RILA supports a uniform national standard that would provide consistent and effective notification if and when a breach of sensitive information occurs and it is reasonable to expect that harm will occur or actual harm has resulted. The current patchwork of state laws unnecessarily complicates the notification process, drives up cost and increases the likelihood of errors. The retail industry is making significant investments in data security infrastructure, and companies need the flexibility to create the organizational structures and systems both necessary and appropriate to secure digital assets.

RILA also remains wary of attempts by regulators and legislators to instruct retailers on what data may be considered personally identifiable. Because of the emphasis on customer relationships within retail corporate cultures, our industry is more conservative than most in the use of such information. Retailers abide by industry self-regulating guidelines that are more adaptable to changes in customer preferences and technology advances.

To better position ourselves for the new Congress and administration, RILA has launched the Privacy and Data Security Legislative Working Group composed of retail industry representatives from departments including government affairs, legal, communications, information technology, marketing and otherdisciplines or departments that play a key role in using, maintaining or securing company data. This Working Group will be closely monitoring these matters and developing white papers to educate legislators and regulators about the impact of broad-sweeping changes to existing standards.

For external outreach, RILA has developed and distributed talking points and supporting material on this issue to key members on Capitol Hill, to the Federal Trade Commission and to the state retail associations, with whom we continue to partner to defeat or amend these bills.

We urge members of Congress to work with retailers and other stakeholders to ensure that legislation provides a uniform federal standard that preempts state laws and creates a balanced and practical notification trigger and notification process.

During the past several years, personal information security breaches have stemmed from the government, data brokers, credit card processors, retailers and others. In light of these breaches, almost every state across the nation enacted data security laws and several U.S. Congressional committees considered a wide range of proposals to address data security measures, notification processes and other related issues.

However, now that the majority of states have enacted data breach legislation and President Bush has signed into law a cybercrime bill that assists law enforcement officers, the impetus has slowed for a preemptive federal data breach bill to help businesses better tackle the patchwork of state laws. Instead, lawmakers and regulators are shifting their focus to broader privacy policy, including initiatives to limit what information may be used for targeted online advertising.

Status

While privacy matters such as the protection of Social Security numbers will continue to be of concern to both Congress and a new administration in 2009, none will be as central as behavioral/targeted advertising. A look at efforts in 2008 surrounding this issue paints the picture well.

On April 7, RILA teamed up with a coalition of merchant, advertising and online trade associations to provide feedback to the Federal Trade Commission (FTC) regarding the agency’s proposed guidelines for industry “self” regulation of behavioral advertising. RILA’s comments noted that no government-imposed guideline is truly self-regulatory and advocated that the FTC’s proposal would inhibit retailers from providing web-based services that customers have come to expect and rely upon because no differentiation was made between identifiable and non-identifiable information. The FTC has not announced its final, revised self-regulatory guidelines, but RILA expects that the agency will do so before the end of the year.

The FTC’s actions also piqued the interest of Congress. In the Senate, Commerce Committee, Sen. Byron Dorgan (D-ND) held July 9 and September 25 hearings to examine targeted advertising and its use by search engines, deep packet inspection companies and Internet service providers. Sen. Dorgan plans to introduce legislation in 2009 on the subject, but details are still unknown.

Further, on August 1, House Energy and Commerce Committee Chairman John Dingell (D-MI) and Ranking Member Joe Barton (R-TX) queried 33 Internet-based companies for their behavioral and targeted advertising practices and posted their responses on the Committee’s website. House Privacy Caucus founder and Commerce Committee member Edward Markey (D-MA) has stated his desire for an online privacy “Bill of Rights,” and Ranking Member Barton has said, "A broad approach to protecting people's online privacy seems both desirable and inevitable...advertisers and data collectors who record where customers go and what they do want profit at the expense of privacy." RILA fully expects to see legislation in the House in early 2009.

Data Security
Despite much momentum early in 2007, Congress likely will not pass a broad-sweeping data breach bill before the end of 2008. Instead, the two bills that passed the Senate Commerce and Senate Judiciary Committees will set the stage for debate in 2009. No comprehensive bills gained significant traction in the House.

Retailer Liability Legislation in the States
As a result of recent high profile retail breaches in New England, many states are revisiting the disturbing trend toward shifting the financial liability of breaches from the banks to the entity from which the breach occurred. In 2008, 10 states introduced legislation addressing data security. Coalitions composed of a wide variety of industry representation (including retailers) were able to successfully oppose those bills with cost-shifting sections. West Virginia’s legislation, signed by the governor in March, does not shift the liability to the breached entity, but does contain onerous notification requirements.

RILA opposes these types of bills since retailers already pay for costly liability through excessive interchange fees and would prefer a more manageable federal system of notification requirements. Lack of federal action to enact data security legislation will most likely lead to similar bills being reintroduced in state legislatures next year. A patchwork of differing formats from state-to-state would prove costly and unworkable for RILA members, and a uniform, workable national solution is preferred.

Behavioral Advertising Legislation in the States
Connecticut, New York and Massachusetts all saw legislation introduced that sought to limit behavioral advertising in 2008.

In New York, a bill titled “Third Party Internet Advertising Consumer's Bill of Rights Act of 2008” was introduced and sought to establish limitations with respect to how third-party online advertisers collect and use information concerning the online behavior of consumers. It required third-party advertisers to provide consumers with notice regarding the types of information collected and methods for consumers to opt-out. It also would have banned companies from collecting personal information such as names or addresses without users' consent. The law cleared several hurdles in the New York Assembly, but did not advance to the floor for a vote. According to the bill’s authors, it will be resubmitted in January 2009.

Massachusetts and Connecticut both saw very similar bills that would have required third-party advertising networks to post notice about their data collection practices and how they use the collected data. The Connecticut bill was reported favorably out of the Joint Committee on General Law and at the close of session was still awaiting action by the full Senate. RILA expects the issue to be taken up again in 2009. The Massachusetts bill is awaiting action in both houses. RILA will continue to monitor all Internet advertising legislation.

RILA opposes the adoption of a national retail sales tax.  A national sales tax would drive up retail prices for consumers, have a devastating effect on the retail sector of the economy, and create excessive administrative burdens for retailers.

In the 111th Congress, Rep. John Linder (R-GA) and Sen. Saxby Chambliss (R-GA) introduced the Fair Tax Act of 2009 (H.R. 25, S. 296), which would replace the federal income tax with a national sales tax.  Neither of these proposals has received a hearing in this or recent Congresses, and it is unlikely that they will receive floor consideration given the congressional Democratic Majority's tax agenda, which does not yet include replacing the current tax system with a national retail sales tax.

On July 25, 2009, President Obama named former Federal Reserve Chairman Paul Volcker to head up the President’s Economic Recovery Advisory Board (PERAB), part of the mandate of which is to review the current tax code, close loopholes, streamline the law, and generate revenue.  The panel also includes Martin Feldstein, Laura D’Andrea Tyson, Roger Ferguson, and William Donaldson.  While the panel has few constraints shaping its recommendations – namely, no tax increase in 2009 and 2010 and no tax increase on families earning less than $250,000 a year – the serious deficit projections for the next ten years and ballooning national debt create significant pressure for the recommendations to raise substantial revenues, which could include proposals to supplement the current tax system, such as through a national sales tax.  The panel is expected release recommendation by the end of 2009.

Following public remarks in September 2009 by Chairman Volcker on the potential for a value-added tax, House Speaker Pelosi also stated publicly that such a tax should be on the table to address the country’s fiscal situation.  In response, RILA wrote to the Speaker to express opposition to a value-added or national sales tax, noting its regressive nature and compliance burdens on retailers.  RILA echoed similar concerns in a letter to the PERAB in December 2009, regarding tax reform.

RILA urges Members of the Senate and House of Representatives not to cosponsor the Linder/Chambliss proposal and to oppose legislation advocating a national retail sales tax.  Any tax-reform legislation considered by Congress should be developed with the full input of retailers, and RILA and its member companies stand ready to assist in that effort.

Some policymakers, economists, and academicians support replacing the current income tax system with a national retail sales tax. They argue that a sales tax is fairer than the current income tax system and will give Americans more incentive to save, simplify federal taxation, reduce the cost of tax filing compliance, and lower the cost of goods and services.

Notwithstanding their arguments, a national retail sales tax raises a number of serious concerns, which undermine its viability:

• Experts believe Congress would need to impose a sales tax rate between 25 percent and 30 percent to offset the costs of moving from an income tax system to a consumption-based system. Such a tax would put the cost of many basic commodities and goods out of reach for millions of Americans.
• Sales taxes are generally regressive and particularly harm low- and middle-income consumers who spend a higher percentage of their income on basic necessities such as food, clothing, and household products. While proponents of a national retail sales tax contend that rebates could be offered to mitigate its regressive nature, to be effective, such rebates would have to be made to the more than 300 million Americans each month, which would entail substantial administrative costs to the government and drive the tax rate even higher.
• Retail represents the third largest employer in the United States – behind only government and healthcare. In 2008, the retail industry saw $3.96 trillion in annual sales and employed 15 million American workers. A national sales tax would significantly depress retail sales and have a devastating impact on this important sector of our national economy and the critical jobs it provides.
• Many national sales tax advocates wish to repeal the current income tax system to eliminate the possibility of layering a sales tax on top of the current federal income tax. Permanent repeal of the income tax would require an amendment to the U.S. Constitution. Given the difficulty and infrequency of constitutional amendments, the possibility of both a national sales tax existing on top of the current federal income tax is highly likely.
• State and local governments already apply sales taxes to many goods and services. A national sales tax would simply add to the tax burden consumers are already asked to shoulder by these jurisdictions.
• A national sales tax of any amount, whether in lieu of or in addition to a federal income tax, would create significant administrative burdens for RILA members that would be responsible for collecting and remitting the tax to the U.S. Treasury.

In confirmation of many of the foregoing fatal flaws, the President's Advisory Panel on Federal Tax Reform, formed by President Bush in January 2005 to make recommendations on fundamental reform of the tax system, rejected a national retail sales tax in its final report, stating that such tax system would result in a high tax rate, be difficult to administer, and burdensome for state taxing authorities.

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org.

Additional References

·         RILA Issue Brief:  Tax Reform

·         RILA Issue Brief:  International Tax Reform

·         RILA Issue Brief:  Streamlined Sales Tax

RILA supports reform of the U.S. international tax rules to improve the competitiveness of U.S. businesses, including a growing number of retailers, participating in the global economy.  Recent proposals in the Obama Administrations’ Fiscal Year 2010 budget, however, raise significant concerns since they would threaten U.S. jobs and undercut the ability of U.S. businesses to compete against other foreign companies.  In particular, RILA opposes the proposals to restrict the deferral of U.S. tax on foreign earnings, limit the use of foreign tax credits, and constrain the business-entity classification rules for foreign entities.

On February 26, 2009, President Obama released his Fiscal Year 2010 budget, which includes a number of proposals affecting the current international tax provisions of the Internal Revenue Code.  While the budget does propose extending two important international tax benefits ­– the Subpart F active finance and look-through exceptions – the vast majority of the proposals are intended simply to raise revenues without regard for their effect on U.S. jobs or the competitiveness of U.S. companies that also operate abroad.  These changes would generally be effective beginning in 2011.

The Obama Administration estimates that the package of international tax changes would raise more than $209.9 billion through 2019, although the Joint Committee on Taxation (JCT) scores the package at $159.3 billion over ten years.  Based on the Administration’s estimates, the limitations on deferral, foreign tax credits, and business-entity classification would account for more than 81 percent of that revenue.

RILA urges Congress not to enact international tax changes – in particular the proposals to limit deferral, foreign tax credits or business-entity classification – simply to raise revenues for unrelated policy purposes.  Any such changes should be considered only in the context of overall reform of the U.S. system for taxing foreign earnings of U.S. companies.  RILA and its members stand ready to assist Congress and the Administration in structuring U.S. international tax rules that will maintain the global competitiveness of U.S. businesses.

In recent years, a growing number of U.S. retailers have expanded into the global marketplace through the establishment of both retail operations in other countries as well as subsidiaries that strengthen the supply-chain of goods and services they provide to their customers.

Despite having the second highest corporate tax rate, behind only Japan, the United States is one of the last major industrialized countries to tax all of the worldwide income of its citizens, including the domestic and foreign earnings of U.S. companies as well as the income earned abroad by foreign subsidiaries of U.S. multinationals.  Typically, other countries tax their domestic companies on a territorial basis, with tax imposed only on the income earned within their borders and not on the earnings of their multinational companies’ foreign subsidiaries that are located outside of their national borders.

Current U.S. tax law attempts to address the competitive advantage that foreign territorial tax systems pose for U.S. companies in two ways.  First, under the so-called “deferral rule,” U.S. companies are not taxed on income from the active business operations of a foreign subsidiary until that income is repatriated to the United States.  The long-standing policy of the deferral rule allows U.S. multinationals to remain competitive against their foreign competitors, which are not subject to tax on their worldwide income at all. The deferral rule, however, applies only to foreign earnings derived from active business operations. The Subpart F rules, enacted in 1962, prevent U.S. multinationals from deferring tax on foreign income that is generally not related to active operations, such as interest and dividends from investments of their foreign earnings. 

The Obama Administration’s budget proposal would restrict the ability of U.S. companies to deduct expenses (other than research and development costs) associated with foreign earning until such earnings were repatriated to the United States.  The result would be increased U.S. taxes for businesses that can no longer deduct expenses, often relating to U.S. headquarter jobs and other selling, general and administrative expenses, allocated to foreign earnings that are necessarily reinvested abroad to maintain the company’s global business operations.  This proposal is made worse by requiring companies to allocate such expenses under the same flawed rules as currently apply to foreign tax credits, without the benefit of the worldwide interest allocation rule that Congress has repeatedly delayed and that the House health care reform bill proposes to repeal.  Accordingly, the proposal would create additional disparities between the U.S. tax system and that of our major trading partners, further eroding the competitiveness of U.S. businesses.

Second, since 1917, the United States has allowed a U.S. company that repatriates the income of its foreign subsidiary to reduce its U.S. tax liability by any foreign taxes paid on that income through a “foreign tax credit,” which reduces the potential for double taxation of the same income by the United States and a foreign jurisdiction.  The Obama Administration’s budget proposal would limit the availability of foreign tax credits by requiring companies to calculate them on a combined basis rather than by the taxes paid by each subsidiary making up the U.S. company’s worldwide organization.  Despite this combined approach, the Administration would also require companies to match their foreign tax credits with the associated repatriated income to prevent so-called “cross crediting,” which is permitted under current law.  As a result, U.S. businesses would have to combine credits derived from high- and low-tax jurisdictions but not be able to apply the credits to the overall repatriated income, making it less likely that they would be able to avoid double taxation of their foreign earnings.

Similarly, since 1997, U.S. companies have been permitted to elect to treat certain of their foreign subsidiaries as “disregarded entities,” with the income and expenses of such subsidiaries flowing up to its parent company.  This regime, commonly referred to as the “check the box” rules, provides simplicity and certainty for U.S. companies in structuring their international operations and managing foreign taxes on their earnings abroad.  The Obama Administration’s budget proposal would limit the availability of the check-the-box rules and allow subsidiaries to be disregarded only when they are organized in the same country as their parent (the U.S. headquartered company and its first-tier subsidiary would be exempt).  A significant, and presumably unintended, consequence of this proposal is that it would likely increase the amount of taxes that U.S. companies would owe to foreign governments without having a significant effect on their tax liability to the U.S. government.

While the Obama Administration has put forth targeted international tax proposals, the Treasury Department under the Bush Administration released a study in December 2007 outlining three broad approaches to overhauling the corporate tax code.  The first approach would replace the corporate income tax with a business activity tax (BAT) on gross receipts, minus the cost of goods and services purchased from other businesses, at a tax rate between 5 percent and 6 percent (to achieve revenue neutrality).  The second approach would lower the corporate tax rate by eliminating the majority of current business tax deductions, and implement a territorial system for the taxation of U.S. companies’ foreign earnings.  Treasury estimated that to maintain revenue neutrality the rate could be lowered to 28 percent with full business-tax base broadening or 31 percent if accelerated depreciation was retained.  The third approach offered a package of proposals, short of full reform of the tax code, aimed at specific areas of the business tax system that could be modified.  While Treasury found that the BAT option would result in modest improvements in economic performance, the second option would require significantly lower business tax rates (e.g., 20 percent) or greater equipment expensing in order to achieve significant benefits to the U.S. economy and the competitiveness of U.S. companies.

Also at the end of 2007, House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced a $1.3 trillion tax measure, the Tax Reduction and Reform Act of 2007 (H.R. 3970), which was partially offset by provisions similar to the Obama Administration’s limitations on the deferral rule and on the use of foreign tax credits.  Although the legislation did not receive a hearing or markup, it continues to serve as a marker for Chairman Rangel’s broader reform agenda.

While President Obama’s Fiscal Year 2010 budget includes the changes to the U.S. international tax rules discussed above to help pay for other policy priorities, the Fiscal Year 2010 congressional budget resolution (S. Con. Res. 13) did not assume the Administration’s proposals. 

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org.

Additional References

·         RILA Issue Brief:  Tax Reform

·         RILA Issue Brief:  National Retail Sales Tax

RILA supports tax policies that spur economic growth by maintaining low income tax rates to help taxpayers keep more of what they earn for savings, investment, and spending.  RILA also supports tax policies that will improve the business climate for retailers, both domestically and internationally, by helping them continue creating jobs and bring price-competitive value to American consumers.  Contrary to these goals would be a consumption-based tax system, such as a national sales tax.

Several bills have been introduced in the 111^th Congress concerning fundamental tax reform.  Major initiatives include:

• The Flat Tax Act of 2009 (S. 741), introduced by Sen. Arlen Specter (D-PA), and the Simplified, Manageable and Responsible Tax (SMART) Act (S. 932), introduced by Sen. Richard Shelby (R-AL), both of which would replace the current tax system with a flat tax for individual taxpayers and a modified value-added tax for businesses.
• The Freedom Flat Tax (H.R. 1040), introduced by Rep. Michael Burgess (R-TX) and the Optional One Page Flat Tax (S. 963), introduced by Sen. Lamar Alexander (R-TN), which would allow taxpayers to elect an alternative tax system that would replace the individual income tax with a flat tax and the business income tax with a modified value-added tax.
• The Fair Tax Act of 2009 (H.R. 25, S. 296), introduced by Rep. John Linder (R-GA) and Sen. Saxby Chambliss (R-GA), which would replace the federal income tax with a national sales tax. 
• The Fair Flat Tax Act (S. 1111 – 110th Congress), introduced by Senator Ron Wyden (D-OR), which models reform on the structure of the 1986 Tax Reform Act.

Although some of these plans for fundamental tax reform are more specific than others, none of the proposals has the level of detail that would be required to make a plan completely operational, and significant transitional considerations have yet to be addressed.

While short of overall reform, House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced a $1.3 trillion tax measure in the 110th Congress, the Tax Reduction and Reform Act of 2007 (H.R. 3970), which focused heavily on reform of the Alternative Minimum Tax and modification of the international tax rules.  Although the legislation did not receive a hearing or markup, it continues to serve as a marker for Chairman Rangel’s broader reform agenda.

