1. Composite Panel Association

2. FIBER, FORMALDEHYDE, AND SHAPING THE FUTURE OF THE NORTH AMERICAN COMPOSITE PANEL INDUSTRY TOM JULIA. PRESIDENT. COMPOSITE PANEL ASSOCIATION 2010 ANAFATA SEMINARIO. RIVIERA NAYARIT Composite Panel Association

3. THE VOICE OF THE NORTH AMERICAN COMPOSITE PANEL AND WOOD-BASED DECORATIVE SURFACING INDUSTRIES 2011 Annual Meetings 1-3 May in Scottsdale, Arizona and 25-27 September in Washington, DC Composite Panel Association

4. The basic issue is competitiveness. Globalization and change are happening faster than we can understand and manage. Our industries have been devastated by the economy – and will be slow to return. Composite Panel Association

5. The impact of China’s economic model is changing the way we do business – and will remain a competitive threat. India will follow, changing the service industries the way China has changed manufacturing. Brazil is coming too. Composite Panel Association

6. Fair trade is essential, or else “free trade” becomes meaningless. We should focus first on the things within our sphere of influence. It starts at home. Two key issues are the regulation of product emissions and access to fiber. Composite Panel Association

7. Today I will review how the fiber and formaldehyde issues are playing out in the United States, and the challenges ahead. The results are important for ANAFATA and the Mexican industry too. Composite Panel Association

8. 1.FIBER Composite Panel Association

9. FIBER AND ENERGY Important ongoing debate about how to diversify America’s energy supply and reduce reliance on imported fuel. President Obama has made renewable energy, especially biomass, a key feature of this debate. Composite Panel Association

10. CONGRESSIONAL RESPONSE Several energy bills were introduced and stalled in the US Senate. One or more will come back in January 2011. None are protective of fiber used by the composite panel industry, and CPA has recommended amendments. Composite Panel Association

11. PRESIDENT OBAMA’S RESPONSE Biomass Crop Assistance Program (BCAP): $500+ million in federal subsidies was to be given out without public input or a rulemaking. Announced June 2009, suspended February 2010, final rule announced in October 2010. Composite Panel Association

12. FINAL BCAP RULE Major victory for CPA and the composite panel industry, landscaping and nursery industries, and others who depend on free market access to fiber. Protects “Higher Value” fiber from subsidized diversion to fuel (burning). Composite Panel Association

13. FINAL BCAP RULE Encourages expansion of fiber supply and new energy sources (“Expand, don’t divert”). Must watch carefully how “Local Sourcing” is determined by government so it does not become a “loophole”. Composite Panel Association

14. FINAL BCAP RULE Is BCAP a model for US federal energy legislation? Could a BCAP rule happen in Mexico too? What more can industry do? CPA has formed an Industry Biomass Council and a Wood Fiber Coalition. Composite Panel Association

15. 2.FORMALDEHYDE Composite Panel Association

16. FORMALDEHYDE & PANELS There has been a longstanding global assault on the use of formaldehyde in a variety of construction and consumer products. Industries have had to make strategic business decisions as a result of policy initiatives and public perception. Composite Panel Association

17. CARB RULE Phase 2 emission limits began for HWPW this year, and will for PB/MDF in January 2011. Most panel producers are ready to meet Phase 2, and most have ULEF/NAUF products too. Who will pay for the added cost. Composite Panel Association

18. CARB RULE CARB’s Third Party Certification (TPC) system is working in most places in the world. Should Mexico have a TPC too? CARB continues to re-evaluate “sell through” deadlines due to lagging inventories. “Finished product testing” for enforcement remains controversial. Composite Panel Association

19. US FEDERAL GOVERNMENT Continuing interest in regulations based on alleged health effects of formaldehyde leads to market uncertainty for the composite panel industry. We needed to shape our future. “Formaldehyde in Composite Wood Products Act” was co-proposed by CPA and the Sierra Club – and is the right path forward. Composite Panel Association

20. THE LEGISLATION Unprecedented coalition of stakeholders assembled – industry, labor, environmental and health care groups. CARB and EPA were consulted early, and neither opposed. Bipartisan, near unanimous support in Congress. Public health and domestic jobs arguments were effective. Composite Panel Association

21. THE LEGISLATION Key provisions of CARB Rule are maintained – including 3 products and Phase Two emission ceilings. Implementation details are referred to EPA for rulemaking. Signed by President Obama on 7 July 2010, EPA must develop and publish the regulation by 1 January 2013. Composite Panel Association

22. THE REGULATION Will the federal regulation replace the CARB Rule? Yes and no. Will it conflict with the CARB Rule? No, but some things should change for the better. Is there a place for a rule like this in Mexico too? Composite Panel Association

23. WHAT WILL CHANGE “Laminated products” definition – cannot be a “loophole” to harm HWPW producers, or a new regulatory burden. “Sell through” provisions for inventory – are now defined as “date of manufacture” not CARB’s “date of sale.” Composite Panel Association

24. WHAT MAY CHANGE Consideration of alternative test methods to measure panel performance – watch for efforts to help offshore producers. CARB-approved Third Party Certifier (TPC) system – including oversight of TPF approvals and regular monitoring of performance. Composite Panel Association

25. WHAT MUST CHANGE Enforcement. Can the US EPA do better than CARB has so far, especially in monitoring offshore imports? Composite Panel Association

26. WHAT’S HAPPENING NOW EPA working with CARB, and also getting input from interested businesses and environmental groups. EPA will appoint a Small Business Advocacy Panel this month. CPA will be on it. EPA’s economic impact research is underway. Composite Panel Association

27. WHAT’S NEXT Final regulation must be done by 1January 2013, and will be effective 180 days later. EPA must report to Congress annually. First look at EPA’s proposed rule in Spring 2011? Composite Panel Association

28. CPA’S INTERVENTION #1 CPA has been industry’s leading advocate. Created CWIC, influenced final CARB Rule, and has recommended amendments since then – most of which have been accepted by CARB. Proposed federal legislation as a check on EPA, and is now working with EPA on development of regulation. Composite Panel Association

29. CPA’S INTERVENTION #2 Monitoring the health-related initiatives within the Obama Administration and in California – which could threaten the EPA rulemaking. Working with all segments of the industry supply chain in North America – and want to help ANAFATA members too. Composite Panel Association