic grinds to a halt, businesses and families across the country will feel the impact. Manufacturing workers, their communities and consumers of all sorts of products will be left reeling from supply chain disruptions. Rail transport between Canada and the United States moves billions of dollars of goods every month, and according to the U.S. Department of Transportation, 14% of the total trade value between our two countries in June 2024. We’ve seen the impact of disruptions at the Canadian border before, and it’s imperative that we avoid another stoppage.

“The flow of materials and products across the U.S.-Canada border is already slowing as preparations are made for a potential work stoppage. Policymakers in the U.S. and Canada must recognize that the stability and reliability of critical supply chains—which directly affects our quality of life—depends on efficient movement of goods across the border.”

Additional data: Total trade flows between Canada and the U.S. via rail in June 2024 were $9.131 billion, representing roughly 14% of total trade flows between the two countries via all modes of transport. Imports totaled $5.319 billion, while exports totaled $3.812 billion. In the first six months of 2024, total trade flows via rail were $55.657 billion. In 2023, total trade flows via rail were $113.860 billion.

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The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.89 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.