To date, the Obama Administration has not put forth a tax reform plan.  However, on July 25, 2009, President Obama named former Federal Reserve Chairman Paul Volcker to head up a panel to review the current tax code, close loopholes, streamline the law, and generate revenue.  The panel also includes Martin Feldstein, Laura D’Andrea Tyson, Roger Ferguson, and William Donaldson.  While the panel has few constraints shaping its recommendations – namely, no tax increase in 2009 and 2010 and no tax increase on families earning less than $250,000 a year – the serious deficit projections for the next ten years and ballooning national debt create significant pressure for the recommendations to raise substantial revenues, which could include proposals to supplement the current tax system, such as through a national sales tax.  RILA submitted a letter to the panel in December 2009, detailing RILA’s principles for tax reform.  The letter also recommended a reduction in the corporate tax rate and preservation of low rates on capital gains and dividends, and opposition to a national retail sales tax.  The panel is expected release recommendations early in 2010.

As part of any major tax reform proposal, it is important to recognize that the current rules governing individual taxation and domestic and international taxation are inexorably intertwined.  According, fundamental tax reform must address all aspects of the tax system, and Congress should focus on the following principles:

• Keep tax rates low – Enabling individuals to keep more of what they earn encourages savings and enables them to make purchases of needed consumer products, which also has the benefit of providing a major stimulus to the economy including sustained, improved retail sales.  Similarly, low tax rates help American businesses by increasing capital for investment and job creation.
• Enact simple, predictable and easy to understand tax rules – A tax system that individual and business taxpayers can easily understand will improve compliance and reduce the cost of tax administration.
• Establish tax rules that are consistent with economic reality – For business taxpayers in particular, tax rules need to result in appropriate timing and accurate reflection of income without arbitrary rules that, for example, delay deductions beyond the period in which the income is earned or set depreciation periods inconsistently with the real economic life of the property.
• Ensure the tax system fosters business competitiveness and promotes economic growth – In an increasingly global economy, the tax system should not hinder the ability of U.S. businesses to compete internationally as well as domestically against foreign firms.  A tax code that treats business fairly and equitably will minimize burdens on compliance and decision-making, thereby enhancing the productive capacity of U.S. businesses and the U.S. economy.
• Implement reforms that ensure industry-specific neutrality – Business decisions should be based on economic benefits of the particular transaction, not driven by special tax benefits targeted to one industry versus another.  The economy does not benefit when the government chooses winners and losers through the tax code.  Accordingly, tax reform should allow the marketplace, not the tax system, to allocate capital and resources appropriately.
• Avoid a whole-scale change in the tax base – Dramatic shifts in tax policy, such as implementing a national retail sales tax, would be immensely disruptive to the economy and particularly detrimental to lower-income workers and families.
• Make changes permanent and ensure certainty – A new tax system must be permanent, not littered with expiring provisions that cause uncertainty for families saving for college and retirement and business striving to expand, create jobs, and remain competitive in the United States and abroad.
• Provide realistic transitions rules – Significant changes to the current tax system will create substantial burdens on taxpayers, especially in the business sector, to ensure compliance.  Establishing transition rules that provide adequate time for implementation and that take into account existing agreements, practices, and other requirements is essential for the success of any new tax system.

RILA looks forward to working with policymakers at all levels of government to implement meaningful tax reform that includes provisions that support the retail industry, help it grow, and create jobs. 

Retail is vital to our nation’s economy, representing one of the largest industry sectors in the United States with 15 million jobs and $3.96 trillion in annual sales in 2008.  The industry pays billions of dollars in federal, state, and local income taxes, and collects and remits billions more in state and local sales taxes. 

Many policymakers contend that the current federal tax system is overly complex and in dire need of reform.  The last major overhaul of the system occurred with the enactment of the Internal Revenue Code of 1986, which compressed 15 individual income tax brackets down to two and restructured much of the corporate tax system as well.

Since 1986, Congress has made thousands of changes to the tax code increasing its complexity and the resulting compliance burdens for individuals and businesses alike.  Periodically, over the past two decades efforts to reform the tax code have been started, but none have reached fruition. 

One recent example was the President’s Panel on Federal Tax Reform, established by President Bush.  On November 1, 2005, the Panel released its final report, which recommended two options to reform the tax code.  The first, the Simplified Income Tax Plan, would eliminate most of the current targeted tax deductions and hidden taxes like the Alternative Minimum Tax, and lower tax rates.  It also proposed an updated corporate tax regime to help American corporations compete in global markets.  The second option, the Growth and Investment Tax Plan, expanded on the Simplified Income Tax Plan by seeking to eliminate the tax on individual savings and businesses investments by establishing a single, low tax rate on dividends, interest, and capital gains and allowing businesses to expense their investments immediately.  Notably, the Panel’s report did not include a recommendation for a National Retail Sales Tax (NST) or Value Added Tax (VAT).

Two years later, on December 20, 2007, the Treasury Department released a study outlining three broad approaches to overhauling the corporate tax code.  The first approach would replace the corporate income tax with a business activity tax (BAT) with a tax rate between 5 percent and 6 percent to achieve revenue neutrality.  Companies would be taxed on gross receipts, minus the cost of goods and services purchased from other businesses.  Because wages would no longer be deductible, this approach would raise business taxes on labor.  Treasury estimated this approach would improve economic performance, ultimately increasing the size of the economy by roughly 2.0 percent to 2.5 percent over the long term.

The second option would lower the maximum corporate tax rate (currently 35 percent) by eliminating the majority of business tax deductions, including the research and development tax credit, deduction for charitable contributions, and low-income housing tax credit.  Of particular importance to retailers, this approach did not contemplate changes to the last-in, first-out method of accounting.  This approach would also implement a territorial system for the taxation of U.S. companies’ foreign earnings.  Treasury estimated that to maintain revenue neutrality the rate could be lowered to 28 percent with full business-tax base broadening or 31 percent if accelerated depreciation was retained.  However, the report noted that at such tax rates, this approach would not provide much, if any, net gain to the U.S. economy.  In addition, U.S. statutory business tax rates would still be higher than those of most Organisation for Economic Cooperation and Development (OECD) countries.  Treasury estimated that business tax rates would have to be cut dramatically (e.g., 20 percent) or greater equipment expensing would have to be provided in order to achieve more significant benefits to the U.S. economy.

Third, short of full reform of the tax code, the Treasury study offered a package of proposals aimed at specific areas of the business tax system that could be modified, including elimination of multiple taxation of corporate profits through a corporate capital gains rate and dividends received deduction, modification of the tax bias favoring debt financing, improvements to the taxation of international income, broader allowance of losses, improvements to book-tax conformity, and other areas to improve tax administration.

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org.

Additional References

·         RILA Issue Brief:  International Tax Reform

·         RILA Issue Brief:  National Retail Sales Tax

·         RILA Issue Brief:  Streamlined Sales Tax

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RILA opposes proposals to repeal long-standing accounting methods applicable to retailers, namely the last-in/first-out (LIFO) and the lower-of-cost-or-market (LCM) methods of accounting.  LIFO and LCM are inventory-accounting methods used for decades by companies throughout the United States for financial reporting purposes as well as for determining their federal tax liability.  Because of the nature of the business, IFO and LCM are widely used within the retail industry.

On February 26, 2009, President Obama released his Fiscal Year 2010 budget that seeks to cut the federal deficit in half over the next four years.  The budget’s revenue raisers include repealing LIFO and LCM, and the budget assumes both changes would be effective beginning in 2012.  

The Obama Administration estimates that LIFO repeal would raise more than $61 billion through 2019, significantly less than the $79 billion estimated by the Joint Committee on Taxation (JCT).  Similarly, the Administration estimates that LCM repeal would raise more than $6 billion over 10 years, while the JCT estimated nearly $8 billion.  The differences in these estimates is likely due to differing assumptions regarding the use of LIFO and LCM by U.S. businesses, with the JCT estimate suggesting that the impact on retailers would be even more significant.

RILA, along with the broader business community, has made headway with several congressional tax-writers in opposing the repeal of inventory accounting methods.  However, these proposals, in particular LIFO repeal, remain a threat given their significant revenue-raising potential.

RILA urges members of Congress to oppose repeal of these widely accepted inventory accounting methods, which the tax law and regulations have permitted companies of all sizes throughout the U.S. economy to use since as early as 1918.

A fundamental principle of accounting is to match the sale of an item with its cost in order to produce a clear reflection of the selling company’s income.  Because of the difficulty in accounting for inventory on an item-by-item basis, businesses are permitted to use several different methods to identify the cost of the inventory sold, including the first-in/first-out (FIFO) method, the last-in/first-out method (LIFO), and the retail inventory method.  For purposes of determining a company’s remaining inventory at year end, financial and tax accounting rules also permit businesses in certain cases to write down the book value of an inventory item – under the lower-of-cost-or-market (LCM) method – to take into account a decrease in the economic value of the item offered for sale.

Last-in/First-out Accounting Method

Under the LIFO method, a business assumes that the last item added to inventory is the first item sold.  Thus, current sales are reduced by the cost of the most recently acquired inventory to determine the net income from the sale.  (Under the FIFO method, the business assumes that the first item added to inventory is the first item sold.)

When inventory costs are rising, as in an inflationary period, the LIFO method results in lower taxable income since the cost of goods sold reflects the more recent, higher inventory values.  Conversely, if inventory costs decline during a year, LIFO will increase taxable income as current lower-cost inventory values are used to determine the business’ cost of goods sold.  Under the Internal Revenue Code, a business may only use the LIFO method if it also applies it for financial-accounting purposes.

For many retail businesses, LIFO is a more accurate method for measuring financial performance and calculating the associated income tax.  LIFO takes into account the greater costs of replacing inventory, thereby giving a more conservative measure of both the financial condition of the business and the economic income subject to tax.  Absent LIFO, phantom profits would be taxed.  In addition, LIFO improves a company’s cash flow, which allows them to use their retained capital more efficiently to finance ongoing inventory replenishment.

LIFO repeal would mean a forced change in fundamental tax accounting for any business that has historically relied on LIFO for its tax reporting, including countless retailers.  As a result, such businesses would have to recapture their LIFO reserves.  The result would be substantial additional income tax, even if spread over several years, especially for businesses that have relieve on LIFO for many years or even decades.  Since companies would have no economic income from such an accounting adjustment, they would effectively be taxed on non-existent cash flow.

Moreover, LIFO repeal will create future tax increases for businesses if inflation accelerates as some expect due to the fiscal imbalances facing the United States.  Since inflation increases prices, a business that can no longer utilize LIFO will have to calculate its taxable income based on older inventory costs that do not reflect the inflationary growth in prices, resulting in a higher future tax bills.

Lower-of-Cost-or-Market Accounting Method

Business that do not use LIFO, often apply the LCM method to write down the book value of their ending inventory that has declined in economic value.  Under this accounting method, the business determines the market value of its inventory at the end of the business’ tax year (generally the cost of replacement or reproduction of the item or comparable sales), and then writes down that value to the lower of the inventory’s original cost or the current market value.  The LCM method also permits a business to write down the cost of certain “subnormal” goods, such as those that cannot be sold in the ordinary manner due to damage, imperfections, shop wear, changes of style, odd or broken lots, or similar causes).  Unlike the use of LIFO, a business applying the LCM method of accounting for tax purposes is not required to use it for financial reporting purposes.

The LCM method provides an important cushion during economic downturns, such as the current economic environment.  If a business’ inventory has declined in market value, it has realized an economic loss, and if that loss is not taken into account until the inventory is ultimately sold, the business will end up paying too much in taxes during the year of the loss and too little in the year that the item is sold or determined to be worthless.

Repeal of the LCM method would mean higher taxes on a retailer that would no longer be able to account for a current economic loss in inventory value, but instead would have to wait until it is able to dispose of such items.  In addition, if inflationary pressures grow, the value of the LCM write-down will also grow.  Thus, the repeal of the LCM method will have an even greater, adverse effect on businesses’ tax liabilities in future years in which inflationary pressures are high.

Legislative and Regulatory Activity

In recent Congresses, significant legislative efforts have included LIFO and LCM repeal as a means to generate revenue.  In 2006, Senate leaders proposed repealing the LIFO inventory accounting method to pay for a $100-per-family gas-tax rebate.  They eventually dropped the proposal because of backlash from the business community, including a strong response from RILA. 

During the last Congress, House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced a $1.3 trillion tax measure, the Tax Reduction and Reform Act of 2007 (H.R. 3970), which was partially offset by repealing LIFO and LCM over an eight-year period.  Although the legislation did not receive a hearing or markup, it continues to serve as a marker for Chairman Rangel’s broader reform agenda.

Most recently, President Obama’s Fiscal Year 2010 budget includes LIFO repeal to help pay for other policy priorities. The budget also proposes the repeal of the LCM method and specifically designates the resulting revenue for the Obama Administration’s health care reform initiative.  (Repeal of the LCM method was also included in budget submissions by the Clinton Administration.)  The Fiscal Year 2010 congressional budget resolution (S. Con. Res. 13), however, did not assume the repeal of either LIFO or LCM. 

On a separate track, the U.S. Securities and Exchange Commission (SEC) has been considering the adoption of International Financial Reporting Standards (IFRS) to replace the United States’ Generally Accepted Accounting Principles (GAAP).  If adopted, IFRS would mean an end to the LIFO accounting method since it is not allowed under the international accounting rules.  (The LCM method would continue to be permitted under IFRS, with certain modifications.)  However, it is unlikely that Congress would refrain from acting on LIFO repeal or modification while the SEC considers such a change given the amount of revenue that the repeal would generate under the current congressional budget rules.

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org.

Additional References

·         LIFO Coalition – www.SaveLIFO.org

·         IRS Publication 538 – Accounting Periods and Methods

·         JCT “Description of Revenue Provisions Contained in the President’s Fiscal Year 2010 Budget Proposal, Part Two:  Business Tax Provisions”

RILA supports legislation to make the Work Opportunity Tax Credit (WOTC) permanent, including recent expansion of the credit.  The WOTC provides an important incentive for companies to hire hard-to-employ workers and to contribute to the recovery of economically lagging areas.  Since its enactment in 1996, this tax credit has help businesses across the nation, including countless retailers, provided millions of quality jobs to Americans who might otherwise remain unemployed.

In 2007, Congress enacted the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery and Iraq Accountability Appropriations Act, which included tax incentives to help businesses absorb the cost of a minimum wage increase.  These incentives included more than $2.5 billion to extend the WOTC through August 31, 2011, and expand it to include disabled veterans and workers in areas where population is declining.

With the enactment of the Emergency Economic Stabilization Act in October 2008, the WOTC was extended for individuals employed within the Hurricane Katrina core disaster area until August 28, 2009.

Most recently, President Obama signed the American Recovery and Reinvestment Act (ARRA), which included a provision to expand the WOTC temporarily to include two new targeted groups:  unemployed veterans and disconnected youth.  The provision became effective on February 17, 2009, and applies to qualified individuals hired between January 1, 2009, and December 31, 2010.

Before adjourning for the year, the House passed the Tax Extenders Act of 2009 on December 9, 2009, extending most of the tax provisions that expired at the end of 2009, including the WOTC.  The cost of the bill is offset by two provisions:  a change in the partnership rules treating income with respect to certain carried interests as ordinary income rather than as capital gain and new provisions to strengthen compliance with U.S. international tax rules.  The Senate did not take up the legislation before adjourning due to the health care debate.  Given the Senate’s concerns about the carried-interest offset, it is expected that when this legislation is considered early in 2010, the Senate will substitute a provisions precluding paper companies from using certain energy-tax incentives – the so-called “black liquor” provision – for the carried-interest provision. 

RILA urges Congress to make the WOTC, including the recent expansions, permanent as soon as possible.  Short of that goal, RILA will continue to advocate for extending the credit.  RILA also supports extension of the WOTC provisions targeted at the Hurricane Katrina disaster areas, which expired on August 28, 2009.

Congress created the WOTC in 1996 as part of the Small Business Job Protection Act.  This federal tax credit encourages employers to hire individuals from specific targeted groups, including recipients of public assistance, qualified veterans, disabled persons, low-income seniors, high-risk youth, and residents of designated areas.  Under current law, businesses may claim a WOTC equal to 40 percent of the first $6,000 of wages paid to employees from these qualifying groups, and the credit is allowed on a larger amount of annual wages for disabled veterans and long-term welfare recipients.

The WOTC helps many retailers offset the added costs of hiring and training individuals who have been on public assistance programs, and through these credits, businesses have helped thousands of disadvantaged individuals find meaningful employment in retail and other settings.

Permanent extension of the WOTC will help retailers administer these programs more efficiently.  For the last few years, Congress has allowed this credit to lapse, ultimately extending it retroactively.  A permanent program would remove uncertainty in business planning, expand employer participation, and improve program administration.

The past few years have also seen significant WOTC expansion.  Most recently, under the ARRA, the WOTC now applies to an unemployed veteran if he or she was discharged or released from active duty from the Armed Forces during the five-year period prior to hiring and received unemployment compensation for more than four weeks during the year before being hired.  The ARRA also expanded the WOTC to include disconnected youth – an individual between the ages of 16 and 25 who has not been regularly employed or attended school in the past six months.

Contact

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org.

·         RILA Issue Brief:  Expiring Tax Provisions

·         WOTC Coalition:  www.wotccoalition.com

The Emergency Economic Stabilization Act of 2008 (EESA) extended the R&D tax credit through 2009.  EESA also increased the new alternative simplified research credit (ASC) from its original 12 percent to 14 percent for qualified research expenses incurred in 2008 and 2009, and the legislation terminated the alternative incremental credit after December 31, 2008.

In the 111th Congress, Representatives Kendrick Meek (D-FL) and Kevin Brady (R-TX) introduced H.R. 422 and Senators Max Baucus (D-MT) and Orrin Hatch (R-UT) introduced S. 1203, which would extend the regular R&D tax credit through 2010, increase the ASC to 20 percent, and make the ASC permanent.

RILA urges Congress to make the R&D tax credit permanent to encourage businesses to invest in long-term product development and technological improvements in the United States.  Short of that goal, RILA will continue to advocate for extending the credit and the ASC percentage for a multi-year period, given the importance of the R&D tax credit to the retail industry.

As part of the Economic Recovery Act of 1981, Congress enacted a tax credit for research and development expenses.  Since it was established, the R&D credit has been extended 13 times, often retroactively after it had lapsed.  The credit has also been tightened and expanded many times during the nearly 30 years it has existed.

Today, businesses can claim a 20-percent tax credit for certain qualified R&D expenditures that exceed an historic base amount.  Beginning in 2007, businesses were permitted to claim the alternative simplified research credit, which is now equal to 14 percent of the qualified research expenses for the taxable year that exceed 50 percent of the average research expenses for the three preceding years.  (Between 1996 and 2009, an alternative incremental research credit (AIRC) also existed, which was based on a three-tiered system of fixed-percentage credits.)

The R&D credit applies to qualified R&D expenditures, such as wages paid with respect to research activities, certain payments to third-party contractors for qualified research, and materials and supplies used to conduct the research.  However, the credit is available only for R&D expenditures incurred in the United States.

For retailers, the R&D credit is an important incentive for the development of new and improved materials and products – often seen as “private labels.”   Many retailers also utilize the credit to help finance innovative research into new technology and software in areas such as inventory management, packaging, loss prevention, production development, and automated systems.

