Comment from Christopher Smith, IKEA Wholesale Inc

The is a Comment on the Animal and Plant Health Inspection Service (APHIS) Notice: Implementation of Revised Lacey Act Provisions

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Comment


IKEA Wholesale Inc.
100 Ikea Drive
Westampton, NJ 08060
Telephone 609-261-1208
Fax609-265-8447

December 5, 2008

Regulatory Analysis and Development
PPD-APHIS
Station 3A-03.8
4700 River Road Unit 118
Riverdale, MD 20737-1238

Subject: Written Comments on Implementation of Revised Lacey Act Provisions
Docket number APHIS-2008-0119

To Whom It May Concern;

IKEA Wholesale Inc. appreciates the opportunity to provide comments to the
above mentioned legislation and Federal Register notice published on October 8,
2008.

IKEA Wholesale Inc. (“IKEA”) is part of the IKEA group of companies and is an
importer of home furniture and various home furnishing articles. IKEA views wood
as an excellent choice from a thriftiness, innovative and environmental point of
view because it is a renewable, recyclable and biodegradable resource. It is
important to IKEA that the wood it uses in its products comes from responsibly
managed forests. At IKEA, we try to treat wood as the valuable resource it is.
Economizing with renewable resources is part and parcel of the IKEA approach to
product development. It helps to save not only money, but the environment, too.
The principle is to make use of as much of the material as possible, and
designers and product developers are constantly searching for new techniques to
get the best possible return from every tree trunk.

This commitment to the environment is further evident in the following forest and
environmental organizations with which IKEA is currently working or has
previously worked: Forest Stewardship Council, World Wildlife Foundation,
Greenpeace International, Rainforest Alliance, Yayasan Sabah Group, and the
Swedish University of Agricultural Sciences, among others. IKEA has also set a
very high corporate standard in relation to environmental protection which includes
standards that our suppliers must meet in order to do business with IKEA.

IKEA understands the need to prevent illegal logging practices around the world.
However the Lacey Act amendments made by Congress in P.L. 110-232, Sec.
8204, would make it nearly impossible for IKEA or other vertically integrated
retailers to comply unless the regulations are carefully and narrowly drawn.
Without narrowly drawn regulations, the administrative costs and record keeping
requirements would be so overwhelming and burdensome throughout the supply
chain that the cost of almost any finished wooden consumer good would
skyrocket.

As with many vertically integrated retailers, IKEA purchases finished consumer
products, in the case of home furniture and other home furnishings from IKEA
suppliers. In many cases these suppliers will purchase components from up to
three to four sub-suppliers and three to four board mills. These sub-suppliers will
also purchase boards from multiple board mills. The board mills get their lumber
from various saw mills, in many cases five or more. The saw mills processed the
lumber from the multiple harvesting companies that performed the original
harvesting of the trees. Add to this scenario that IKEA is a global company
sourcing materials, components and finished goods from 1,380 suppliers in 54
countries and trying to trace this information to certify compliance all the way
through the supply chain to the harvesting of each and every tree is unrealistic. As
explained in detail below, these requirements, without narrow tailoring, would
require transmission of approximately 33.6 billion lines of data over the course of a
year, just
by one company.

Please find IKEA comments which are on a number of key concerns including:

1)Listing of genus and species
2)Listing of country of harvest
3)Recycled plant materials
4)Lack of de minimis amount for reporting purposes
5)Reporting of articles and components of articles
6)Implementation
a.Time frame of implementation
b.Products produced prior to 2008 amendments to the Lacey Act.
7)Additional questions raised by Lacey Act regulations

1)Listing of Genus and Species

The amendments to the Lacey Act have no de minimis limit associated with the
reporting requirement on the genus and species of plants or plant products
incorporated in or used in a product. In particular the requirement to list all
possible plant species which may have been used to produce a product will affect
a large number of IKEA products and has a particularly high burden on IKEA
manufacturers’ paper, particle boards and fiberboards. Most of IKEA’s plant-
based products such as particle board and fiberboard are produced in Europe.
Generally 97% to 99% of a normal particle board or fiber board will consist of three
or fewer species. The remaining 1% to 3% of the wood material from IKEA’s
European manufacturers could consist of as many as 20 different species.

