2013 Legislative Outlook: Uncertainties Mean Plastics Industry Must Remain Engaged on National Issues

by William R. Carteaux, SPI: The Plastics Industry Trade Association

With the November elections fading into a distant memory, Congress and the White House now face the challenge of day-to-day governing – and it will be a challenge. As I talk to plastics company leaders around the country, their frustration over the recent handling of the so-called “fiscal cliff” comes across loud and clear. For businesses that make purchasing, hiring and other key decisions based in no small part on our nation’s overall economic picture, the uncertainty that characterized the lead-up to eventual resolution wasn’t amusing political theater. It was a threat, pure and simple.

It is true that the deal struck between the White House and Congress included some pro-business provisions that SPI has lobbied for, most notably an extension of the federal R&D tax credit and 50 percent “bonus depreciation” which allows for faster write-offs of capital purchases, such as factory floor equipment. However, rate hikes of nearly five percent on a multitude of plastics industry companies that pay taxes at individual rates (because they are organized as S-corporations or other “pass-through” entities) certainly will have a negative impact. How negative remains to be seen.

Unfortunately, avoiding the “fiscal cliff” doesn’t mean we’re out of the woods from an economic perspective. The US soon will reach its borrowing limit once again, and Washington’s ability to handle issues around our debt ceiling will be the next crucial test. We all recall none-too-fondly the summer of 2011 when Standard & Poor’s downgraded the US debt rating over these issues, and at least one other major ratings service has threatened to do the same if there’s a repeat performance. All this has a direct impact on the ability of plastics processors to access all-important capital.

Overdue: TSCA Modernization

On the environmental front, the federal Toxic Substances Control Act (TSCA) gives the US Environmental Protection Agency (EPA) authority to review and regulate chemicals and ensure that products containing them are safe for intended uses. Despite the EPAs clearly defined role, and often stirred by activist claims rather than scientific facts, individual states have begun creating their own chemical use reporting and management systems. Facing a patchwork of overlapping and conflicting state laws is not acceptable for our industry. The solution is a modernized TSCA that embraces scientific advances since the law’s enactment over 35 years ago. Modernization is overdue and must be predicated upon sound science and a meaningful and open stakeholder consultation process. We continue to strongly oppose efforts to pull processors into the reach of the law, which has historically applied only to chemical manufacturers and importers.

Mixed Bag: Medical Device and Food Packaging Sectors

Implementation of 2010’s “Obamacare” law means a new 2.3 percent tax on the sale of medical devices went into effect at the beginning of 2013. This is among the controversial aspects of the law and, like all taxes, imposes a new burden. In this case, the burden falls on processors doing business in the medical arena. While goods such as those sold through retail outlets – contact lenses, for example – are exempt, the new tax affects a huge swath of plastic products.

Those in the food packaging space can be confident that the Food Packaging Coalition, a group of trade associations and companies that come together here at SPI, continues its work to ensure the Food and Drug Administration’s Food Contact Notification (FCN) program remains viable. The program is a successful model of government/industry collaboration that is vitally important to ensuring timely introduction of new food packaging technologies into the US market through expedited FDA review.

Wait a SEC … Why Are These Compounds Included?

Also on the regulatory front, SPI will continue seeking clarification from the Securities and Exchange Commission (SEC) on the scope of its rule implementing the conflict minerals provision of the Dodd-Frank Act. Many think that Dodd-Frank applies only to the banking and financial services industries, but actually it is much broader. Currently, we are pressing for the exclusion of chemical compounds derived from tin, tantalum and tungsten (“3T”) from reporting requirements. As many readers will know, chemical compounds like tin oxide and tin tetrachloride, which are chemically distinct from 3T, may be used in extremely small amounts as catalysts, stabilizers and aids to polymerization in the manufacture of plastic articles and coatings. SPI does not believe the SEC intended to include these compounds within the scope of its Dodd-Frank interpretation. However, if the SEC decides otherwise, all manufacturers of plastic articles and coatings manufactured with these substances would be subject to administratively and financially burdensome reporting requirements.

Fuel and Feedstock: Why Energy Issues are Doubly Important

In closing, a few short words about the crucial natural resources upon which we rely both for the power to run our facilities and for our raw materials. It benefits us all to remember that this gives our industry a unique voice in the national energy discussion, and with this voice comes responsibility. We must caution our elected officials about the unintended consequences of arbitrary restrictions on access to these natural resources, and that environmentally-responsible extraction – including hydraulic fracturing – is helping to create a new era of manufacturing in America.

In 2011 (the most recent year for which aggregated data is available), plastics industry shipments nationwide totaled some $380 billion – over a billion dollars per day and on pace to yield well over a trillion dollars every three years. That adds up to real economic might and should make all of us proud. But, we can’t take it lightly, and we can’t allow decisions that affect our bottom lines to be made without our input. By hosting a plant tour for an elected official, plugging into the advocacy network of an industry association or taking advantage of other opportunities for engagement, we each take our rightful places as leaders of a strong and advancing industry.

William (Bill) Carteaux is president and CEO of SPI: The Plastics Industry Trade Association. Founded in 1937, SPI promotes growth in the $380 billion US plastics industry. SPI delivers legislative advocacy, market research, industry promotion and the fostering of business relationships and zero waste strategies. SPI also owns and produces the international NPE trade show. All profits from NPE are reinvested into SPI’s industry services. Find SPI online at www.plasticsindustry.org and www.inthehopper.org.