Industry Eyes Changing Tides in Washington
A Modern Casting Staff Report
Click here to see this story as it appears in the July 2017 issue of Modern Casting
The current presidential administration and Congress both profess to be pro-business with an agenda to change policy in terms of regulation, trade and taxes, which could impact the U.S. metalcasting supply chain.
President Trump’s Executive Order 13777 requires federal agencies to establish task forces to review existing regulations to identify those that may be unnecessary, negatively impact jobs or are not justified on a cast-benefit basis. Metalcasting industry advocate AFS submitted comments for the task forces highlighting the regulatory burden on U.S. foundries, with recommendations for program modifications and solutions. In May, the Senate Homeland Security and Government Affairs Committee approved a series of bills to reform the regulatory process.
Another executive order, dubbed “Buy American, Hire American,” is intended to assess procurement rules and remove loopholes that give foreign products an advantage over American ones.
The administration’s interest in reevaluating established trade agreements might also impact U.S. metalcasters. In April, the administration announced it was launching investigations into whether steel and aluminum imports should be restricted on national security grounds.
One piece of federal action of perhaps most interest to metalcasters—the OSHA silica rule—at this point remains unchanged, with foundries having until June 23, 2018, to come into compliance with the new standard.
In June, members of the metalcasting supply chain gathered in the Capitol for a day of face to face meetings with legislators to ask for support in a few key issues that could have a lasting effect on their businesses.
OSHA’s Crystalline Silica Rule
On March 25, 2016, the U.S. Occupational Safety & Health Administration (OSHA) published its final comprehensive and complicated new regulatory structure for the control of crystalline respirable silica. It sharply reduces the existing permissible exposure limit (PEL) in half to 50 micrograms of crystalline silica per cubic meter of air (µg/m3) from the current 100. Metalcasting facilities would be required to implement a series of protective measures, develop a written exposure control plan, and limit access to high exposure areas that are not required under OSHA’s existing standards
Nearly 70% of the U.S. foundry industry will be impacted by this rule. OSHA has determined that a rule is needed to substantially reduce the risk of serious disease from exposure to airborne concentrations of silica dust. This runs contrary to data from the Centers for Disease Control that show a sharp decline in the incidences of silicosis in recent decades.
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. Several recent estimates have shown costs to update and install new ventilation systems will run over $1.5 million and doesn’t include costs associated with the ancillary provisions.
The new rule from OSHA does not favor respirators and clean filtered air helmets, and instead pushes for its “hierarchy of control” policy. Facilities will only be able to provide respiratory protection after proving all the available engineering and work practice controls are not able to limit exposures to the new permissible level and action level.
Metalcasters have argued OSHA failed to include costs to shut down a foundry for installation and underestimated costs for ventilation, dust collectors, professional cleaning, and vacuums.
Most of the data OSHA relied on for its study was from foundry inspections dating back to the 1990s. Many of the foundries cited have since gone out of business.
OSHA’s final cost of the silica rule for the foundry industry is $47 million ($38,000 for the typical foundry). An independent analysis initiated by AFS calculates the cost to be more than $2.2 billion annually. This would represent 9.9% of the foundry industry’s revenue and 276% of its profits.
At the Fly-In, metalcasters requested lawmakers to contact Secretary of Labor Alexander Acosta and urge him to delay, reopen, revise or nullify the silica rule.
Comprehensive Tax Reform
The last major overhaul of the U.S. tax code was in 1986. With a combined (state and local) corporate tax rate that tops 39%, manufacturers in the United States face the highest corporate statutory tax rate among the 34 industrialized nations of the Organisation for Economic Co-operation and Development (OECD). The average OECD nation’s tax rate is 25%.
Meanwhile, tax rates for manufacturers organized as pass-throughs are in some cases even higher and can hit almost 50%.
In July, U.S. metalcasters urged for the following key elements in tax reform:
Lower Tax Rates for Businesses of All Sizes.
Repeal of the Estate Tax. For capital-intensive, family-owned foundries, the estate tax is particularly problematic.
Protection of LIFO. This inventory accounting method has been recognized in the U.S. tax code for more than 70 years. If LIFO is repealed, the penalty to foundries that used LIFO could extend decades into the past, forcing companies to pay off the “reserve” to which they had legally been entitled.
Strengthened R&D Incentive. Strengthening the R&D incentive by increasing the alternative simplified credit formula from 14 to 20% would make it easier for companies of all sizes to use the R&D credit, fueling more research investment.
Full Expensing of Capital Equipment. Moving to a system of full expensing would enable foundries to deduct the entire cost of capital expenses (such as machines and equipment) up front, rather than having to spread the deduction out over several years.
The American Society of Civil Engineers gave the nation’s drinking water a D in its 2017 Infrastructure Report Card. According to a study by the American Water Works Association, repairing the nation’s water infrastructure is estimated to cost $1 trillion over the next 25 years. The majority of the burden of upgrading the nation’s water and wastewater infrastructure falls on the public sector, as approximately 85% of water systems are municipal-owned.
Congress will be considering infrastructure legislation that may provide additional critical investment in water infrastructure. The EPA’s Drinking Water State Revolving Fund does NOT include the Buy American provisions for Iron and Steel.
Metalcasters on Capitol Hill urged lawmakers to include in the FY18 appropriations bill or infrastructure package:
A permanent “American Iron and Steel” Requirement in the Drinking Water State Revolving Fund (DWSRF) for iron and steel products that are produced in the U.S.
Removal of the cap on tax-exempt private activity bonds for water and wastewater infrastructure.
Full funding for the state revolving loan funds programs.
Full funding for the Water Infrastructure Finance and Innovation Act (WIFIA).
According to the American Society of Civil Engineers 2017 Report, America’s infrastructure scores a D+. Whether it’s structurally deficient bridges, dams and levees or inadequate roads, airports and waterworks, America’s infrastructure is insufficient.
Thirty percent of U.S. casting production is dedicated to infrastructure. Metalcasters at the Fly-In asked lawmakers for a comprehensive infrastructure package that includes sustained infrastructure spending; new tools to attract more private investment in infrastructure to supplement public funding; variety of funding mechanisms, and where possible, utilize existing federal programs; increased accountability and expedited regulatory permit processes; and, funding support for long-term projects.
Fair Trade for U.S. Metalcasters
U.S. metalcasters continue to face significant trade challenges from foreign government trade-distorting policies and practices, in particular China’s state-owned enterprises. President Trump launched a Section 232 investigation into steel imports and aluminum in March. The Commerce Department is conducting a probe and held a public meeting in May. In early June, Trump indicated major action was coming quickly and that it could affect countries besides China, which is often blamed for creating a global steel glut. Section 232 isn’t used often, but it gives the administration power to determine whether the imports are having an adverse impact on national security and if so, it could lead to new tariffs or quotas in response.
Metalcasters have faced a deluge of new regulatory mandates from the Environmental Protection Agency (EPA), OSHA, National Labor Relations Board (NLRB), Department of Labor (DOL), and other federal agencies. Recently, EPA and other agencies have begun to review a number of regulations including, but not limited to Waters of the U.S., Clean Power Plan, and Joint Employer.
The Regulatory Accountability Act is bipartisan legislation that would constitute the most significant reform to the federal regulatory system in over seven decades. It requires effective cost-benefit analysis. It also would require agencies to adopt the most cost-effective approach to achieve their objectives. The bill would permit a judicial check on an agency’s cost-benefit analysis of major rules—the 40 to 80 costliest regulations out of the more than 3,000 issued each year.
The bill passed the House in January and is currently being considered in the Senate.