Making the R&D tax credit permanent (or at a minimum enacting a multi-year extension) is essential for the credit to achieve its objective of encouraging long-term research and development in the United States and its aim of increasing the high-paying U.S. jobs that such research requires.  Too often over the past three decades, the R&D credit has been allowed to lapse, and the extensions have often been for only one or two years.  The result has been significant uncertainly for businesses seeking to undertake research projects, which can frequently span multiple years.  Moreover, the uncertainty surrounding the credit has had adverse effects on financial reporting for companies relying on the credit when it has lapsed. 

The R&D credit is also an important inducement for businesses to keep research activities in the United States.  In recent years, foreign governments have offered substantial tax and other financial incentives to attract U.S. companies to invest their research dollars abroad.  In an increasingly global economy, the R&D credit helps level the playing field so the United States can maintain its position as a leader in research and development.

RILA supports legislation to extend many expiring tax provisions, ultimately making them permanent tax policy so that individuals and businesses can plan better for the future.  In particular, RILA supports the following expiring provisions:

·         The individual tax relief that is scheduled to expire at the end of 2010, including the expanded 10-percent tax bracket, the $1,000 child tax credit, and marriage-penalty tax relief

·         The increased exemption from the Alternative Minimum Tax (AMT) and inclusion of nonrefundable personal credits

·         Deduction for state and local sales taxes

·         Accelerated depreciation for retail space

·         Research and development (R&D) tax credit

·         Work opportunity tax credit (WOTC)

·         Look-through treatment for controlled-foreign corporations (CFC) and exemption for active-financing income

·         New Markets tax credit and renewal community and empowerment zone tax incentives

·         Special rules for employment and depreciation of property in Native American communities

As retailers begin to recover from the lengthy recession that has gripped the nation since 2007, RILA also supports extension of the bonus depreciation and other stimulus provisions intended to encourage economic growth and job creation.

With the enactment of the Emergency Economic Stabilization Act of 2008, the AMT exemption was extended through 2008 and dozens of other temporary provisions were extended through 2009, including the state and local sales-tax deduction and the other business provisions listed above. 

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009, which further extended the AMT relief through 2009.  By increasing the AMT exemption amount to $70,950 for joint filers and $46,700 for individuals, the legislation provides tax relief to more than 26 million families in 2009.

The Economic Stimulus Act of 2008 and the Housing and Economic Recovery Act of 2008 also provided important economic stimulus incentives for business investments – small business expensing, bonus depreciation, and an option to claim AMT and R&D credits in lieu of bonus depreciation.  These incentives were extended through 2009 in the American Recovery and Reinvestment Act.

Most recently, with the extension of unemployment benefits in the Worker, Homeownership, and Business Assistance Act of 2009, Congress extended the net operating loss (NOL) relief under the tax code to allow businesses to carry back losses from 2008 or 2009 for five years.  The legislation also expanded the NOL carryback provision to apply generally to all businesses.Recent Activity

Before adjourning for the year, the House passed the Tax Extenders Act of 2009 on December 9, 2009, extending most of the tax provisions that expired at the end of 2009.  The bill includes priorities identified by RILA member companies, including extension of the 15-year depreciation recovery period for retail improvements, deduction for state and local sales taxes, look-through rule for controlled foreign corporations, research and development tax credit, and extension of the new markets tax credit and renewal and empowerment zone benefits, the cost of which are offset by two provisions:  a change in the partnership rules treating income with respect to certain carried interests as ordinary income rather than as capital gain and new provisions to strengthen compliance with U.S. international tax rules. 

The Senate did not take up the legislation before adjourning due to the health care debate.  Given the Senate’s concerns about the carried-interest offset, it is expected that when this legislation is considered early in 2010, the Senate will substitute a provisions precluding paper companies from using certain energy-tax incentives – the so-called “black liquor” provision – for the carried-interest provision. 

RILA urges Congress to enact legislation to extend retroactively the temporary tax provisions that expired at the end of 2009.  In addition, to encourage economic growth and job creation after a lengthy recession, RILA urges Congress to consider extending the business investment incentives (e.g., bonus depreciation) enacted in the recent stimulus legislation.

When Congress considers fundamental tax reform, as both tax-writing chairmen have indicated they intend to do in the 111th Congress, RILA will continue to advocate for permanent tax policy with respect to the individual tax relief signed into law by President Bush as well as important business tax relief provisions enacted in recent years.  Additionally, RILA believes that tax reform legislation should permanently repeal the AMT to provide additional tax relief, especially to moderate-income earners.

Since the tax code was last reformed in 1986, Congress has enacted dozens of Policy Rationale

important tax provisions for American businesses to encourage:

• Job creation (e.g., WOTC, renewal community and empowerment zone tax incentives, Indian employment tax credit),
• Investment (e.g., New markets tax credit, accelerated depreciation for improvements to leased and retail-owned property),
• Research (e.g., R&D tax credit), and
• International competitiveness (e.g., CFC look-through rule and exemption for active-financing income). 

 Unfortunately, due to budgetary and political constraints, too many of these provisions were enacted on a temporary basis, requiring repeated extensions (occasionally even retroactively).  The uncertainty resulting from such temporary tax policy makes it difficult for American businesses, which rely on five- and ten-year business strategies, to plan effectively for the future and remain competitive in an increasingly global economy.

During economic downturns, such as the recent recession, Congress has also enacted temporary tax provisions to help stimulate the economy and job growth.  For example, in the Economic Stimulus Act of 2008, Congress expanded the amount of new equipment purchases that small businesses could immediately expense and allowed all businesses to claim 50-percent bonus depreciation on qualifying assets placed in service during 2008.  For businesses unable to utilize the bonus-depreciation  incentive (e.g., businesses with net operating losses), the Housing and Economic Recovery Act of 2008 allowed companies in 2008 to claim unused corporate AMT credits or R&D credits in lieu of the bonus depreciation and receive a refund to invest in new property or equipment.  With the enactment of the American Recovery and Reinvestment Act of 2009, these provisions designed to stimulate business investments, were extended through 2009.  As the economic recovery takes hold, these provisions need to be extended into 2010 to ensure economic growth does not falter.

For individuals and families, the temporary nature of much of the tax code also makes it increasingly difficult for them to plan for the future, especially in terms of saving for education and retirement. 

Beginning in 2001 with the Economic Growth and Tax Relief Reconciliation Act, substantial tax relief was provided for individuals, including owners of pass-through businesses (e.g., S corporations, partnerships, and sole proprietorships), ranging from lower tax rates, expanded child tax credit, and marriage penalty relief to expanded expensing of equipment, lower rates on capital investments, and estate-tax relief.  Through subsequent legislation – Jobs and Growth Tax Relief Reconciliation Act of 2003, Working Families Tax Relief Act of 2004, and Tax Increase Prevention and Reconciliation Act of 2005 – these temporary provisions were generally aligned to expire at the end of 2010.

Making the tax relief enacted since 2001 permanent will help stimulate the nation’s economy.  By enabling American taxpayers, especially low-and moderate-income earners, to retain more of their earnings, the tax relief will stimulate savings, investment and spending on retail purchases.  Moreover, permanent extension of this tax relief will make it easier for families to plan their financial future by eliminating the uncertainty about whether and when their taxes will increase should these temporary tax provisions expire.

Another temporary provision affecting a growing number of individuals is the AMT.  Under current law, individual taxpayers are generally required to pay either the regular tax or the AMT, whichever is greater.  Unlike the regular tax, however, the various aspects of the AMT were never indexed for inflation.  As a result, it now affects several million taxpayers, with millions more at risk each year (and affecting increasingly lower amounts of taxable income) if the exemption amount is not extended and adjusted for inflation. 

Originally established in 1969 to ensure that the top income earners in the United States (which numbered a few hundred) did not entirely escape taxation, the AMT has grown far beyond its intended purpose and now threatens millions of Americans and a growing number of moderate-income earners.   In past years, Congress has annually enacted legislation to constrain the AMT’s expansion by increasing the exemption amount from the alternative tax.  Permanent repeal of the AMT will provide much-needed certainty as well as critical tax relief to the middle-income earners and families.

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org.

·         RILA Issue Brief:  Work Opportunity Tax Credit (WOTC)

·         RILA Issue Brief:  Accelerated Depreciation for Retail Space

·         RILA Issue Brief:  Research and Experimentation Tax Credit

RILA supports federal legislation that would grant states the authority to require businesses to collect and remit, through a simplified system, state sales and use taxes on remote sales, including sales made over the Internet and through other remote methods.  Today, brick-and-mortar retailers are required to collect sales taxes while many online and catalog retailers are not.  This difference is not only unfair to brick-and-mortar retailers, who create jobs in the community, but it also is costing states and localities billions in lost revenue that could benefit vital public services.

Rep. Delahunt (D-MA) and Sen. Enzi (R-WY) are expected to re-introduce the Main Street Fairness Act with modifications in the 111^th Congress.

Once the bills are re-introduced, RILA will urge Congress to take up and pass the Main Street Fairness Act to give states the authority to require remote sellers to collect sales and use taxes through a simplified system of collection and administration among the states.

For more information, please contact Mark Warren, vice president for tax and finance, at mark.warren@rila.org, or Joe Rinzel, vice president for state government affairs, at joe.rinzel@rila.org.

 Additional References

·         RILA Issue Brief:  Tax Reform

·         RILA Issue Brief:  International Tax Reform

·         RILA Issue Brief:  National Retail Sales Tax

·         Streamlined Sales Tax Governing Board, Inc. – http://www.streamlinedsalestax.org/

·         White Paper on Streamlining State Sales Taxes

·         Study:  State and Local Government Sales Tax Revenue Losses from Electronic Commerce

RILA is opposed to the repeal of the last-in/first-out (LIFO) method of accounting. LIFO is an inventory accounting method used by companies throughout the U.S. to determine both book income and tax liability. Because of the nature of the business, LIFO is widely used by the retail industry.

On February 26, 2009, President Obama released his Fiscal Year 2010 budget that seeks to cut the federal deficit in half over the next four years. Revenue raisers include repealing LIFO outright beginning in 2012. This proposal would raise over $61 billion through 2019. Although the details of this proposal are forthcoming as the President is expected to deliver his complete, multi-hundred-page document in April, we anticipate that it will be similar to a LIFO repeal provision included last Congress in the House Ways and Means Committee Chairman’s $1.3 trillion tax reform measure, known as the “Mother of All Tax Bills.” Of note, its cost of LIFO repeal is significantly less expensive than the $105 billion figure provided by the Joint Tax Committee for the LIFO provision contained in Chairman Rangel’s bill. Explanations for the cost difference include the separate entities scoring each provision and the fact that the President’s budget uses a seven-year window while Chairman Rangel’s legislation has a 12-year window. 

Opposition to LIFO repeal by RILA and the broader business community has made headway with several congressional tax-writers. However, LIFO repeal remains a threat given its revenue raising potential.

RILA opposes LIFO repeal, and we urge members of Congress to oppose repeal of this widely accepted inventory accounting method that the Internal Revenue Service has approved for use since the 1930s by companies of all sizes throughout the U.S. economy.

Over past congresses, two significant legislative efforts have included LIFO repeal as a means to generate revenue. These efforts have failed due in part to strong opposition from RILA and the broader business community. Most recently, President Obama’s Fiscal Year 2010 Budget includes LIFO repeal to help pay for other policy priorities.

On a separate track, the U.S. Securities and Exchange Commission has proposed the adoption of International Financial Reporting Standards (IFRS) over the next five years. This adoption would signal the end of the LIFO accounting method since it is not allowed under IFRS. However, it is unlikely that Congress would refrain from acting on LIFO repeal or modification in the meantime given the amount of revenue that would be generated.

Proponents of LIFO argue that when inventory costs are rising, as in an inflationary period, LIFO is a more accurate way of measuring financial performance and calculating tax. LIFO takes into account the greater costs of replacing inventory, thereby giving both a more conservative measure of the financial condition of the business and the economic income to which the tax should apply. Absent LIFO, phantom profits would be taxed.

Opponents of LIFO argue that it is a permanent deferral of tax liability. While it is true that if inventory costs are rising, using the LIFO method will decrease tax liability, it is also true that as prices fall, taxpayers would repay the LIFO benefit through greater tax liability.

LIFO repeal would mean a forced change in fundamental tax accounting for any business that uses the method. As a consequence, taxpayers forced off LIFO would have additional taxable income pursuant to reversing the LIFO reserve in the year the change occurred. However, companies would have no economic income from such an accounting adjustment; meaning, taxation without receipt of dollars.

In 2006, Senate leaders proposed repealing the LIFO inventory accounting method to pay for a $100-per-family gas tax rebate. They eventually dropped the proposal because of backlash from the business community, including a strong response from RILA.

Last Congress, House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced a $1.3 trillion tax measure, the Tax Reduction and Reform Act of 2007 (H.R. 3970), which was partially offset by repealing LIFO spread over eight years. Although the legislation did not receive a hearing or markup, it continues to serve as a marker for his broader reform agenda.

For more information, please contact Mark Warren, vice president of tax policy, at mark.warren@rila.org.

RILA supports legislation that helps American workers and their families keep more of their hard-earned dollars. To that end, RILA urges Congress to permanently extend the individual tax relief that is scheduled to expire at the end of 2010, including the expanded 10 percent individual tax bracket, the $1,000 child tax credit and marriage penalty tax relief.

RILA also supports a permanent repeal of the Alternative Minimum Tax (AMT). The AMT was established in 1969 to ensure wealthy families did not entirely escape taxation, but because it was not indexed for inflation, it now impacts a growing portion of the middle class.

On February 17, President Obama signed the American Recovery and Reinvestment Act of 2009 (Public Law 111-005), which was not offset and included a provision to extend AMT relief for 2009. Specifically, the provision would provide more than 26 million families with tax relief in 2009 by extending AMT relief for nonrefundable personal credits and increasing the AMT exemption amount to $70,950 for joint filers and $46,700 for individuals. This proposal is estimated to cost $69.759 billion over 10 years.

When Congress considers fundamental tax overhaul in the 111th Congress as both tax-writing chairmen have indicated it will, RILA will continue to advocate for repeal of the AMT and extension of the individual tax relief signed into law by President Bush as well as other measures to extend middle class tax relief.

Under current law, individuals are generally required to pay either the AMT or the regular tax, whichever is greater. Unlike the regular tax, the AMT is not indexed for inflation. Thus, rising prices, the growth of incomes and enactment of tax cuts under the regular tax subject a growing number of taxpayers to the AMT each year. The AMT’s scope has begun to take in middle-class taxpayers along with the upper-income individuals who were previously its principal subjects. In past years, Congress has addressed the AMT’s growth with temporary measures that restrict its scope.

Other tax issues that Congress must face include whether to extend the broad tax cuts first enacted in 2001.

• Extending individual tax cuts will help stimulate our nation’s economy. It will also put more money into the hands of American consumers, especially low-and moderate-income earners, for savings, investment and needed retail purchases.
• Permanent extension of these tax cuts will make it easier for families to plan their financial future by eliminating the uncertainty about when and whether their taxes will increase when the tax cuts expire.
• Permanent repeal of the AMT will provide tax relief to the middle class and to families.

Preventing the AMT from hitting middle-class taxpayers has become an annual exercise in Congress, and the cost gets more expensive every year. The question for congressional tax writers is whether to provide a one-year AMT patch or a permanent solution, and whether to pay for this effort.

Status

For more information, please contact Mark Warren, vice president of tax policy, at mark.warren@rila.org.

Sens. Durbin and Kit Bond (R-MO) tried to offer an amendment to the recently enacted Credit CARD Act (P. L. 111-24) that would have relaxed rules that currently restrict retailers from offering discounts for certain forms of payments. The amendment was ultimately not brought up for a vote; however, the sponsors have pledged to look for other legislative vehicles to move the amendment.

Separately, the Credit CARD Act included a mandate requiring the Government Accountability Office (GAO) to conduct a study on interchange fees and report back to Congress within six months with recommendations for legislative or administrative actions that may be appropriate. Several RILA members have met with the GAO to offer policy recommendations and the study is expected to address:

• the extent to which interchange fees are required to be disclosed to consumers and merchants, whether merchants are restricted from disclosing interchange or merchant discount fees, and how such fees are overseen by the Federal banking agencies or other regulators;
• the ways in which the interchange system affects the ability of merchants of varying size to negotiate pricing with card associations and banks;
• the costs and factors incorporated into interchange fees, such as advertising, bonus miles, and rewards and how such costs and factors vary among cards;
• the consequences of the undisclosed nature of interchange fees on merchants and consumers with regard to prices charged for goods and services;
• how merchant discount fees compare to the credit losses and other costs that merchants incur to operate their own credit networks or store cards;
• the extent to which the rules of payment card networks and their policies regarding interchange fees are accessible to merchants;
• other jurisdictions where the central bank has regulated interchange fees and the impact on retail prices to consumers in such jurisdictions;
• whether and to what extent merchants are permitted to discount for cash; and
• the extent to which interchange fees allow smaller financial institutions and credit unions to offer payment cards and compete against larger financial institutions.

The MPC and RILA are pursuing a variety of avenues to help U.S. merchants obtain more reasonable interchange fees. Among other steps, the coalition is examining reforms that have been recently adopted or are under consideration around the globe because rates in countries where reforms have been implemented are drastically lower than in the U.S. In addition, the coalition is educating members of Congress and their staffs, as well as antitrust enforcers, financial regulators and the media, about this issue in an effort to advance workable policy solutions.

Unlike cash or check payments, merchants do not receive the full value of payment transactions that customers make with credit and debit cards. Rather, the credit or debit card issuing bank subtracts a “merchant discount” (e.g., 2 percent) from the amounts owed to the merchant for the privilege of accepting electronic payment from customers. While some of this discount reimburses the acquiring bank for services provided to the merchant, most of the discount reflects an interchange fee, charged by the issuing bank, which is subsequently passed through to the merchant.

Interchange fees do not reimburse the card associations themselves; rather, interchange fees are payments from one group of competing banks (acquirers) to another (overlapping) group of competing banks (card issuers) at a price collectively set by these competitors through their control over the associations. The MPC considers this to be price fixing, and its view is shared by the competition authorities of U.S. trading partners.

This interchange fee on merchants is used by card issuers to subsidize their marketing efforts and bolster their rapidly expanding bottom lines, among other things. In particular, the use of interchange fees has allowed card companies to issue lines of credit without properly assessing risk. This guaranteed source of revenue has fueled the proliferation of cards to the point where the average consumer has nine cards today.  In addition, the use of interchange fees provides cardholders – and especially affluent cardholders – with points, miles, concierge services and cash-back features and thus adds a substantial burden on the cost of goods and services that Americans of all income levels buy. According to industry statistics, U.S. interchange fees paid to Visa and MasterCard have increased by at least 120 percent since 2001.

On April 24, 2006, numerous merchants filed a consolidated complaint in class action litigation challenging collectively set interchange fees, but the ultimate resolution of this litigation could be years away.  While the class action lawsuit remains in a lengthy discovery phase, Congress has taken increased notice of the exorbitant fees that credit card companies are charging merchants.

For more information or to sign up for RILA’s Interchange Fees Working Group alerts, please contact John Emling, senior vice president of government affairs, at john.emling@rila.org, or Andrew Szente, director of government affairs, at andrew.szente@rila.org.