It should be noted that U.S. Companies will have to begin tracking and
recordkeeping their own production as many U.S. based board and paper
companies currently export their base products to Canadian and Mexican
companies only to have their base materials returned to the U.S. as components
of finished products. These Mexican and Canadian manufacturers will be asking
these U.S. Companies for this genus and species information in order for it to be
incorporate it into their declarations. This legislation requirement when applied to a
Virginia based board mill, the potential number of species that would have to be
tracked and or reported in a particle board or fiber board could exceed 70
species. For a Pennsylvania based board mill the potential number could exceed
100 species.

IKEA suggests that a de minimis limit for reporting purposes be employed to
capture the largest percentage of plant products used in the production of goods
while trying to keep the administrative and recordkeeping costs associated with
this reporting at a manageable level. IKEA would suggest that if an individual
component represents less than 10% of the weight or value of a product, that
component be exempted from the reporting requirements. As in IKEA particle
board example above, APHIS would accurately capture 97% or more of the plant
products used in the manufacture of particle board, without over burdening the
entire supply chain, the importer, Customs and Border Protection, or APHIS with
a listing of all possible tree species and countries from a greater geographic
region.

IKEA would also suggest that APHIS consider the use of the General Rules of
Interpretation (“GRIs”) of the Harmonized Tariff Schedule of the United States
(“HTSUS”) in order to better define a plant and plant product and the limit in
product that would require filing of this declaration. GRI 2(a) states that “Any
reference in a heading to an article shall be taken to include a reference to that
article incomplete or unfinished, provided that, as entered, the incomplete or
unfinished article has the essential character of the complete or finished article. It
shall also include a reference to that article complete or finished … entered
unassembled or disassembled.” GRI 3(a) and 3(b) provide guidelines for HTSUS
classification when goods are classifiable under two or more headings. GRI 3(a)
states in relevant part that “The heading which provides the most specific
description shall be preferred to headings providing a more general description.”
GRI 3(b) states that “Mixtures, composite goods consisting of different materials
or made up of different components, and goods put up in sets for retail sale, which
cannot be classified by reference to 3(a), shall be classified as if they consisted of
the material or component which gives them their essential character, insofar as
this criterion is applicable.”

These GRI principles can be applied to define the product in question, and
whether it is reportable, based on the “essential character” of the article. For
example, a tree is classified in chapter 6 of the HTSUS. It is harvested and taken
to the saw mill where it is turned into lumber which is classified in chapter 44.
This is a tariff shift from chapter 6 to chapter 44 while also moving from a plant to
a plant product. In the case of a couch this lumber is combined with textiles from
chapter 59 and screws and nails from chapter 73, it is now a composite good and
as such would not have the essential character of the plant or plant product. In
this case the combining of IKEA plant product with other product to create a tariff
shift again causes the plant product to lose its identity as a plant product and
become a furniture product.

2)Listing of Country of Harvest

Under the Act, the reporting of area of harvest is to be made on country level. This
will, in European manufactured products, generate an extensive amount of data as
the harvest area for a board mill is approximately 500 km (approximately 350
miles) and in Europe that could mean the plant product could come from several
countries (from 5-15 countries). For paper mills the harvesting area can be even
more extensive.

IKEA suggests that a de minimis limit for reporting purposes be employed to
capture the areas with the largest percentage of harvesting related to the
production of specific goods while trying to keep the administrative and
recordkeeping costs associated with this reporting at a manageable level. IKEA
would suggest that an area of harvest, for those plant materials which represents
less than 10% of the weight or value of a product be exempted from the reporting
requirements. For example a shipment of birch logs where 95% were harvested in
Sweden, 4% were harvested in Finland and 1% in Norway would be reported
listing Sweden as the country of harvest as the other two represent less than 10%
of weight or value of the shipment.

