In late March, the Biden administration lifted steel and aluminum tariffs from the United Kingdom that former president Donald Trump imposed in 2018. Industry groups applauded the action, while also taking the opportunity to encourage the administration to similarly re-examine tariffs on Canadian softwood lumber.
“The Biden administration’s move to end steel and aluminum tariffs from the United Kingdom is a welcome development and a positive first step that can help lower construction and housing costs,” said Jerry Konter, chairman of the National Association of Home Builders. “The administration must now act with the same sense of urgency to negotiate a new agreement with Canada that will eliminate tariffs on softwood lumber shipped into the U.S. A failure to act decisively will be a bitter blow for American home buyers and for housing affordability.”
“As the construction and manufacturing industries continue to grapple with supply chain challenges and record-high price volatility, this action by the Administration is an important step to help stabilize supply and improve conditions for residential construction,” said Michael O’Brien, Window & Door Manufacturers Association president and CEO, in a statement. “Moving forward, WDMA encourages the Administration to also re-examine tariffs on Canadian softwood lumber and Chinese imports subject to Section 301 tariffs.”
Notable though this tariff lifting is, it’s merely the tip of legislative and regulatory topics to watch in the coming year. The WDMA 2022 Spring Meeting and Legislative Conference March 30-31 addressed myriad topics and highlighted what might impact the industry moving forward.
Build Back Better Act and tax credits
Although the Build Back Better Act did not pass the Senate, Kevin McKenney, vice president, government affairs, WDMA, said it’s still worth addressing several provisions in the act in the event Congress tries to pass individual provisions. He specifically referenced a proposed minimum 15 percent corporate tax on corporations that book income with profits more than $1 billion.
Several efficiency tax credits also bear examination, McKenney said:
25C increases the percentage of credit from 10 percent of the cost to 30 percent and replaces lifetime cap on credits with a $1,200 annual credit. It also creates a new credit level of $600 for Energy Star most-efficient windows and removes all skylights from 25C credit eligibility. Manufacturers and taxpayers must comply with reporting the ID number of certain properties, including windows, to access the credits.
25D extends the full 30 percent tax credit for eligible products through 2031 before it phases down to 26 percent in 2032 and 22 percent in 2033.
45L extends the credit for energy-efficient new homes through 2031, with the single-family criteria being that of the Energy Star Single-Family New Homes Program. There is also a $5,000 credit for single-family and manufactured new homes certified as zero-energy ready.
Much of WDMA’s lobbying efforts focused around 25C, said McKenney. “We see this as unworkable for manufacturers.” He believes his team made “significant progress” in getting some members of Congress to see issues with the way it was written. “There’s no real justification for creating this new credit level for essentially triple-pane products,” he said. He added the credit level for windows should be at least $1,000.
Trade and tariffs
A lot of focus revolves around the America Competes Act, which addresses trade imbalances Congress sees with China and unfair trading practices they’re engaged in, much of which focuses on semiconductors, said McKenney.
In addition to the lifting of U.K. steel and aluminum tariffs, efforts are also underway for the administration to reopen exclusion requests for Chinese products (Section 301) and there is bipartisan support to suspend Russia’s trade relations with the U.S.
OSHA withdrew its Emergency Temporary Standard around COVID-19 vaccinations after the Supreme Court ruling blocked it, but it still remains an active proposed rule. As of late March, it’s unclear if OSHA will move forward with the rulemaking, said McKenney.
In late 2021, OSHA issued advance notice of proposed rulemaking for a heat illness and prevention standard that would protect workers who “work outdoors in agricultural, construction and delivery services, as well as workers in such indoor facilities as warehouses, factories and kitchens.” Specific considerations include heat stress thresholds, heat acclimatization planning, exposure monitoring and strategies to protect workers. Biden’s administration said it would prioritize work inspections on days where the heat index exceeds 80 F.
The Department of Labor might resurrect a proposal from 2016 that would change the salary threshold for overtime pay from its current level of $35,568 to as high as $47,000.
Supply chain challenges and the federal response
Representatives from the U.S. Chamber of Commerce shared insight as to the current supply chain challenges and federal responses. Plenty of challenges existed prior to the COVID-19 pandemic; the pandemic was a tipping point for supply chain woes, said Jack Overstreet, senior manager in the cyber, intelligence and supply chain security division at the U.S. Chamber of Commerce.
The pandemic’s resulting fiscal stimulus packages injected wealth into American homes, thereby increasing and shifting spending habits, causing further disruptions. Whereas prior to the pandemic, many consumers spent money on travel, the travel restrictions caused many to turn their spending to retail.
Businesses prepared for an anticipated slowdown and factory closures in Asia disrupted the flow of goods into the U.S. The pandemic also put three times the usual number of trucking companies out of business in 2020, laying off thousands of workers while others retired. Today, there’s a shortage of 80,000 drivers and the U.S. workforce is 3.6 million below pre-pandemic levels. An estimated five to seven years’ worth of e-commerce growth was compressed into a single year, which put further strain on the logistics and transportation industry, explained Overstreet.
Forty percent of seaborne imports to the U.S. arrive through the Ports of Los Angeles and Long Beach, which remain center stage for congestion. At peak, more than 100 container ships anchored off the coast waiting to offload. The number has since subsided, but remains “very problematic.” He also explained how U.S. ports are among the least productive in the world, with Los Angeles and Long Beach ranking 328 and 333, respectively, out of 351 ports worldwide in terms of productivity.
Overstreet predicts supply chain woes aren’t through their worst. COVID remains part of the equation, especially with China’s zero-tolerance policy and locking down major ports. Some businesses are hoarding goods, which affects supply. West Coast ports are also negotiating contracts with unions, which Overstreet has heard “isn’t going very well.”
The government, however, is examining supply chain resilience through measures such as America’s Supply Chain Executive Order, the U.S. Innovation and Competition Act and recent riders on the National Defense Authorization Act. It also appears as though the administration is exploring ways to rely less on the Chinese market, he said. Businesses, meanwhile, are shifting supply chains through regionalization, near-shoring and re-shoring. Overstreet warns, however, that these tactics take time, money and increase the risk of supply chain turmoil.
His short-term recommendations include:
Stable labor negotiation. “A strike would be devastating,” he said.
Better communication between all parties such as ocean carriers, importers and terminals
Double the cap on employment-based visas
Long-term recommendations include:
Better data sharing among ocean carriers, terminals, truckers, railroads
Increased public investment in port infrastructure
Policymakers recognizing the importance of ports in planning and investment decisions
Productivity improvements, such as embracing automation
Smart policies around near-shoring, re-shoring, etc.
The Russia-Ukraine war will continue to impact global relations. Isabelle Isco, director, international policy, expects more sanctions on the Russian economy and supply chains soon, and the U.S. and European Union are expected to announce sanctions dialogue. Isco anticipates the administration will focus on enforcement in the form of secondary sanctions applied to third parties that transact with prohibited entities.
More than 400 Western companies have suspended or withdrawn operations from Russia. The sanction environment, she explains, make exiting necessary and profits can’t be made there right now. Companies also need to consider the reputational risk of continuing business in Russia, she said.