Democrat Craig Becker. The seats on the board are staggered in the duration of their terms and the individual who drew the longest term was Craig Becker, a 27-year union attorney who has most recently served as associate general counsel to both the AFL-CIO and the SEIU. Becker is a prolific writer on labor law issues and has made many statements about his desire to significantly curtail an employers’ freedom of speech rights in union organizing drives. In addition, Becker recognizes that the NLRB has the power to enact powerful interpretations of the NLRA without Congress, disrupting years of established precedence and balance in labor law.

On October 20, RILA joined other business trade associations opposing Becker’s nomination to the NRLB. On October 21, all three NRLB nominees were reported as a package out of the Senate Health, Education, Labor and Pensions (HELP) Committee on a 15-8 vote. Republican Sens. Mike Enzi (R-WY) and Lisa Murkowski (R-AK) joined all committee Democrats in supporting the three nominations.  Meanwhile, Sens. John McCain (R-AZ) and Orrin Hatch (R-UT) have pledged to take whatever procedural maneuvers necessary to stop Becker’s nomination from passing the full Senate. While it remains to be seen whether Becker’s nomination can be blocked altogether, it is unlikely a full Board will be in place before February 2010.

Also of concern for RILA is Chairman Liebman’s stated intent to pursue rulemaking through the NLRB in an effort to curb the ebb and flow of policy changes that occur each time a new political party occupies the White House. While RILA supports the enactment of policies that can better stand the test of time, we are very concerned that those policies may not protect managers’ rights to speak with their workers as adequately as they could if Becker is confirmed.

Regardless, once the Board has a quorum, they will begin considering Bush Administration cases to overturn, including:

1. Dana Corp.: Voluntary Recognition
In Dana Corp., 351 NLRB No. 28 (2007), by a 3-2 decision, a 40-year precedent was reversed when the NLRB held that an employer's voluntary recognition of a labor union did not bar a decertification or rival union petition filed within 45 days of the notice to employees of the voluntary recognition. Organized Labor’s least popular Bush board decision, Dana Corp. undermines neutrality, card check and voluntary recognition agreements that unions have increasingly used as a major organizing device in lieu of filing petitions for election.

2. Harborside Healthcare: Supervisors Soliciting Authorization Cards
In Harborside Healthcare Inc., 343 NLRB 906 (2004), by a 3-2 decision the majority reversed precedents to state that, absent mitigating circumstances, solicitation of an authorization card by a supervisor has an "inherent tendency" to coerce the employee solicited and therefore the challenging employer does not have to establish that the supervisor engaged in coercive conduct.

3. Register Guard: E-Mail Solicitation
In Register Guard, 351 NLRB No. 70 (Dec. 16, 2007), the last controversial decision of the Bush board, the 3-2 majority held that employers have a basic property right regarding their e-mail systems and thus may develop policies that enforce “business only” emails. The dissent took the position that e-mail should be treated like other forms of solicitation and employees should have the right to engage in e-mail solicitation when not on work time. In addition, the board majority adopted a new standard from the 7^th U.S. Court of Appeals which would effectively allow an employer to distinguish between solicitations of a personal nature and solicitations for an organization – or union related solicitation.

4. Oakwood Healthcare: Definition of a Supervisor
The Oakwood Healthcare Inc. 348 NLRB No. 37 (2006) ruling resulted in the U.S. Supreme Court’s decision in NLRB v. Kentucky River Community Care, 532 U.S. 706 (2001), which criticized the board's analysis of supervisory status for purposes of union organizing. In its decision, the majority clarified the statutory terms "assign," "responsibility to direct," and "independent judgment" to classify employees as a supervisor and thus exclude them from union representation.

This decision was heavily criticized by unions and the dissenting members. In response to this decision, Senator Chris Dodd (D-CT) and Representative Robert Andrews (D-NJ) introduced the Re-Empowerment of Skilled and Professional Employees and Construction Trade (RESPECT) Act in the 110^th Congress, legislation which as not resurfaced in the 111^th Congress to date.

5. Oakwood Care Center: Temporary Workers Should Not be in Same Unit as Regular Employees
In Oakwood Care Center, 343 NLRB 659 (2004), the 3-2 board majority overruled the Clinton-era board case M.B. Sturgis, 331 NLRB 1298 (2000), which in turn had overruled Lee Hospital, 300 NLRB 947 (1990). Oakwood Care Center held that a combination of solely and jointly-employed employees (including temporary workers) with the consent of both employers (i.e., a temporary agency and an employer) could join a bargaining unit. The dissent argued that the decision effectively removed a large group of employees in alternative work arrangements and any employee who works closely with members of the bargaining unit should be able to join the same bargaining unit if they wish.

6. IBM Corp.: Weingarten Rights for Non-Union Employees
In IBM Corp., 341 NLRB 1288 (2004), the 3-2 board majority held that employees in non-unionized workplaces do not have Weingarten rights, including the right to have a witness or co-worker present in a disciplinary meeting. This overturned the Epilepsy Foundation of Northeast Ohio, 331 NLRB 676 (2000) enf. 268 F.3d 1095 (D.C. Cir. 2001), which in turn overruled Sears, Roebuck & Co., 274 NLRB 230 (1985).

7. Brevard Achievement Center: Disabled Workers in Rehabilitation Settings Are Not Employees
In Brevard Achievement Center Inc., 342 NLRB 982 (2004), the 3-2 majority held that disabled workers in a primarily rehabilitative relationship with their employers are not statutory employees, even though the disabled workers work the same hours, receive the same wages and benefits, and perform the same tasks under the same supervisor as the nondisabled employees. The Bush board did not reverse precedent in this case, but the dissent argued that it means that a disabled worker has no protection under the NLRA.

8. Crown Bolt: Threat of Plant Closure Not Presumed Disseminated throughout Plant
Crown Bolt, 343 NLRB No. 86 (2004), held that a union should have to prove dissemination through a bargaining unit of an employer’s coercive statements or threats to close a plant, instead presuming dissemination. The dissent argued that any statement or threat with a coercive effect should be presumed to have been disseminated absent any evidence. The 3-2 board majority overruled Springs Industries, 332 NLRB 40 (2002), another Clinton-era precedent which held that all plant closing threats are presumed disseminated throughout the plant. Threats of plant closure have traditionally been considered the most severe form of coercion of employees' right to organize.

9. Lutheran Heritage Village-Livonia: Work Rule Prohibiting "Abusive or Profane" Language
In Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), the 3-2 majority adopted new standards for determining whether a work rule is unlawful, requiring a showing of one of the following: (i) that the employee reasonably construed the work rule to prohibit or restrict protected activity, (ii) that the rule was promulgated in response to union activity, or (iii) that the rule had been applied to restrict the exercise of protected rights.

10. NLRB v. Gissel Packing: Employers Must Bargain with a Union in Unfair Election Process
In NLRB v. Gissel Packing Co. Inc., 395 U.S. 575 (1969), the U.S. Supreme Court held that the NLRB can require a non-union employer to bargain with a union whenever it deems a fair election has taken place due to an inappropriate employer conduct. When determining this issue, Board considerations include the extensiveness of an employer’s unfair labor practices, the effect of those actions on union elections, and the likelihood that similar practices would occur in the future. Because Gissel Packing gave the NLRB discretion to issue bargaining orders, even if the union loses an election, the criteria for issuing a bargaining

Retailers place the highest priority on their employees’ happiness, which includes taking steps to ensure fair and equitable treatment in the workplace. RILA member companies employ processes aimed at preventing any unlawful discrimination behaviors, including date-of-hire education, management awareness training and anonymous tip lines for employees to place claims of discrimination.

We believe the Paycheck Fairness Act (PFA) of 2009 (S. 182, H.R. 12) goes well beyond its intended goal of ending workplace discrimination. If passed, the PFA would effectively limit wage rate differences related to bona fide factors such as education, training or experience that are legal and commonly practiced under the Equal Pay Act of 1963 (EPA). The PFA would also limit other forms of merit-based pay including performance bonuses, travel per diems, health benefit plan choices, etc. As a result, retailers would have a difficult time recruiting and retaining qualified employees. Further, the PFA has extremely onerous claims and damage award changes that could leave employers defenseless in the face of expensive class action suits.

On January 6, 2009, Rep. Rosa DeLauro (D-CT) reintroduced the Paycheck Fairness Act in the 111^th Congress. Three days later, the House voted 256-163 to couple the bill with the Lilly Ledbetter Fair Pay Act. Former Sen. Hillary Rodham Clinton (D-NY) reintroduced the Senate companion on January 8, 2009, before leaving the Senate to assume the role of Secretary of State. When voting on Ledbetter, the Senate refused to consider the PFA and separated the two bills, sending only Ledbetter to the president’s desk.

The Senate bill is now championed by Sens. Chris Dodd (D-CT) and Barbara Mikulski (D-MD). On June 10, the anniversary of the Equal Pay Act, Sens. Dodd and Mikulski sent a Dear Colleague letter urging support for the bill and held a press conference to drum up support. While Congress is grappling with a number of other priorities, it is expected that the Paycheck Fairness Act will continue to be pushed by its supporters in the second half of the 111^th Congress. 

We urge members of Congress to oppose the Paycheck Fairness Act of 2009, which could remove the cap for unlimited compensatory and punitive damages for employers and restrict an employer’s ability to utilize bona fide pay practices and models.

RILA will continue to advocate for more responsible measures to end pay discrimination such as leadership training for women and girls, Labor Department recognition awards and government-funded research to help businesses implement successful programs.

President Barack Obama campaigned on a promise to end pay discrimination in the United States, often citing a Labor Department statistic that says women earn 77 cents for every dollar a man earns. And, on January 29, 2009, the president signed into law the Lilly Ledbetter Fair Pay Act (P.L. 111-2), which amended Title VII of the Civil Rights of 1964 as well as the EPA. Ledbetter was the first bill to amend the EPA in almost forty-five years and extends the statute of limitations for all claims of discrimination, including gender-based pay discrepancies.

Supporters of Ledbetter applaud the president for acting so swiftly on the legislation, but assert that enactment of the PFA is also necessary in order to ensure Ledbetter makes a strong impact upon ending wage disparity. PFA advocates focus on the damage provisions of the legislation, which would place an unprecedented burden on claimants to opt out of a class action law suit, rather than opt in as is done currently. The PFA would also lift the cap on both compensatory and punitive damages in class action and single plaintiff lawsuits. Advocates say that these two measures would force employers to take the matter of pay discrimination more seriously.

The PFA would also disallow judges or juries from considering whether a discriminatory act was intentional. This clause, combined with unlimited damage awards and large class action pools threatens to bankrupt hundreds of businesses, even those with programs in place to try and prevent workplace discrimination from occurring.

RILA opposes the Paycheck Fairness Act because it would have the following profound negative effects on all employers, whether union or non-union:

·         Unlimited Liability for Employers under the Equal Pay Act (EPA). Employers would be subject to unlimited compensatory and punitive damage awards regardless of the employer’s intent to discriminate. In some instances, the employer would also be responsible for double pay back.

 ·         Expanded Exposure for Employers to Class Action Lawsuits. Any employee would automatically be included in discriminate class actions. Under the Fair Labor Standards Act (FLSA), employees have the option to “opt-in” to such a class action suit and file the appropriate paper work. The Paycheck Fairness Act would require an employee to “opt-out” of the suit, which would allow for a larger pool of plaintiffs and larger compensatory and punitive damages.

·         Restricted Employer Pay Models and Practices.  The Paycheck Fairness Act would severely curtail how employers compensate their employees. Employers would have difficulty in defending a disparate pay-scale based on the bona fide factors of job-related and business necessity.

 A number of laws attempting to end workplace discrimination are already on the books. RILA supports those laws and our member companies work hard to comply with them.

The retail industry places a high priority on employees’ health and wellbeing and is a driving, innovative force in providing our employees and their families with choice while advancing efficiency. RILA supports market-based health policies that allow retailers and other employers to provide more benefit choices to their employees, empower health care purchasers and consumers to make informed decisions, and assist the uninsured in obtaining coverage. We will continue to advocate for the employer-based system of health care delivery that provides 170 million people in the United States with health care benefits and to support reform proposals that allow retailers to continue offering public health access benefits such as in-store medical clinics, discount generic drugs and wellness programs.

Both President Obama and Congress have prioritized improving access to care in lieu of changing the existing delivery system. RILA applauds this approach, which is more likely to preserve Employee Retirement and Income Security Act (ERISA) preemption and ensure that retailers can continue to offer comprehensive and competitive benefits to our employees.

President Obama campaigned on a platform that included universal access to health insurance. The president has stated his desire to build on the current employer-sponsored system of coverage, but left the details—and bill crafting responsibility – to Congress, preferring to dispatch his top deputies to aide legislators and to use his own position to ensure the spotlight remains centered on the debate. In recent days, the president has increased his visibility on health reform by devoting increased personal attention in the form of on-location press conferences, radio addresses, grassroots activation and other communications outlets on the need for health reform.

In the Senate, the Finance Committee and the Health, Education, Labor and Pensions (HELP) Committee had agreed to work closely to craft similar bills that could eventually be joined together on the Senate floor. In recent days, however, legislative text released by the HELP Committee has been considerably more progressive than the policy options we have seen from the Finance Committee. Specifically, the HELP legislation includes strict limits on the health care premiums employers can charge, requirements that employers pay for the care of employees who do not choose an employer-sponsored health plan and significant financial incentives for employees not to participate in an employer-sponsored plan. RILA is deeply disappointed in the direction taken by HELP Committee Democrats who have signaled their desire to craft a partisan bill with harsh treatment of employers after months of good faith and closed door negotiations with many stakeholders, including some in the business community. 

Legislative text from the Senate Finance Committee has been delayed to foster bipartisan talks between legislators behind closed doors. Discussions with this committee have been more open with several public stakeholder hearings, policy options papers and an open door policy by legislators and staff to discuss any matter related to health reform. RILA has weighed in extensively with the committee throughout the process. At this point, RILA is anticipating that the only bipartisan bill to be considered by Congress may be reported out of this committee. Central to the debate in this committee is how to pay the $1.3 trillion reform price tag and whether a compromise can be forged on a government-backed insurance plan that individuals can purchase. Liberal Democrats are pushing for a government-funded public plan option modeled after Medicare while more moderate Democrats and some Republicans are discussing a self-sustaining plan that would operate much like a co-op.

The Senate Finance Committee is considering two primary options to pay for reform. The first would be to tax premiums above a certain level, such as the value of the standard family plan offered to federal employees, which will be about $15,000 in 2013, generating about $420 billion over 10 years. The other option would be to apply the cap only to families earning more than $200,000 a year ($100,000 for individuals), which would raise about $160 billion over 10 years. Senate Finance Committee Chairman Max Baucus (D-MT) and many Republicans have long said they would prefer the former approach in order to offer a tax benefit for those purchasing insurance on the individual market. President Obama, however, has said he would prefer taxing high income earners because studies show that taxing health benefits would hit hardest middle class households and union members who in recent years have negotiated better health benefits over increased wages.

Both Senate committees plan to complete consideration of their bills in July.

In the House of Representatives, where it is shaping up to be a partisan process, Democrats from the three committees of jurisdiction have joined together to release health reform principles on behalf of the entire Democratic Caucus. It is expected that a bill passed by the House will contain the most broad-sweeping changes to our nation’s health system, including the elimination of high deductible health plans, strict limits on the premiums that can be charged and heavy handed employer mandates. House Speaker Nancy Pelosi has pledged that a health care bill mirroring President Obama’s priorities for health reform will pass the House by July 31. Legislative text is expected to be released soon and hearings will continue this week.

In the states, RILA is monitoring cities and counties where health care mandates similar to San Francisco’s are likely to appear, especially if the Ninth Circuit Court of Appeals’ decision in the Golden Gate Restaurant Association vs. San Francisco case is upheld by the U.S. Supreme Court.

However, in the immediate future, states and localities may take a back seat to federal action given the new climate on Capitol Hill, the financial strain on state and local budgets, and the appetite for true health care reform both in government and within the business and provider community.

RILA will continue to promote effective strategies to provide America’s insured with quality, affordable health care and to expand comparable opportunity to the uninsured.

The finer points of health reform are still being shaped by policymakers, even as they head into markup sessions beginning this week. However, areas of consensus appear to be emerging around top-line reform concepts, including:

• Overall preservation of the Employee Retirement and Income Security Act (ERISA), which allows employers to offer the same level of insurance to employees across state lines.
• Pay-or-play mandate, requiring all employers to contribute toward health insurance coverage for their employees or toward the cost of a plan offered under a new National Health Insurance Exchange.
• National Health Insurance Exchange, created to showcase private insurance plans to consumers purchasing in the individual market and to give access to a new public plan.
• Comparative effectiveness tools so that consumers, insurers and health care providers can better assess and compare the relative merits of health care treatments, procedures and therapeutic approaches.
• An individual mandate to require that every American purchase a minimum level of insurance coverage, which has the backing of key legislators and the support of many businesses if coupled with appropriate subsidies to make purchasing plans more affordable. 

It is important to note that while a top-line consensus is developing, contentious policy debate around the specifics of each of these proposals—particularly the employer and individual mandates—could hinder reform efforts.

Other health care policy issues that have not been fully vetted, but will be of key importance to retailers include:

• The role of a government-sponsored plan, if any, and whether that plan is the default for individuals to purchase, the model of a basic benefit, an option for purchase by working adults with access to employer-sponsored coverage, or competitive with private plans has yet to be determined and is the central point of debate in Congress at the moment.
• The definition of what constitutes a basic benefit will likely be left up to an independent board made up of key stakeholders. What remains in question is how much oversight and accountability the board would have for its decisions.
• The tax treatment of health care will be important to systemic reform, and legislators must decide whether or not to cap the currently limitless employer exclusion, to offer an individual tax deduction or to use the tax code in other creative ways to expand Americans’ access to health insurance plans.
• The definition of an “employee” under a pay-or-play system will particularly matter to retailers who traditionally employ significant numbers of part-time and seasonal workers.

Both President Obama and Congress have prioritized improving access to care in lieu of changing the existing delivery system. RILA applauds this approach, which is more likely to preserve ERISA preemption and ensure that retailers can continue to offer comprehensive and competitive benefits to our employees.

Because financial constraints will be a major driver of any proposal, “pay-or-play” mandates and capping the employer tax exclusion for offering benefits will be major considerations for cost savings. Further, leaders are considering possible reform of the health insurance market by creating a “connector” to assist individuals with access and to streamline benefits packages. Despite these and other considerations, congressional and administration leaders have not settled on a single proposal to date and are meeting extensively with the business, labor, medical, insurance, and patient communities to craft a bill.

The president has stated his desire to build on the current employer-sponsored system of coverage with a “pay-or-play” health care mandate similar to the one in Massachusetts that would require all employers to contribute toward health insurance coverage for their employees or toward the cost of a plan offered through a newly created health insurance “exchange.” Further details about the President’s plans for health reform will likely be left up to his Secretary of Health and Human Services (HHS), former Kansas Governor Kathleen Sebelius and his Director of the White House Office of Health Reform, Nancy-Ann DeParle.

On Capitol Hill most of the policy crafting work to date has taken place in the Senate, where Finance Committee Chairman Max Baucus (D-MT) and Health, Education, and Labor Committee (HELP) Chairman Edward Kennedy (D-MA) are working in tandem to devise a single bill for congressional consideration. In November 2008, Chairman Baucus issued a comprehensive health care “Call to Action” white paper that outlined his vision to address access, quality and cost. He has spent the last several months discussing the financial feasibility of his and others’ proposals. Meanwhile, Chairman Kennedy has focused his attention on crafting legislation that incorporates policies which business, labor, medical and patient communities’ put forth, but retains the same goals laid out thus far by President-elect Obama. Other key negotiators in the Senate include Finance Committee Ranking Member Charles Grassley (R-IA), HELP Committee Ranking Member Mike Enzi (R-WY), Budget Committee Ranking Member Judd Gregg (R-NH), Sen. Jay Rockefeller (D-WV), and Sen. Orrin Hatch (R-UT).

In the House, even though most key committee leaders are taking a less public approach than their Senate counterparts by not releasing policy details on their broader health care reform agendas, they are working closely with the Obama transition team. The only committee leader to release a policy proposal to date is Health Subcommittee Chairman Pete Stark (D-MA), whose AmeriCare (H.R. 193) bill granting the uninsured access to Medicare has been introduced for the last 15 years. Because Chairman Stark’s position is so well known, introduction of his legislation is not expected to derail the current debate. Other key health reform players include the new Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Education and Labor Committee Chairman George Miller (D-CA), both close allies of Speaker Nancy Pelosi (D-CA). Speaker Pelosi, in particular, will face a tough challenge passing a broad health care proposal in the House because of the financial constraints under pay-as-you-go budget (PAYGO) rules.

In the immediate future, before turning to systemic health reform, legislators in both chambers of Congress will likely address reauthorizing State Children’s Health Insurance Program (SCHIP) funding as a stand-alone bill and then turn to the economic stimulus package to add a provision to create nationwide health information technology (Health I.T.) databases and to jump start comparative effectiveness initiatives.

In the states, RILA is monitoring cities and counties where health care mandates similar to San Francisco’s are likely to appear, especially if the 9^th Circuit Court of Appeals’ decision in the Golden Gate Restaurant Association vs. San Francisco case is upheld by the U.S. Supreme Court. However, in the immediate future, states and localities may take a back seat to federal action given the new climate on Capitol Hill, the financial strain on state and local budgets, and the appetite for true health care reform both in government and within the business and provider community.

RILA will continue to promote effective strategies to provide America’s insured with quality, affordable health care and to expand comparable opportunity to the uninsured.

For more information, please contact Sarah Arbes, vice president of government affairs, at sarah.arbes@rila.org. For information on state health care issues, please contact Joe Rinzel, vice president of state government affairs, at joe.rinzel@rila.org.

Federal: Congresswoman Rosa DeLauro (D-CT) reintroduced the Healthy Families Act (H.R. 2460) in the House on May 18, 2009.  On May 21, Sen. Ted Kennedy (D-CT) introduced the Senate companion (S. 1152).  Shortly after the bill introductions, House Workforce Protections Subcommittee Chairman Lynn Woolsey (D-CA) held a hearing to discuss a number of paid leave proposals, including the Healthy Families Act.  Rep. DeLauro was one of two members of Congress to testify before subcommittee members in support of the legislation.

Amidst the recent worries of a H1N1 flu pandemic, House Education and Labor Committee Chairman George Miller (D-CA) introduced the Emergency Influenza Containment Act (H.R. 3991) which would authorize employees who are sent home by their employers for having any contagious condition to take up to five days of paid leave. The legislation would take into effect 15 days after signed into law and would expire in two years. RILA sees this proposal as a vehicle to push a modified Healthy Families Act--but with many more onerous compliance challenges-- through Congress and is working with a broader group of trade associations to oppose this vague and troublesome proposal.

Similarly, Chairman of the Senate Subcommittee on Children and Families Chris Dodd (D-CT) held a hearing on November 10 to discuss the H1N1 pandemic and announced his intentions to introduce legislation that will guarantee paid sick days for those infected by the H1N1 virus. Rep. Rosa DeLauro, a former Senate Dodd staffer and longtime advocate of the Healthy Families Act, testified at the hearing. RILA has not seen language of Senator Dodd’s proposal but predicts it will not mirror the troublesome proposal introduced in the House.

Because time on the Senate calendar is extremely limited with health care and other important issues at hand, it is unlikely that an emergency paid sick leave bill can be moved before the end of the year.  However, RILA sees the H1N1 bills as an opportunity to advocate for a broader paid leave mandate that preserves employers’ flexibility and addresses this long-term challenge of defeating the Healthy Families Act.

Further, RILA is a steering committee member of the National Coalition to Protect Family Leave (NCPFL), a broad-based group of organizations, companies and associations that support public policy which promotes voluntary, employer-provided leave benefits to maximize flexibility for both employers and employees. RILA and NCPFL oppose paid leave proposals that have a one-size fits all government approach, which would limit employers’ abilities to provide flexible compensation and benefit packages that meet the diverse needs of their workforces to the employer community. Such an approach would impose conflicting federal and state laws and compliance under varying regulatory bodies.

States: A permanent injunction against the implementation of the Milwaukee Sick Leave ordinance was granted in a ruling filed on June 12.

Recently, Colorado and Nevada became the first states in the last 10 years to give employees unpaid leave for school-related events and Wisconsin is expected to take up similar legislation this fall.  Lawmakers in roughly a dozen other states are debating measures that would require employers to grant paid family or sick leave.

RILA urges members of Congress to oppose the Healthy Families Act, the Emergency Influenza Containment Act and any other paid leave mandate that does not preserve benefit design flexibility and preempt state and local leave laws. Instead, we encourage policymakers to involve the employer community in conversations on alternatives that meet the diverse needs of unique workforces.

RILA has convened a Paid Leave Working Group comprised of benefits design and government affairs executives from our member companies.  This group has developed a comprehensive set of paid leave principles that we encourage congressional members to consider in lieu of the HFA, including:

• Exempt employers from a paid sick leave mandate if they provide a paid leave program benefit that is as generous as any legislative proposal.
• Provide that any federal leave requirement to preempt other state and local leave laws, including expansion of who qualifies and the generosity of the benefit offered.
• Ensure definitions of employer, employee, full-time, part-time, family members under any legislative proposal is consistent with other employment laws in place.
• Encourage Congress to use the FMLA for guidance.

Federal: Enacted in 1993, the Family Medical Leave Act (FMLA) has helped millions of employees take unpaid, job-protected leave for the birth, adoption or foster care placement of a child; for the “serious health condition” of a spouse, son, daughter, or parent; or for an employee’s own medical condition. The FMLA is the benchmark law to which policymakers when considering paid leave mandates. And, despite RILA member company compliance challenges with the FMLA, resulting from the many conflicting provisions contained in the law, we agree with federal paid leave mandate advocates that a national approach is preferred to a patchwork of city and state regulations. However, RILA also believes that policymakers must be careful to ensure that any new mandate is flexible enough to meet the evolving needs of diverse workforces.  

The Healthy Families Act was first introduced in the 108^th Congress by Rep. Rosa DeLauro (D-CT) and the late Sen. Edward Kennedy (D-MA). The bill introduced in previous sessions was more restrictive for employers than the bill we see today.  If passed, the HFA would require employers with 15 or more employees to provide one hour of paid sick leave for every 30 hours worked, with a maximum of 56 hours in one calendar year. Employees would begin accruing the leave on their first day of work and be allowed to take any accrued leave after 60 days.  Employee leave notice requirements would follow the “as soon as practicable” clause prescribed in the FMLA. The HFA would also expand the qualifying reasons to absences resulting from domestic violence, sexual assault or stalking that involves the employee or the employee’s relatives.

RILA has a number of technical concerns with the HFA. Chief among them, the legislation does not effectively take into account the paid time off, flex time, and compensatory time programs that employers are using increasingly in today’s workforces. These types of programs allow employees to take leave for a wider variety of reasons other than just illness and often are not subject to the employer reporting requirements that inherently exist under the HFA.  Further, the HFA does nothing to prevent the current trend of state and local governments to mandate other, more onerous paid leave requirements.

The Healthy Families Act is neither the only paid leave mandate, nor the only FMLA expansion bill pending in Congress. Other bills that exist include a paid vacations bill, paid maternity and paternity leave, and FMLA leave to care for domestic partners. RILA is closely monitoring these bills as well, but we do not anticipate they will have as much traction as the Healthy Families Act.

For more information, please contact Sarah Arbes, vice president of government affairs, at sarah.arbes@rila.org, Joe Rinzel, vice president of state government affairs, at joe.rinzel@rila.org, or Amber Landis, manager of government affairs, at amber.landis@rila.org.

A successful business depends upon a quality workforce that includes supervisors to manage employees and operations. Employers in all industries seek to promote and retain effective supervisors as both a tool for successful business development and a way to reward individual employees’ workplace contributions. RILA opposes the Re-Empowerment of Skilled and Professional Employees and Construction and Tradeworkers (RESPECT) Act, which would undermine an employer’s right to manage its business by restricting which employees would legally qualify as supervisors under the National Labor Relations Act for purposes of union organizing and collective bargaining.

To date, this legislation has seen no activity in the 111^th Congress, but we anticipate that it will be reintroduced by the same Houes and Senate sponsors.

We urge members of Congress to oppose the RESPECT Act, which would undermine an employer’s right to manage its business by restricting which employees would legally qualify as supervisors.

The National Labor Relations Act (NLRA) defines which employees are eligible to participate in union organizing and collective bargaining and specifically excludes "supervisors." Hence, unions cannot require supervisors to be included in a collective bargaining unit and supervisors do not have a protected right to promote unionization in the workplace.[1] In 2006, the National Labor Relations Board, which has authority vested in it by the NLRA to oversee labor-management relations, clarified the definition of “supervisor” as part of its ruling in the Kentucky River cases.[2] This ruling frustrated union backers of the litigation’s backers, who favored a narrower definition because it would have increased the number of employees who could be unionized.                    

In response to the Kentucky River cases, Sen. Chris Dodd (D-CT) and Rep. Robert Andrews (D-NJ) introduced on March 22, 2007, the RESPECT Act ( S. 969, H. R. 1644). If signed into law, this bill would effectively increase the number of employees eligible for union membership by severely narrowing the pool of individuals who qualify as a “supervisor” under the NLRA.[3]

The RESPECT Act would have a profound negative effect on all employers and supervisors by:

• Handicapping Competitiveness. Supervisors would be subject to union work rules and union discipline as part of the same collective bargaining unit as the employees they supervise, and thus prohibited from performing certain management duties crucial to business operations;
• Constraining Employee Promotions. Employers’ current ability to promote effective candidates to supervisory positions and to retain current supervisors would be inhibited.
• Expanding Employer Exposure to Lawsuits. Because the NLRA is used to define who is and who is not a supervisor in other areas of employment law, employers would be subject to a host of lawsuits filed under not only the NLRA, but also the Fair Labor Standards Act, Occupational Safety and Health Act, anti-discrimination laws and other federal and state statutes, regulations and rules which do not define "supervisors" within those laws but instead rely upon the definitions provided under the NLRA.

On September 19, 2007, the House Committee on Education and Labor passed H.R. 1644, but did not officially report the bill, which is a procedural step before its consideration on the House floor.  S. 969 was never considered by the Senate Committee on Health, Education, Labor and Pensions.

[1] The NLRA Section 2(11) defines “supervisor” as follows:

The term “supervisor” means any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay-off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.

[2] See Oakwood Healthcare, 348 NLRB No. 37 (2006).

3 The RESPECT Act would amend the NLRA’s definition of “supervisor” in three ways:

1.     Strike the duty to “assign” employees;

2.     Strike the duty to “responsibly direct” employees; and

3. After the existing language of “interest of the employer” add a requirement with the phrase “and for a majority of the
 individual’s work time.”

For more information, please contact Sarah Arbes, vice president of government affairs, at sarah.arbes@rila.org.

The Employee Free Choice Act (EFCA) has three components: 1) effectively replace secret ballot elections with a “card check” system of organizing, 2) provide a path for the federal government to dictate employment contract terms for two years, and 3) increase employer penalties for committing unfair labor practices.

Under the current organizing process, when 30 percent or more of employees file a petition, the National Labor Relations Board (NLRB) administers a secret ballot vote. If a majority of employees vote in favor, then the union is recognized as the exclusive bargaining agent for all workers at that workplace and management is instructed to bargain a new employee contract with the union. This system works: NLRB data shows that unions won 62.4 percent of all representation elections in fiscal year 2008, and more than half of all representation elections in each of the past 10 years.

EFCA would circumvent a worker’s right to a private ballot vote in union certification elections. The legislation would instead force workers into a union once union organizers have obtained signatures indicating support for a union from 50 percent plus one additional worker in any bargaining unit. These worker signatures may be collected anywhere—even at an employee’s home or place of worship—and no rules govern how many times a worker may be approached or what the employee is promised in return for signing the petition.

In addition, compulsory binding arbitration as required by this legislation would be an unprecedented government intrusion into the right to bargain freely over working terms and conditions, would take away the right of members of a newly recognized union to accept or reject a contract, and would overturn nearly 60 years of law and precedent on collective bargaining. Workers and managers alike would be bound for two years by a contract.

Finally, the bill would provide excessively punitive penalties that apply only to employers (not to unions) that interfere illegally with organizing drives. 

If enacted, EFCA could lead to the intimidation of workers, forcing them to cast their vote in front of union organizers and fellow employees who support unionization. It would also deny those workers, as well as all who declined to sign the card, the right to a private ballot vote to officially recognize the union.

Last Congress, the House passed the Employee Free Choice Act primarily along party lines, 241 to 185. The bill then moved to the Senate, where it failed to overcome a 60-vote procedural threshold to proceed to a vote on its substance. The procedural vote was along party lines, 51 to 48, with the exception of Sen. Arlen Specter (D-PA), then a Republican. However, with President Bush in the White House pledging to veto the bill, some members believed they could support the proposal without fear of it actually being implemented into law.

For more information, please contact Katherine Lugar, executive vice president of public affairs, at katherine.lugar@rila.org.

RILA member companies take employee safety seriously and believe it is the shared employer-employee responsibility of both employers and employees to ensure a work environment that adhere to health and safety guidelines, and which promotes good employee relations and sound business practices at all levels of the organization. The ongoing support and interest from employees is essential to any health and safety program.

While the modernization of any program or law governing the safety and health of our workforces is necessary as the workplace evolves, RILA is concerned about any reform regulation that does not stay within the statutory and regulatory framework of the Occupational Safety and Health (OSH) Act. This framework preserves the process for developing new standards and regulations of various stakeholders. RILA members believe that a thorough review of data, standards and regulations is necessary before any reform proposals should be considered. In addition, employers should be actively involved in the rulemaking process to ensure it achieves the goal of protecting worker’s safety and providing employers with clear and feasible guidelines.

Congress:

 On April 23, House Workforce Protections Subcommittee Chairman Lynn Woolsey (D-CA), introduced the Protecting the America’s Workers Act, or PAWA, (H.R. 2067). On August 5, the late Senate Health, Education, Labor and Pensions Committee (HELP) Chairman Edward Kennedy (D-MA) introduced a companion bill (S. 1580). In Sen. Kennedy’s absence, the Senate HELP Committee Chairman Tom Harkin (D-IA) and Workforce Safety Subcommittee Chairman Patty Murray (D-WA) will take over as lead sponsors of the bill.

If enacted, PAWA would make the most broad-sweeping modifications to the OSH Act since it was enacted by expanding coverage, increasing penalties for employers, increasing protections for whistleblowers and requiring immediate abatements for injured workers.

On April 28, Senate Subcommittee Chairman Murray and House Education and Labor Chairman George Miller (D-CA) each held hearings to discuss whether current health and safety laws ensure that employers who fail to protect their workers are adequately penalized.  A third hearing was held on April 30th by Subcommittee Chairman Woolsey to further discuss the need for enhanced enforcement programs which adequately deter employers from putting their employees at risk.

RILA is opposed to PAWA, noting that workplace injuries and deaths have decreased significantly over the last decade as a result of better compliance assistance for existing laws from OSHA. The changes would be the most significant in 40 years and significantly increase the power of OSHA enforcement. The legislation:

·         Significantly increases criminal and civil penalties (accounts for inflation) for businesses with 25 or more employees and makes corporate officers (managers, safety directors etc.) subject to federal prosecution.

·         Requires employers to implement corrective “abatement” measures immediately after a safety violation. This requirement significantly changes current law in which an employer is able to contest a citation until OSHA prevails in a final adjudication of the citation issued.

·         Expands “whistleblower” protections and gives victims and their families the right to meet with investigators and privilege in the enforcement system.

·         Requires employers to compensate employees for time spent involved in the investigation of an OSHA inspection.

·         Prohibits any type of program that would discourage the reporting of injury or illness. Employers would no longer have incentive programs for employees to maintain a healthy and safety workplace.

Another pending OSH Act reform bill is the Corporate Injury, Illness, and Fatality Reporting Act (H.R. 2113), introduced by Rep. Phil Hare (D-IL). The proposal would require employers with 500 or more employees to maintain accurate records and make annual reports of the number of work-related deaths, injuries and illnesses. RILA believes this proposal has overly onerous requirements for retailers who are already committed to health and safety of their employees.

Administration:

On October 21, the Senate HELP Committee postponed the scheduled confirmation of George Washington University Professor David Michaels, who has been nominated by President Obama to serve as Assistant Secretary of OSHA. RILA anticipates that Professor Michaels will eventually be confirmed but joined other trade associations in a letter urging the committee to hold a hearing in order to explore his views on how data and science are used for developing regulations and how his previous work might influence his decisions in key areas such as ergonomics.

While the confirmation of an Assistant Secretary continues, Labor Secretary Solis and OSHA Acting Assistant Secretary Jordan Barab continue to reiterate their desire for a myriad of OSHA rulemakings and enhanced enforcement mechanisms. One recent example occurred on September 30 as OSHA published the first major proposed rulemaking of the Administration on the Hazard Communication Standard (F.R. 74:50280-50549).  The rulemaking would adopt the United Nations’ (UN) Globally Harmonized System of Classification and Labeling of Chemicals (GHS). The goal of the rulemaking is to help promote the consistency in the identification, classification, and labeling of chemicals around the world. Under the current standard, chemical manufacturers and importers evaluate and control chemical hazards and are required to label and appropriately document those hazards on material safety data sheets (MSDS). There is no formal requirement for industry to list the information on the MSDS. While the rulemaking does not directly impact retailers, RILA is concerned with the new labeling requirements and the training of employees involved with evaluating the chemical information.

Effective compliance with the OSH Act is the responsibility of both employers and employees. In accordance with the law, every OSHA investigation and enforcement effort should review and address the compliance responsibilities of both employers and employees equally. RILA urges members of Congress to oppose PAWA and the Corporate Injury, Illness, and Fatality Reporting Act. We also encourage any rulemaking or regulatory changes to take into account the responsibilities of employers and employees alike to advance our shared goal of giving employees the protection and tools they need to work in healthy and safe work environments.

RILA is a member of the Coalition for Workplace Safety, a broad-based coalition of trade associations, professional organizations and employers who seek to improve workplace safety by bringing more fairness and balance to the OSH Act. The coalition dedicates its focus on advocacy with congressional offices on workplace safety issues important to employers and employees alike, as well as provides the Labor Department with a forum to communicate potential regulations or rulemakings.

RILA also encourages member companies to participate in our Workplace Safety Committee and our OSHA Policy Working Group, comprised of government affairs and safety experts in our member companies who have an interest in these issues.

For more information, please contact Amber Landis, manager of government affairs at amber.landis@rila.org, or Sarah Arbes, vice president of government affairs, at sarah.arbes@rila.org.

Despite significant volume reduction as a result of the economic contraction, America’s ports and infrastructure are still requiring new investment to handle existing cargo volume and mitigate the environmental impact caused by congestion. Federal, state and local officials continue to propose and implement numerous fees on those operating at the ports.  However, in many cases fee collection has been postponed due to the economic downturn.  It is a sure bet that the tide will turn when the economy begins to bounce back, and so RILA members are committed to working with federal, state, and local governments to help proactively address emerging port issues.

Surface Transportation Reauthorization:  Congress will soon reauthorize legislation for surface transportation (highways, transit) projects. The two issues that affect RILA members most directly are the source of funding for the legislation and the inclusion of a national freight policy. Currently, the only legislation that has been introduced is a policy framework piece introduced by Senate Commerce Committee Chairman Jay Rockefeller (D-WV) and Subcommittee Chairman Frank Lautenberg (D-NJ) and a 775-page proposal by Transportation and Infrastructure Chairman Jim Oberstar (D-MN); neither includes financing mechanisms.  Discussions will continue to develop but are not expected to yield a final product before 2011.  As the debate continues, development and funding of a national freight policy will require public and private stakeholders to coordinate and collaborate on a framework that includes strategies and tactics to address freight issues and congestion and how to pay for them.

The MOVEMENT Act:  In May, Congresswoman Laura Richardson (D-CA) re-introduced her legislation, which raises fees on freight to pay for infrastructure in and around the nation’s seaports.  The Movement Act of 2009 seeks to increase the Harbor Maintenance Fee with all additional revenue placed in a separate fund dedicated to infrastructure, environmental and security improvements. Discussion has taken place on possibly including this fee to help finance the next surface transportation reauthorization bill, but the authors of the bill have not hinted that they intend to use this mechanism.

ON TIME Act:  In February, Rep. Ken Calvert (R-CA) re-introduced his legislation (HR 947) that directs the Secretary of Transportation to designate key trade transportation corridors, or National Trade Gateway Corridors, extending out from every official air, land, and sea port of entry in the United States.  The bill plans to derive its trade-based dedicated funding stream through the establishment of a capped and nominal ad valorem fee (at .075 percent) on all goods entering and exiting through official ports of entry.  The fee is capped at $500 per shipment and would be deposited into the newly created “National Trade Gateway Corridor Fund.”  As stated above for Richardson’s proposal, discussion has taken place on possibly including this fee to help finance the next surface transportation reauthorization bill, but the authors of the bill have not hinted that they intend to use this mechanism.  

The National Freight Mobility Infrastructure Act:  Congressman Adam Smith (D-WA) recently introduced legislation (H.R. 2707) calling for the creation of a national fund that would be financed on an annual basis by $7 billion to $9 billion in new fees from freight system users.  This legislation generates revenue through a minimal 1percent user fee on the cost of multimodal surface freight transport.  In turn, the funds raised are reinvested back into improving the freight network, including both highways and railways, through a national competitive grant program at the Department of Transportation.  This legislation has the most legs at the moment as it has very little international trade implications.

State Level:

California:  On a state level, the west coast has been focused on establishing standards to continue their focus on “greening” the economy.  The California Air Resources Board (CARB) passed a series of vehicle and fuel rules to cut port diesel emissions. One rule bars old diesel trucks from visiting California ports after Jan. 1, 2010, unless they install diesel filters.  CARB also announced that it is releasing $90 million in state bond money for the state's Goods Movement Emission Reduction Program. The funding will go toward cleaning up port trucks, upgrading trucks in the Central Valley and Mexican Border regions and installing shore-based electrical power for two ship berths at the Port of Oakland.

Local Level:

Port of Los Angeles and Long Beach:  Last year, both ports approved a Clean Air Action Plan (CAAP) to reduce emissions from trucks, vessels and operating equipment by 45 percent over five years. The Los Angeles/Long Beach plans are as follows:

• Clean Truck Fee:  The Port of Long Beach has now eliminated the Clean Truck Fee for privately financed clean trucks, port-funded liquefied natural gas and alternative-fueled trucks. Recently, it was decided that only container cargo moved by 2006 and older trucks and clean diesel trucks funded by the Port of Long Beach after April 20, 2009, will pay the fee.
  
• Concession Requirements: Los Angeles’s concession plan prohibited the use of independent owner-operators over a five-year period.  In April, a federal judge ruled portions of the clean-truck programs at the ports of Los Angeles and Long Beach illegal, but left others in place. The requirement that would have banned owner-operators from working at the port is gone.  The American Trucking Association, however, believes the April 28 decision by the U.S. District Court in Los Angeles did not go far enough. ATA argues the concessions are entirely illegal and filed an appeal challenging the district court decision.
  
• Local Cargo Infrastructure Fees: The ports of Los Angeles and Long Beach also approved a cargo infrastructure fee to fund priority port infrastructure projects.  However, in light of the economic downturn, the ports have delayed collection of the fee until at least July 1, 2010.

Port of Seattle/Tacoma:  In Spring 2009, the Port of Seattle Commission and the Port of Tacoma Commission separately approved plans to reduce emissions from trucks that serve the port without involving additional cargo fees. The Port of Seattle’s plan calls for prohibiting the most polluting trucks (1994 model-year and older) from entering port terminals beginning January 1, 2011, in keeping with the 2010 standard of the Northwest Ports Clean Air Strategy.  The program will include measures to scrap the old trucks, compensate truck owners for their older trucks and help them buy or lease newer ones.  The Port of Tacoma’s plan does not have a truck replacement program.  Port officials are encouraging the use of low sulfur fuels and are using an on-dock rail system to minimize the concentration of trucks in the port.

Port of Oakland:  Last year, the Port of Oakland approved a container fee but the fee collection has been postponed.  Port of Oakland commissioners also approved an air quality improvement plan in April 2009 designed to reduce diesel emissions from port activities  85 percent by 2020.  In June, the Port of Oakland approved its Maritime Comprehensive Truck Management Plan, which sets hard targets for truck retirement goals without the imposition of new container fees or an employee driver mandate.  Oakland now becomes the second major west coast port (after Seattle/Tacoma) to adopt a retailers supported clean truck plan.

American ports will require new investment in infrastructure to handle the annual increase in cargo volume and mitigate the environmental impact caused by port congestion. Dramatic environmental impact plans that include new port fees are becoming increasingly popular to fund port investments and alleviate pollution caused by port operations. Nowhere is this dynamic more true than the state of California, particularly the ports of Los Angeles and Long Beach. Los Angeles and Long Beach are the nation’s two largest ports, handling approximately 44 percent of the nation’s containerized cargo. Congestion at the ports is significant, and operations from both locations have been recognized as a substantial source of pollution in the Los Angeles metropolitan area. Taken in total, the port fee proposals at the state and local levels have the potential to cost RILA companies an additional $182 per 40-foot container to import goods into Southern California.  Other west coast ports have followed suit, including Seattle/Tacoma and Oakland.  It is only a matter of time before these proposed fees expand to ports located throughout the nation.

For more information, please contact Kelly Kolb, vice president of global supply chain policy, at kelly.kolb@rila.org.

RILA members place the highest priority on assuring the quality and safety of the merchandise sold in their stores and continue to lead efforts that will enhance product safety. These efforts include RILA support for sound scientific studies on the health effects of chemicals in consumer products. 

Leaders from the House of Representatives and the Senate have filed legislation to establish a federal ban on BPA in all food and beverage containers.

The bills, introduced by Rep. Edward Markey (D-MA), H.R. 1523, and Sen. Dianne Feinstein (D-CA), S. 593 and Sen. Charles Schumer (D-NY), S. 753 greatly expand efforts to limit use of BPA in products intended for use by babies and children.  The bills would: amend the Federal Food, Drug, and Cosmetic Act; ban BPA use in food and beverage containers (no age limit); include food/beverage containers sold with and without consumable substances; appear to be retroactive for reusable food/beverage containers and appear to be prospective for food/beverage containers sold with consumable products.

House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Oversight and Investigations Subcommittee Chairman Bart Stupak (D-MI) have asked the U. S. Food and Drug Administration (FDA) Commissioner Margaret Hamburg to review the FDA’s conclusion on BPA.

On January 30, 2009, the FDA and Health Canada’s Health Products and Food Branch hosted a meeting of representatives of U.S. and Canadian manufacturers and users of food packaging materials containing BPA.  According to the FDA, “based on all available evidence [on BPA], the consensus of regulatory agencies in the United States, Canada, Europe, and Japan is that the current risk levels of exposure to BPA through food packaging do not pose an immediate health risk to the general population, including infants and young children.”

States: In June, Connecticut Governor M. Jodi Rell signed legislation into law that makes Connecticut the first state to ban the use of BPA in products designed to contain infant formulas and foods.  Per the legislation no person shall manufacturer, sell, offer for sale, or distribute infant formula or baby food that is stored in a plastic container, jar or can that contains BPA beginning on October 1, 2011.  Retailers will have a one-year period from this date to sell existing inventory.

This follows legislation already passed in Minnesota, Suffolk County in New York and Chicago to ban BPA from infant products.  Similar legislation to ban BPA is now pending in California, Michigan and New York.

A significant push is underway in both the Congress and among state legislatures to continue the momentum from Minnesota and Connecticut to pass either federal legislation or more state bills. RILA and its members will continue to work with members of Congress, their staffs, state policymakers and state retail associations to ensure that all products meet high safety standards.

Bisphenol A (BPA) is an organic compound that is used primarily to make polycarbonate plastic and epoxy resins and that has been in commerce for over 50 years.  It a well studied substance, with a large database of toxicological and exposure information available to assess human health concerns.

Polycarbonate plastic is a lightweight, high-performance plastic that possesses a unique balance of toughness, optical clarity, high heat resistance and excellent electrical resistance. Because of these attributes, polycarbonate is used in a wide variety of common products including digital media (e.g., CDs, DVDs), electrical and electronic equipment, automobiles, sports safety equipment, reusable food and drink containers, and many other products.

Epoxy resins are materials used as protective liners in metal cans to maintain the quality of canned goods and beverages and have achieved wide acceptance for use as protective coatings because of their combination of toughness, adhesion, formability and chemical resistance.

For more information, please contact Stephanie Lester, vice president of international trade at stephanie.lester@rila.org, Jim Neill, vice president of product safety or Joe Rinzel, vice president of state affairs, at joe.rinzel@rila.org. 

Trade preference programs, including the Generalized System of Preferences (GSP), Andean Trade Preferences Act (ATPA), Caribbean Basin Trade Partnership Act (CBTPA) and other initiatives are important development tools.  Reducing tariffs and establishing dependable sourcing options are also essential for successful retail supply chains.

RILA is committed to promoting flexible, meaningful and simple-to-use preference programs that will assist development in the world’s poorest countries and offer American families the opportunity to purchase a variety of high-quality products at affordable prices.

Trade Preference Reform:  Key Members of Congress have signaled a willingness to provide a short term (likely 9-month) extension of the GSP and ATPA programs this year while consideration of broader trade preference reform will spill over into next year.  The House Ways and Means Committee and the Senate Finance Committee have both held hearings on trade preference programs. 

RILA is working with a coalition of NGOs and businesses seeking to reform, expand, and simplify the trade preference programs.  The coalition is proposing a unified, new preferences program with the following elements:

• Extends benefits to all developing countries, including advanced developing countries, that meet clear eligibility criteria;
  
• Contains consistent, transparent predictable and enforceable rules for termination of country and product eligibility that also, when possible, are sensitive to opportunities to expand United States-beneficiary, or beneficiary-beneficiary trade;
  
• Uses a simple 35% value-added rule of origin common to all products; and
  
• Remains in effect for a period long enough to encourage long-term investment and sourcing.

To begin the debate on trade preference reform, Rep. Jim McDermott (D-WA) recently introduced his bill, the “New Partnership for Trade Development Act of 2009” (H.R. 4101).  The bill would expand products eligible for duty-free treatment to include more products that are made by more of the world’s least developed countries, such as textiles and apparel produced in Cambodia and Bangladesh.  The bill would also simplify the rule of origin for preference programs, and extend the Generalized System of Preferences (GSP) the Africa Growth and Opportunity Act (AGOA) programs until 2019.  RILA welcomes these positive changes to enhance, simplify, and harmonize the U.S. trade preference regime. 

Afghanistan/Pakistan Reconstruction Opportunity Zones (ROZ):  The Obama administration has made it a priority to enact new trade preferences for Afghanistan and Pakistan.  Rep. Chris Van Hollen (D-MD) introduced H.R. 1318, and Sen.  Maria Cantwell introduced S. 496 to provide duty-free treatment for certain goods from Afghanistan and designated ROZs in Pakistan.  The House approved a modified version of H.R. 1318 on June 11, 2009 as part of a larger bill to authorize foreign assistance for Pakistan and Afghanistan (H.R. 1886).  The House bill limited product and geographical coverage and contained controversial labor language which has prompted heated debate in the Senate; the Senate is not expected to take up this issue before the end of the year and the issue will likely be considered in the context of broader trade preference reform.  RILA has advocated that the Afghanistan/Pakistan ROZ proposals be expanded to cover more areas of Pakistan and important product categories such as cotton shirts and cotton trousers to provide meaningful benefits for those countries.

Trade preference programs help developing countries create jobs and economic opportunity to lift people out of poverty.  In doing so, preference programs can help to establish viable production in the agriculture and textile and apparel industries, among others.  Meanwhile, preference programs have become increasingly controversial for some members of Congress, because they believe unilateral duty-free treatment is inappropriate for advanced developing countries, and it is time for those countries to open their markets to U.S. exports.  This debate is prompting Congress to consider broad reform of preference programs.  RILA is advocating that such reform should also include improvements to make preference programs more streamlined and flexible.  The pending expirations of the GSP and the ATPA programs in December 2009 provide an action-forcing event for Congress to consider trade preference legislation.

• Generalized System of Preferences Program – GSP has been an effective trade tool in bolstering domestic manufacturing, expanding consumer choice and promoting economic growth in developing countries. The program is scheduled to expire in December 2009.  RILA continues to work with Congress and the administration to reauthorize the program and to improve the benefits to cover more products.  RILA also supports designating Vietnam as a beneficiary country under the GSP program and has asked that the Office of the U.S. Trade Representative grant Vietnam’s formal request.
  
• Andean Trade Preferences Act –ATPA benefits for Colombia, Peru and Ecuador are currently set to expire on December 31, 2009.  Bolivia’s benefits lapsed on June 30, 2009 after President Obama declined to renew them—citing the country’s lack of cooperation with U.S. antinarcotics efforts (which is one of the ATPA eligibility criteria). 

• Caribbean Basin Trade Partnership Act – CBTPA provides trade preference benefits to 19 Caribbean nations. The program is scheduled to expire September 30, 2010.

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org, or Andrew Szente, director of government affairs, at andrew.szente@rila.org.

RILA supports open economic engagement with China, including in textile and apparel trade.  RILA believes that open competition in textiles and apparel creates healthier industries in both the United States and China.  RILA does not support unfair subsidies and believes any countervailing measures should be considered objectively and transparently.  RILA opposes preemptive efforts to manage trade in textiles and apparel.

In April 2009, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) filed a section 421 safeguard petition on consumer tires from China.  Safeguard actions under section 421 move very quickly, and on June 29, 2009, the ITC recommended tariffs of 55% in year one, 45% in year two, and 35% in year three “to prevent or remedy market disruption.”  U.S. tire producers did not support the petition, and near the end of the process, some publicly opposed the ITC’s recommended tariffs.  On September 11, President Obama announced his determination to impose tariffs on consumer tires from China of 35% in year one, 30% in year two, and 25% in year three.

The U.S. textile industry applauded Obama’s tire decision, and has publicly stated that it is keen to use either 421 or the AD/CVD laws to slow the flow of apparel imports from China.

RILA is working with other stakeholders to address and minimize the risk of trade disruption on textile and apparel imports from China that would come from action under section 421 or AD/CVD cases.  RILA urges the administration to continue productive economic engagement and dialogue with China, and to recognize the significant economic costs that trade barriers place on U.S. retailers, importers, and families.  

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org.

In May 2009, Senate Commerce Committee Chairman Jay Rockefeller (D-WV) and Subcommittee Chairman Frank Lautenberg (D-NJ) introduced legislation to persuade the policy discussions aimed at creating a 21st century approach to our transportation system.  The legislation, entitled the Federal Surface Transportation Policy and Planning Act of 2009, seeks to reduce 10 percent of freight transport by trucks by 2020 and plans to offer incentives to increase non-truck transport of goods.  The measure also targets reducing per-capita motor vehicle miles traveled on an annual basis, reducing motor vehicle-related fatalities 50 percent by 2030 and reducing surface transportation-generated carbon dioxide levels 40 percent by 2030. 

While it appears that their goal was to influence the product put forward by the House Transportation and Infrastructure Committee, it is also important to note that there has been a long-standing jurisdictional battle between the Senate Environment and Public Works (EPW) Committee and the Senate Commerce Committee.  Currently, the Senate Commerce Committee has jurisdiction over the safety issues within the reauthorization bill, whileEPW is the bill’s main author. If a national freight policy were to be included in the new reauthorization legislation, the Commerce Committee would then oversee its creation and which would expand its authority over the bill.   With the EPW Committee currently focused on climate change legislation, it appears that with the introduction of the Rockefeller/Lautenberg legislation, the Commerce Committee has sent a clear message that it intends to do more than focus on the safety issues in the next reauthorization. 

In June 2009, House Transportation and Infrastructure (T&I) Committee Chairman James Oberstar (D-MN) unveiled the first draft of a new transportation spending bill and marked up the bill in a subcommittee hearing.  Oberstar has estimated the cost of reauthorizing the six-year plan to be roughly $450 billion.  The 775-page Surface Transportation Authorization Act proposes a restructuring of the Department of Transportation, consolidates sources of funding and creates a national transportation strategic plan. Other listed priorities include congestion reduction, safety and improved intermodal planning.  Currently, his legislation refrains from including any funding mechanisms. 

The week before Chairman Oberstar unveiled his legislation, Secretary of Transportation Ray LaHood indicated that the Obama administration preferred an 18-month extension of current law with only a few changes.  Sen. Barbara Boxer (D-CA), who chairs the Senate Environment and Public Works Committee, quickly followed suit stating that she also favors an 18-month extension.  The reasoning for this approach is largely based on the need to focus on shoring up the Highway Trust Fund, the heavy legislative schedule facing both chambers of Congress, and the fiscal concerns of how to pay for the next bill.  Even though the Obama Administration and the Senate have been advocating for an 18-month extension, House T&I Chairman Oberstar has campaigned strongly for quick passage of the full bill.  With discussions looming throughout most of the year, the expiration date of SAFETEA-LU has come and passed with no end in sight on the timing of the next reauthorization.  Since September, the bill has been surviving on 2009 funding levels through a series of continuing resolutions; the most recent one expires on December 18^th. 

Much is still up for debate on the surface transportation reauthorization bill.  Congressional talks have currently focused on moving a “creating jobs” bill in the next couple of months, bearing in mind unemployment has moved above the ten percent mark.  Some of these discussions have highlighted adding funding for infrastructure projects or possibly passing the surface transportation reauthorization and frontloading it.  If either of these situations take place, it is likely the current policy structure of the bill will stand as it is and the potential for including additional measures focused on freight movement will be deminished.  If not, and an extension continues to carry the reauthorization through next spring, then the bill will most assuredly be punted and the true debate will occur in the 112^th Congress, conveniently following the midterm elections.

Congress is expected to reauthorize legislation for surface transportation (highways, transit, etc.) projects sometime in the near future.  The Transportation Equity Act for the 21st Century was reauthorized in August 2005 as the Safe, Accountable, Flexible, Efficient Transportation Equity Act – A Legacy for Users (SAFETEA-LU) and expired on September 30, 2009.  The two issues that will affect RILA members most directly are the sources of funding for the legislation and the possible inclusion of a national freight policy.

The Highway Trust Fund (HTF) is the primary source of funding for the programs in the bill. The HTF is composed of the Highway Account, which funds highway and intermodal programs, and the Transit Account.  Federal motor fuel taxes have been the major source of income into the HTF.  Under current law, the funds are released to the states by a mathematical formula that attempts to match the scope and usage of each state's surface transportation system with payments received from the federal government.

The HTF fund is unsustainably and expected to go into deficit in the near future. In 2008, Congress infused $8 billion to keep the fund from reaching a zero balance this year and infused another $7 billion in July 2009.  Many discussions are taking place on how to fund the HTF as Congress is reluctant to raise the federal fuel tax on motorists and truckers, as many argue the viability and sustainability of the gas tax, so Congress is focusing on finding alternative funding methods.  In addition, Congress would like to significantly increase the funding for the next reauthorization bill.  The 2005 reauthorization allocated $286 billion toward the Act’s programs --- that amount is expected to double in the next reauthorization.

The consideration of the last reauthorization (SAFETEA-LU) included much debate over how to construct a national freight policy.  With congestion issues increasing and a new majority in place to craft the legislation, the new reauthorization will likely include a freight congestion/goods movement program.

For more information, please contact Kelly Kolb, vice president of global supply chain policy, at kelly.kolb@rila.org.

RILA members are committed to partnering with federal and state agencies to enhance global supply chain security. RILA has supported congressional efforts to improve supply chain security, specifically, the Security and Accountability for Every (SAFE) Port Act. Building upon the multi-layered, risk-based approach used by the U.S. government since September 11, 2001, this legislation allows government and industry to work together to develop measures that not only improve security but also enhance the movement of legitimate commerce.

In February, recently confirmed Department of Homeland Security Secretary Janet Napolitano indicated her interest in reviewing the 100 percent scanning mandate. With the Obama administration starting the discussion again, consensus appears to be slowly building in Congress that the law is neither practical nor effective and should be modified.  However, it is highly unlikely that the administration will push for a change in law before 2012, an election year.  Most likely, the Obama administration will ask for an extension to the 2012 mandate.  RILA is continuing to reach out to members at DHS, Customs and Border Protection (CBP) and Hill staff.

On November 25, 2008, CBP released its interim final rule on the Advance Trade Data Requirements, also known as “10+2.” This rule took effect on January 26, 2009, (60 days after the publication date) and allows for a 12-month delayed compliance period to allow industry to comply with the new requirements.  During this first year, CBP is conducting a structured review and allowed a comment period for four of the data elements.  The comment period closed June 1. On the basis of information obtained during the structured review, CBP will not reprimand importers, but instead work to help them reach compliance by January 26, 2010.  RILA continues to monitor the program and work with CBP staff to address issues before final compliance.

Effective April 2009, the Transportation Security Administration (TSA) requires Transportation Worker Identification Credential Card (TWIC) for all personnel, including truck drivers, requiring unescorted access to secure areas of ports around the country. The TWIC program was established by Congress through the Maritime Transportation Security Act (MTSA).  By way of background, individuals meeting TWIC eligibility requirements will be issued a tamper-resistant credential containing the worker's biometric (fingerprint template), allowing for a positive link between the card and the individual.

Enrollment and issuance of cards began at the Port of Wilmington, Delaware, October 16, 2007, and has continued through 2009 with over 1 million cards being issued nationwide. The compliance deadline for the TWIC initiative passed on April 15, 2009.  Since the April enforcement, all personnel requiring unescorted access to secure areas in facilities and vessels (regulated under the Maritime Transportation Security Act of 2002) are required to have their TWIC card.   One thing to note, however, was that the original intent was to roll out cards and card readers together. Currently, the full effort has been delayed for at least two more years because the government lacks machines to read fingerprint ID cards issued to more than 1 million workers. After listening to industry concerns, TSA made the decision to stagger the implementation to make it easier on industry.

RILA will continue to oppose efforts to impose arbitrary security mandates.

RILA members will need to continue to engage the new Congress and the new leadership at Department of Homeland Security to effectively implement new supply chain security policies. Industry must also continue to educate Congress on why risk-management is the only way to meet the dual objectives of a secure and efficient supply chain. Specifically:

• Supply chain security policies should focus on areas of risk.
• Proven technologies should be deployed in a way to ensure that high-risk containers are inspected.

Safe and secure seaports are essential elements in efficient and technologically advanced supply chains that can move cargo quickly to distribution centers, stores and factories around the world. In the post-9/11 era, RILA and its members have played a critical leadership role in shaping our nation’s supply chain security policies. As some of the largest users of the global supply chain, RILA members have actively participated in and supported public-private collaboration to enhance security through efforts such as the Customs-Trade Partnership Against Terrorism (C-TPAT) and, most recently, the Secure Freight Initiative.

• The federal government has been very active in developing polices that strengthen supply chain security. Since 9/11, Congress has passed two major pieces of legislation: the Maritime Transportation Security Act of 2002 and the SAFE Port Act. These laws have greatly improved supply chain security and will continue to do so over time.
• Since the passage of these laws, a number of regulations and initiatives have been undertaken to protect the U.S. from a terrorist attack throughout the supply chain. Programs such as C-TPAT, the Container Security Initiative (CSI), the 24 Hour Rule, Transportation Worker Identification Credential, the Radiation Portal Monitor program and the International Ship and Port Facility Security Code (ISPS) all address important aspects of supply chain security.
• Supply chain security is a global issue that cannot be addressed unilaterally and without the involvement of the private sector. While enhanced domestic port security is an important part of that equation, the most effective supply chain security measures will be those that assess vulnerabilities and identify threats before products reach U.S. ports. Thus, it is important that security policy be developed in partnership with foreign trading partners through organizations such as the World Customs Organization and the International Maritime Organization and with the private sector stakeholders such as terminal operators and carriers who own supply chain assets.
• Over time, technology will play a valuable role in the improvement of supply chain security and efficiency. It must, however, undergo thorough evaluation to ensure that it can be integrated effectively into the operation of the supply chain.
• RILA members are already funding security-related initiatives through federal customs duties and port/terminal security fees. In addition, RILA members have made security investments through participation in C-TPAT and believe that the government should ensure that revenue from current fees is used effectively before any new fees are levied.

Congress also addressed container scanning with the passage of the Implementing the Recommendations of the 9/11 Commission Act of 2007 (9/11 bill). RILA played an active role in the development of the legislation and will continue to work with Congress and the Department of Homeland Security (DHS) as the law is implemented.

A provision in the 9/11 bill mandated that the Department of Homeland Security require foreign seaports to scan 100 percent of U.S. containers for radiation and density by 2012. The proposal allows the Secretary of Homeland Security to grant renewable waivers for up to two-year increments if the secretary can certify that: scanning technology is not available for purchase, the scanning technology does not have a sufficient false alarm rate, the equipment cannot be deployed because of the physical characteristics of the port, scanning systems cannot be integrated, the scanning systems will significantly impact trade or the systems do not provide automated notification of questionable or high-risk cargo for further inspection. It also requires the secretary to consult with other appropriate federal agencies to ensure that actions taken under this section do not violate international trade obligations.

DHS submitted a report to Congress on container scanning pilot projects at three foreign seaports. The report, which is required by the SAFE Port Act, demonstrated the results of projects that occurred in Port Qasim, Pakistan; Puerto Codero, Honduras; and Southampton, United Kingdom. The report highlighted the logistical, staffing, and financial challenges associated with 100 percent scanning.

For more information, please contact Kelly Kolb, vice president of global supply chain policy, at kelly.kolb@rila.org.

• a measured phase-in schedule for the declaration requirement and, to provide clear and predictable guidance to importers, the identification of covered products by Harmonized Tariff Schedule (HTS) classifications;
• the exclusion of composite wood materials (such as particleboard and fiberboard) until it is reasonable and practical to gather genus and species information for such products;
• a commitment that sundries which often accompany a product (including, inter alia, tags, labels, manuals, warranty cards, wrap, boxes, cardboard or paper inserts, bottle corks and pallets) are not subject to the declaration requirement;
• application of the declaration requirement only to formal, consumption entries and exclusion of other entries such as informal entries, personal importations, mail (unless subject to formal entry), transportation and exportation entries, in transit movements, carnet importations and foreign trade zone and warehouse entries;
• exclusion from the scope of the declaration requirement within the first two years of implementation broad categories of products, including beverages, cosmetics and personal care products, textiles, apparel and footwear, and rubber and cork products.

RILA continues to work with stakeholders to ensure the Lacey Act is implemented in an appropriate manner.  RILA is also advocating that APHIS publish proposed definitions for “common food crop” and “common cultivar” as soon as possible.

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org.

Free Trade Agreements (FTAs) help reduce trade barriers between countries and enhance trading partnerships between nations. FTAs can provide significant benefits to retailers through trade liberalization, transparency in regulatory trade practices, reductions in tariffs and non-tariff barriers and the creation of dependable sourcing opportunities. These issues are essential to providing U.S. customers with the high-quality goods they demand at a price they can afford. To provide the most benefit, FTAs should be comprehensive and commercially meaningful for retailers. FTAs should include: across-the-board tariff eliminations, services trade liberalization, trade facilitation measures, strong intellectual property rights protections and flexible rules of origin.

Congress should approve the three pending FTAs, vote to extend Trade Promotion Authority (TPA) so that new deals can be concluded and enact policies that ensure the United States remains competitive in an economically interconnected world.

RILA encourages members to urge Congress to schedule a vote on the U.S.-Colombia Free Trade Agreement and approve the FTAs that have been concluded with Panama and South Korea. Members should also encourage the 111^th Congress to extend TPA authority so that new deals can be concluded and enact policies that ensure the United States remains competitive in an economically interconnected world.  RILA is working with other business coalitions to demonstrate the tangible benefits of trade liberalization for retailers, workers, manufacturers, service suppliers and U.S. consumers.

• Australia
• Bahrain
• Canada and Mexico (North American Free Trade Agreement or NAFTA)
• Chile
• Morocco
• Central America (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua)
• Oman
• Peru
• Singapore
  

Countries with which FTAs have been concluded but Agreements await congressional consideration:

• Colombia
• Panama
• Republic of Korea

Countries with which FTA negotiations have been initiated but not completed:

• Ecuador
• Malaysia
• South African Customs Union (Botswana, Lesotho, Namibia, South Africa and Swaziland)
• Thailand
• Trans-Pacific Strategic Economic Partnership (also known as P4, with Australia, Peru, Brunei Darussalam, Chile, New Zealand and Singapore). Note: Vietnam was recently added to the negotiations as a “partnering member.”
• United Arab Emirates

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org, or Andrew Szente, director of government affairs, at andrew.szente@rila.org.

RILA members place the highest priority on assuring the safety and quality of the products they sell to their customers. Many retailers rely on a multi-layered approach to food safety, beginning with the incorporation of best practices for harvesting food and using independent testing on finished products.

Efforts in Congress to assess a user fee on food imports would have the effect of restricting consumer choice to a wide variety of high-quality foods that are available at reasonable prices. RILA strongly opposes assessing new user fees on the importer community and would instead support increased federal appropriations for the Department of Health and Human Services (HHS), and in particular the U.S. Food and Drug Agency (FDA), for additional food quality assurance programs based on risk assessment and multi-layered checks.

Recent reports of salmonella-laced peanut butter and pistachios have renewed interest in legislation on food safety. So far in the 111^th Congress, several food safety bills have been introduced in both chambers and numerous hearings have been held on the matter.

Summary of legislative proposals in the 111th Congress:

• S. 510, the FDA Food Safety Modernization Act – In March 2009, Senate Majority Whip Richard Durbin (D-IL) and Sens. Lamar Alexander (R-TN), Richard Burr (R-NC), Chris Dodd (D-CT), Judd Gregg (R-NH), Johnny Isakson (R-GA) and Edward Kennedy (D-MA) introduced a bill that would direct the FDA to assess user fees based on inspection costs related to certifying high-risk food facilities annually and low-risk facilities at least once every four years.  The legislation takes a risked-based approach to food safety, requiring all facilities to have in place preventive plans to address identified hazards and prevent adulteration, and gives the FDA access to these plans and relevant documentation.  If passed, the legislation would require importers to verify the safety of foreign suppliers and imported food and allow the FDA to require certification for high-risk foods and deny entry to a food that lacks certification or that is from a foreign facility that has refused U.S. inspectors.  It is important to note that the legislation allows the FDA to recognize laboratory accreditation bodies to ensure U.S. food testing labs meet high quality standards and requires food testing performed by these labs to be reported to the FDA. Certification of foreign food facilities for compliance with U.S. food safety standards would be conducted by qualified third parties.
  
  The bill also requires the Secretary of Health and Human Services (HHS) to establish a pilot project to test and evaluate new methods for rapidly and effectively  tracking/tracing fruits and vegetables in the event of a food-borne illness outbreak, gives the FDA the authority to order a mandatory recall of a food product when a company fails to voluntarily recall the product upon the FDA’s request and empowers the FDA to suspend a food facility’s registration if there is a reasonable probability that food from the facility will cause serious adverse health consequences or death.  The bill also creates a voluntary qualified importer program whereby the importer may apply for expedited review and entry of food products into the U.S.
  
  The bill has been referred to the Senate Health, Education, Labor and Pensions (HELP) Committee for consideration, although as of early April no hearings have been held by the Committee on the legislation or on food safety more generally.  Nearly identical legislation has been introduced in the House by Reps. Jim Costa (D-CA) and Adam Putnam (R-FL).
  
  
• H.R. 759, the Food and Drug Administration Globalization Act of 2009 – In January 2009, former House Energy and Commerce Chairman John Dingell (D-MI), Health Subcommittee Chairman Frank Pallone (D-NJ) and Oversight and Investigations Subcommittee Chairman Bart Stupak (D-MI) reintroduced a reiteration of more onerous legislation introduced in the 110^th Congress that would have charged a per-tariff line fee of $50 on each food import.  The bill was favorably reported out of the House Energy and Commerce Health Subcommittee on June 10 through a unanimous voice vote and was subsequently favorably reported out of the full committee on June 17 also by a unanimous voice vote.  The legislation establishes a new inspection regime to be carried out by the Secretary of Health and Human Services whereby “Category 1” “high-risk” facilities must be inspected every six months to one year, “Category 2” “low-risk” facilities must be inspected every 18 months to three years, and “Category 3” facilities that merely “hold” food must be inspected a least every five years. The legislation also includes a requirement that FDA submit a report on the timeline for a reasonable inspection frequency for low-risk facilities and warehouses, and gives FDA the authority to modify the inspection frequency based on the findings of this report.
  
  Throughout the committee’s consideration of the bill there has been considerable discussion regarding whether to require positive finished product testing results to FDA. There has been some concern from industry that FDA would be inundated with these testing results. The compromise language provides flexibility so that the Secretary of Health and Human Services would be required to conduct a pilot project and a study to evaluate the feasibility, benefits and costs of collecting finished product testing results from Category 1 facilities. After completion of the study, the secretary could require the submission of finished product test results of Category 1 facilities. Other provisions of the legislation include granting the FDA mandatory recall authority, authorizing FDA to charge importers an annual registration fee of $500 per food handling facility (not to exceed $175,000 per company per year), and giving FDA broad access during an inspection to records bearing on whether an article of food is adulterated, misbranded or in violation of the Act. 

• H.R. 875, the Food Safety Modernization Act of 2009 – In February 2009, House Appropriations Agriculture Subcommittee Chairwoman Rosa DeLauro (D-CT), who presides over the subcommittee responsible for appropriating funds for food issues in the Department of Agriculture and the FDA under HHS, introduced legislation to create a unified federal food safety agency at HHS called the Food Safety Administration.  The bill also provides for all foreign and domestic food establishments, defined as anyone manufacturing, processing, packing, or holding food for consumption, to register annually with the U.S. Government, have in place preventative controls and maintain adequate supporting records.  All “food establishments” would be divided into five categories based upon the type of contact and processes each facility has with food products, whereby establishments with the highest amount of interaction with food products would be inspected weekly and the ones with the lowest amount of contact would be inspected at least annually.  Two years after enactment, all importing food facilities would have to have been inspected by a qualified third party or foreign government for meeting all applicable U.S. standards.  Beginning five years after enactment, all imports not coming from a certified facility would be banned or could only be imported into the U.S. through a port of entry in a metropolitan area that has an accredited food testing laboratory.  Other provisions of the bill include giving the U.S. Government mandatory recall authority and creating a traceability program for tracking food in the supply chain.  The bill also allows for private rights of action, enhanced employee whistleblower protections and increased civil and criminal penalties.
  
  The bill has been referred to the House Agriculture and Energy and Commerce committees for consideration, and the House Appropriations Agriculture Subcommittee has held several hearings on the bill this year.
  
  
• H.R. 1332, the Safe FEAST Act of 2009 – In March 2009, Reps. Jim Costa (D-CA) and Adam Putman (R-FL) reintroduced food safety legislation that is nearly identical to the Durbin-Gregg bill in the Senate, taking a risk-based approach to food safety.  The bill has been referred to the House Agriculture Committee and the House Energy and Commerce Committees for consideration.  

An effective food safety regime requires a close partnership between the private sector and the U. S. government. RILA stands ready to work with government policymakers to enact legislation that strengthens consumer confidence and advances the production of safe, high-quality food that is affordable and readily available. RILA members place the highest priority on assuring the safety and quality of the products they sell to their customers.

Individual RILA members require their suppliers to:

• Hold an independent, accredited factory certification based on internationally recognized standards such as the Global Food Safety Initiative standards;
• Undergo periodic certification audits by an accredited firm to maintain approved supplier status;
• Proactively undertake due diligence to assure the safety of all products and materials used in corporate brand products;
• Register and participate in the International Compliance Information Exchange, a web-based exchange that facilitates compliance documentation between suppliers and retailers; and
• Submit samples for independent testing for compliance with chemical, physical, microbiological, nutritional, shelf life, safety, labeling and packaging standards. Such tests are conducted on preliminary samples as well as samples pulled from actual lots to be shipped to stores.

A number of legislative proposals were introduced in the 110^th Congress, and the president’s Interagency Working Group on Import Safety released its findings and began to implement new actions. The Senate Health, Education, Labor and Pensions (HELP) Committee and the House Energy and Commerce Committee held hearings on the issue of food safety. Energy and Commerce Chairman John Dingell (D-MI) introduced legislation to levy user fees on food and drug imports. HELP Committee Chairman Edward Kennedy (D-MA) and Ranking member Michael Enzi (R-WY) could not find agreement on a bipartisan proposal and did not ultimately introduce joint legislation in the 110^th Congress, as had been expected.

For more information, please contact Andrew Szente, director of government affairs, at andrew.szente@rila.org.

RILA opposed a proposed interpretation by the U.S. Customs and Border Protection (CBP) to revoke the so-called “First Sale Rule,” a valuation methodology used by importers to determine duty liability on imports. CBP’s proposed rule, which was subsequently withdrawn after facing fierce opposition from importers, would have unilaterally reversed numerous court rulings that favor the first sale rule. RILA advocated for CBP to withdraw the proposal and now advocates that Congress specifically codify the first sale rule.

RILA and the import community applaud CBP for revoking the proposal to eliminate the use of the first sale rule. RILA will continue to monitor this issue and encourages Congress to codify the first sale rule to prevent any efforts by CBP to revisit this issue in 2011.  In addition, RILA is monitoring tax legislation in Congress as some have suggested repeal of the first sale rule could be used as a revenue generator to pay for other programs.

In January 2008, CBP published a notice in the Federal Register (73 FR 4254) with a proposed interpretation of the expression “Sold for Exportation to the United States” for the purposes of applying the transaction value method of valuation in a series of sales.  The notice outlined the changes CBP proposed to the way import duties are calculated.  The changes would no longer allow importers to calculate the duty based upon the “first sale” price between the manufacturer and an intervener when the imports are subject to a series of transactions. Instead, CBP would calculate the duty based upon “the price paid in the last sale occurring prior to the introduction of the goods into the United States” (thereby eliminating the first sale rule). The proposed interpretation would contradict several U.S. court decisions in support of the first sale rule and could increase the duty liability that retailers face on imported products.  CBP justified the change in the calculating methodology based on commentary by the World Customs Organization’s (WCO) Technical Committee on Customs Valuation, which adopted Commentary 22.1, entitled “Meaning of the Expression ‘Sold for Exportation to the Country of Importation’ in a Series of Sales.”

A coalition of approximately 100 companies and associations organized in opposition to CBP’s proposed rule. The informal coalition sent a letter to then-Department of Homeland Security Secretary Michael Chertoff in February 2008, requesting that the proposal be immediately withdrawn. RILA played a critical role in reaching out to key congressional offices and federal agencies to express opposition to both the substance of the proposal as well as the process by which it was introduced, without prior consultations with industry or Congress.

In May 2008, Congress included “Sense of the Congress” language in the Farm Bill (P. L. 110-246) that put a freeze on CBP moving forward with its proposal until after 2011. Specifically, the language said that CBP could only move forward with its proposal after 2011 and after consulting with the appropriate congressional committees and the Advisory Committee on Commercial Operations (COAC) and receiving the explicit approval of the Secretary of the Treasury.

The Farm Bill also included a requirement that CBP collect data on the use of the first sale rule, which would then be compiled into a report by the U.S. International Trade Commission (ITC). The ITC has instituted investigation No. 332-505, Use of the “First Sale Rule” for Customs Valuation of U.S. Imports, and is required to analyze use of the first sale rule from the time period covering August 20, 2008 to August 19, 2009.       

In August 2008, CBP announced in a Federal Register notice that it was withdrawing its January 2008 notice of proposed reinterpretation of the first sale rule.  In the August notice, CBP cited the Farm Bill language directing the agency to not amend its interpretation of the term “sold for exportation to the United States” until after 2011. Withdrawal of the notice means that CBP will have to completely restart the regulatory process if it chooses to revisit the issue in 2011.

The notice also announced an interim rule, effective immediately, which requires importers to declare when an item is imported into the U.S. under the first sale rule. According to the notice, “importers will be required to insert a single code on CBP Form 7501 at the line-item level, indicating when first sale was used to determine the value of the imported merchandise.

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org, or Andrew Szente, director of government affairs, at andrew.szente@rila.org.

RILA members place the highest priority on the safety and quality of the products they sell to their customers.  RILA supported bipartisan legislation, the Consumer Product Safety Improvement Act (CPSIA), to reform and reauthorize the Consumer Product Safety Commission (CPSC) (P.L. 110-314).  RILA is now working with the CPSC and Congress to ensure that implementation of the CPSIA is effective and workable. We will also work with Congress as it considers new legislation in other areas of product safety, such as reform of the Toxic Substances Control Act.

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org or Jim Neill, vice president of product safety, at jim.neill@rila.org.

RILA recognizes the importance of provisions to combat unfair trade practices. Nevertheless, efforts to “strengthen” U.S. trade remedy laws would unfairly harm U.S. companies that rely on global supply chains.  Instead, Congress should recognize that predictable and reliable global sourcing is a fundamental requirement to maintain American economic competitiveness, and U.S. trade remedy laws should be updated to reflect this modern reality.  Specifically, Congress should adopt a prospective normal value system to administer U.S. antidumping and countervailing duty laws and allow industrial users to fully participate in trade remedy proceedings.

The 111^th Congress will likely consider legislation that would make it easier for petitioning industries to bring successful cases under U.S. trade remedy laws, including the countervailing duty (CVD), antidumping and safeguard  laws (Sections 201 and  421 of the Trade Act of 1974). These cases would result in higher tariffs on subject imports.

Ways and Means Committee Chairman Charles Rangel and Trade Subcommittee Chairman Sander Levin have introduced H.R. 496 to modify several trade remedy provisions. Among other things, H.R. 496 would:

• codify the application of the CVD law to nonmarket economy countries (such as China and Vietnam),
• politicize determinations of whether a nonmarket economy country should be treated as a market economy country by requiring a Congressional vote,
• limit the president’s discretion in Section 421 safeguard investigations,
• require the Department of Commerce to reconsider allowing WTO-inconsistent zeroing in antidumping proceedings, and
• weaken the material injury standard in trade remedy proceedings.

Collectively, these changes would make it more difficult for retailers to successfully defend against trade remedy cases that would raise import costs.  In the 110^th Congress, Senate Finance Committee Chairman Max Baucus introduced a bill, S. 1919, to make similar changes to U.S. trade remedy laws. Chairman Baucus is planning to introduce a new enforcement bill in the coming weeks. 

The Department of Commerce began applying the CVD law to China in 2007, and several CVD cases have been filed against specific Chinese imports.  In March 2009, the first CVD petition was filed against Vietnam, on polyethylene retail carrier bags.  The Department of Commerce will have to determine whether, as a threshold matter, it is appropriate to apply the CVD law to Vietnam since Vietnam is still considered a non-market economy country.

The 111^th Congress will likely consider legislation that would make it easier for petitioning industries to bring successful cases under U.S. trade remedy laws, including the countervailing duty (CVD), antidumping and safeguard  laws (Sections 201 and  421 of the Trade Act of 1974). These cases would result in higher tariffs on subject imports.

Ways and Means Committee Chairman Charles Rangel and Trade Subcommittee Chairman Sander Levin have introduced H.R. 496 to modify several trade remedy provisions. Among other things, H.R. 496 would:

• codify the application of the CVD law to nonmarket economy countries (such as China and Vietnam),
• politicize determinations of whether a nonmarket economy country should be treated as a market economy country by requiring a Congressional vote,
• limit the president’s discretion in Section 421 safeguard investigations,
• require the Department of Commerce to reconsider allowing WTO-inconsistent zeroing in antidumping proceedings, and
• weaken the material injury standard in trade remedy proceedings.

Collectively, these changes would make it more difficult for retailers to successfully defend against trade remedy cases that would raise import costs.  In the 110^th Congress, Senate Finance Committee Chairman Max Baucus introduced a bill, S. 1919, to make similar changes to U.S. trade remedy laws. Chairman Baucus is planning to introduce a new enforcement bill in the coming weeks. 

The Department of Commerce began applying the CVD law to China in 2007, and several CVD cases have been filed against specific Chinese imports.  In March 2009, the first CVD petition was filed against Vietnam, on polyethylene retail carrier bags.  The Department of Commerce will have to determine whether, as a threshold matter, it is appropriate to apply the CVD law to Vietnam since Vietnam is still considered a non-market economy country.

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org.

RILA supports the elimination of billions of dollars in footwear taxes paid by American consumers annually. Enactment of the Affordable Footwear Act of 2009 (S. 730) would provide targeted relief to consumers who most need it – lower- and middle-income families – and would free up funds for other crucial expenses.

The most difficult hurdle to overcome in advancing the AFA through Congress is the cost of the bill.  Because Congress operates under pay-as-you-go (PAYGO) rules, the cost of that duty savings would have to be offset unless these rules are waived. Any provision to offset the duty costs or waive PAYGO would likely be controversial.

Significant advances were made in support of AFA in the 110^th Congress, and RILA will continue to educate members of Congress and their staffs on this important issue and to advocate for congressional approval of AFA in the 111^th Congress.

Each year American consumers pay the U.S. Government an estimated $1.9 billion in regressive duties. In fact, duties on footwear are the second highest of any category (second only to textiles.)

Enacted in the 1930s for the protection of U.S. industries under the Smoot-Holly Tariff Act, American businesses and consumers are still paying these high duties even though 99 percent of all footwear sold in the United States is imported and the remaining 1 percent is footwear supplied to the military or specialty niche items (such as high-end footwear, fishing waders and fireman’s boots) that would not be affected by the AFA legislation.

Current U.S. tariffs on footwear are regressive: the lowest earners pay the highest percentage of their income to fund these taxes. Tariffs on certain low-cost shoes can run as high as 67.5 percent of the import price, and the highest tariffs apply to the types of shoes that people of modest means tend to buy while lower duties are imposed on similar products that are more often purchased by upper-income individuals. For example, tariffs on low-end sneakers range between 48 percent and 67 percent, but tariffs on higher-end sneakers are about 20 percent. In the case of leather dress shoes, the tariff is 8.5 percent. This trade policy forces consumers with limited means to pay a greater percentage of their disposable income for life’s necessities. This high tariff amounts to a shoe tax that can cost consumers up to 40 percent of the retail price for some footwear.

The Affordable Footwear Act of 2009 would permanently eliminate roughly $800 million in footwear duties annually, primarily in three categories: children’s footwear, footwear with excessively high duties, and a number of uncontroversial product categories that have been incorporated into a previous Miscellaneous Tariff Bill passed by the Congress. Domestic footwear producers do not oppose this initiative.

For more information, please contact Andrew Szente, director of government affairs, at andrew.szente@rila.org.

RILA members place the highest priority on assuring the quality and safety of the merchandise sold in their stores and continue to lead efforts that will enhance product safety. These efforts include RILA support for sound scientific studies on the health effects of chemicals in consumer products. 

Leaders from the House of Representatives and the Senate have filed legislation to establish a federal ban on BPA in all food and beverage containers.

The bills, introduced by Rep. Edward Markey (D-MA), H.R. 1523, and Sen. Dianne Feinstein (D-CA), S. 593 and Sen. Charles Schumer (D-NY), S. 753 greatly expand efforts to limit use of BPA in products intended for use by babies and children.  The bills would: amend the Federal Food, Drug, and Cosmetic Act; ban BPA use in food and beverage containers (no age limit); include food/beverage containers sold with and without consumable substances; appear to be retroactive for reusable food/beverage containers and appear to be prospective for food/beverage containers sold with consumable products.

House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Oversight and Investigations Subcommittee Chairman Bart Stupak (D-MI) have asked the U. S. Food and Drug Administration (FDA) Commissioner Margaret Hamburg to review the FDA’s conclusion on BPA.

On January 30, 2009, the FDA and Health Canada’s Health Products and Food Branch hosted a meeting of representatives of U.S. and Canadian manufacturers and users of food packaging materials containing BPA.  According to the FDA, “based on all available evidence [on BPA], the consensus of regulatory agencies in the United States, Canada, Europe, and Japan is that the current risk levels of exposure to BPA through food packaging do not pose an immediate health risk to the general population, including infants and young children.”

States: In June, Connecticut Governor M. Jodi Rell signed legislation into law that makes Connecticut the first state to ban the use of BPA in products designed to contain infant formulas and foods.  Per the legislation no person shall manufacturer, sell, offer for sale, or distribute infant formula or baby food that is stored in a plastic container, jar or can that contains BPA beginning on October 1, 2011.  Retailers will have a one-year period from this date to sell existing inventory.

This follows legislation already passed in Minnesota, Suffolk County in New York and Chicago to ban BPA from infant products.  Similar legislation to ban BPA is now pending in California, Michigan and New York.

A significant push is underway in both the Congress and among state legislatures to continue the momentum from Minnesota and Connecticut to pass either federal legislation or more state bills. RILA and its members will continue to work with members of Congress, their staffs, state policymakers and state retail associations to ensure that all products meet high safety standards.

Bisphenol A (BPA) is an organic compound that is used primarily to make polycarbonate plastic and epoxy resins and that has been in commerce for over 50 years.  It a well studied substance, with a large database of toxicological and exposure information available to assess human health concerns.

Polycarbonate plastic is a lightweight, high-performance plastic that possesses a unique balance of toughness, optical clarity, high heat resistance and excellent electrical resistance. Because of these attributes, polycarbonate is used in a wide variety of common products including digital media (e.g., CDs, DVDs), electrical and electronic equipment, automobiles, sports safety equipment, reusable food and drink containers, and many other products.

Epoxy resins are materials used as protective liners in metal cans to maintain the quality of canned goods and beverages and have achieved wide acceptance for use as protective coatings because of their combination of toughness, adhesion, formability and chemical resistance.

For more information, please contact Stephanie Lester, vice president of international trade at stephanie.lester@rila.org, Jim Neill, vice president of product safety or Joe Rinzel, vice president of state affairs, at joe.rinzel@rila.org. 

RILA members place the highest priority on the safety and quality of the products they sell to their customers.  RILA supported bipartisan legislation, the Consumer Product Safety Improvement Act (CPSIA), to reform and reauthorize the Consumer Product Safety Commission (CPSC) (P.L. 110-314).  RILA is now working with the CPSC and Congress to ensure that implementation of the CPSIA is effective and workable. We will also work with Congress as it considers new legislation in other areas of product safety, such as reform of the Toxic Substances Control Act.

For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org or Jim Neill, vice president of product safety, at jim.neill@rila.org.

RILA and our member companies are committed to environmental sustainability and support legislation that takes a comprehensive and practical approach to maximizing energy savings and reducing greenhouse gas emissions while assuring that Americans get relief from high energy prices. Companies and consumers seek federal leadership that will allow them to make meaningful, cost-effective investments in clean, renewable energy supplies and energy-efficient products.  

On June 26^th, the House of Representatives passed the American Clean Energy and Security Act of 2009 (ACES) aimed at significantly reducing greenhouse gas emissions between 2012 and 2050 through an economy-wide cap-and-trade program. The bill narrowly passed by a vote of 219 to 212, one more than the 218 needed, with eight Republicans supporting and 44 Democrats opposing.   

 Among other things, it calls for reducing emissions by 17 percent below 2005 levels by 2020, as well as:

• A new low-carbon transportation fuel standard to promote advanced biofuels and other clean transportation fuels;
• A focus on transportation efficiency, which would order the EPA to set emissions standards for locomotives and marine vessels and a requirement for states to establish goals for reducing global warming pollution from the transportation sector; and
• Authorization for the EPA to carry out the SmartWay Transportation Efficiency Program to increase highway trucking output and efficiency.

The House bill also contains a provision, inserted in the middle of the night before the vote Friday, that requires the president, starting in 2020, to impose a “border adjustment” on certain goods from countries that do not act to limit their global warming emissions. The provision was added to secure the votes of certain lawmakers who were wavering on the bill because of fears of job losses in heavy industry. Since the passage of the bill, President Obama has cautioned House and Senate members to reconsider the tariff in favor of a less restrictive policy as the trade sanctions - based on the extent to which other countries curb carbon dioxide emissions - might be illegal and counterproductive.

While most have focused on the proposed “cap and trade” system and other impacts of ACES on utilities and energy production, small attention has been given to the rules for energy efficiency in building construction and renovation, which are buried in the text of the bill.  The bill mandates new federal, state, and local building codes to achieve energy reduction for construction of new buildings.  It also provides national standards and unspecified financial incentives for energy-efficient retrofitting of existing buildings.  The new building rules are requirements, whereas the retrofit program is at the owner’s election – a combination of financial “carrots” and “sticks” for the nation’s building owners. 

The green revolution, now accelerating exponentially, is already influencing energy use. Voluntary energy efficiency programs such as Leadership in Energy and Environmental Design ("LEED"), the leading system of United States Green Building Council ("USGBC"), and other rating programs, have been widely adopted. However, while a number of state and local governments have required building code changes keyed to LEED or equivalents (which do have an energy-reduction emphasis), to date only a few state and local governments have mandated comprehensive energy efficiency standards and technologies in building codes, and most laws focus only on new construction or alterations to existing buildings. If enacted, it is important to note that ACES will represent the first comprehensive uniform national energy efficiency laws for new construction and renovation in the U.S.

It is also important to note that although the House bill had been endorsed by Speaker Nancy Pelosi (D-Calif.), and President Obama, it only recently gained an adequate level of support among rank-and-file House members, making the leadership’s decision to bring it to the floor for a vote somewhat risky. House leadership was forced to undertake a strong lobbying effort among undecided members to gain passage.

It is now up to Senate Democrats to take up the bill or introduce new legislation. Senate Majority Leader Reid has shown his support for the bill but pointed out the bill “is not perfect.”  The Senator mentioned they are moving at a slower pace than their House counterparts, primarily because of hopes to combine energy and climate bills in a single piece of legislation.  At the absolute earliest, a vote would come this fall.

RILA will retain its leadership role in these efforts as well as inform and engage RILA member companies of the latest happenings through the RSI and the Government Affairs Committees.

National and global discussions of climate science and related policy choices have intensified noticeably in the last several months, which is not surprising given pledges by President Obama and congressional leaders to pursue climate change legislation and the December 2009 deadline world leaders set for a new climate treaty.

In the 110^th Congress, a number of climate bills were introduced that had a unifying feature for the adoption of a cap-and-trade system to achieve greenhouse gas emissions reductions through a flexible and efficient regulatory system.  While a comprehensive carbon-reduction strategy did not pass in the last Congress, it is important to note that Congress did enact some moderate, preliminary measures.  Among those was a significant provision that Congress quietly included in a 2007 appropriations bill.  The provision requires the U.S. Environmental Protection Agency (EPA) to develop a rule in the next 18 months to require the mandatory reporting of greenhouse gas emissions.  In the spring of 2009, EPA proposed a draft regulation to create a registry for reporting greenhouse gas emissions. This draft rule currently is under review by the White House Office of Information and Regulatory Affairs (OIRA).  In the meantime, states have not waited for federal mandates to be passed.  As of November 2008, 18 states have imposed mandatory reporting of greenhouse gas emissions and an additional 23 states have encouraged voluntary greenhouse gas emissions.

For more information please contact Kelly Kolb, vice president of global supply chain security, at kelly.kolb@rila.org.