In addition, IKEA suggests the designation of “EU” for wood coming from the
European Union as an acceptable area of harvesting for reporting purposes.

3)Recycled Plant Material

The Lacey Act specifically authorizes that there be an exception in the reporting
requirement for paper and paperboard products that are made with recycled
paper. The importer is required only to declare the percentage of recycled
materials used in a product. While they are responsible to make a full declaration
on any percentage that is not made of recycled materials, this significantly
reduces the administrative and record keeping costs for paper and paperboard
importers. This is conceivably made as a concession to the recycling industry
which has grown significantly over the years and in which paper is one of the more
noteworthy recyclable materials.

While the legislation specifically calls out an exemption for paper and paperboard,
the legislation does not specifically prohibit the expansion of this environmentally
favorable exemption into other equally recyclable materials. IKEA would strongly
suggest that the section covering the declaration of recycled plant material be
expanded to cover all recycled plant materials and products containing these
recycled materials, including, but not limited to, particle board, fiberboard, and
hardboard products in addition to the paper products currently called out in the
amendments.

The use of recycled materials by operators of board mills in the production of
fiberboard and particle board is a standard business practice. Nearly all of the
particle board, fiberboard, and hardboard IKEA uses are partly made using pre-
consumer recycled sawdust from saw mills, with some board mills also using
recycled wood from buildings. Identification of the species for the recycled
sawdust is extremely difficult to trace and would be nearly impossible to do for the
wood recycled out of buildings.

All recycled plant materials should be included in the reporting exemption. The
consequence if they are not included would be that recycled wood commercially
becomes less viable due to the enormous costs in tracking materials used in
production, in compliance with the record keeping and reporting requirements of
the Act. This would have a negative impact on the environment, as manufacturers
move to produce more solid wood boards in an effort to lower tracking,
administrative and record keeping costs. This global increase in the demand for
solid woods would increase the amount of wood harvested. This would cause the
price of solid wood to increase which in turn increasing the cost of consumer
goods as the demand for wood increases.

4)Lack of a de minimis amount for reporting

Composite materials are often used in furniture and some of these are partly plant-
based cellulose. These materials, in most cases, represent a very minute part of
total plant material in a product. The plant-based materials are more or less
unidentifiable, are traded cross-border and the harvesting is very far down the
chain of supply.

Plant-based cellulose material content is often added to products due to
environmental concerns. Forcing a tracking system of the extent needed to
comply with the Act will further increase the reporting burden and increase the
cost for use of renewable materials.

IKEA again suggests that a de minimis limit for reporting purposes be employed
to capture the largest percentage of plant products used in the production of
goods while trying to keep the administrative and recordkeeping costs associated
with this reporting at a manageable level. IKEA would suggest that if an individual
component represents less than 10% of the weight or value of a product, that
component be exempted from the reporting requirements. As in our particle board
example above, APHIS would accurately capture 97% or more of the plant
products used in the manufacture of particle board, without over burdening the
entire supply chain, the importer, Customs and Border Protection, or APHIS with
a listing of all possible tree species and countries from a greater geographic
region.

5)Reporting of articles and component of articles

The draft declaration form for the Lacey Act requires that a product be broken
down to its parts in the reporting where a part differentiates from the main part of
the product. This is adding an additional level of complexity which is not called out
in the verbiage of the amendment. This additional requirement would also generate
an enormous amount of repetition data. Modern furniture parts are often
composites of 2-5 different plants materials, for example:

- The top of a chest of drawer can have an edge of solid oak, a surface veneer of
oak, the underside of the panel is covered with a paper foil and the panel it self is
made of a honey comb construction with a particleboard frame, top and bottom of
hardboard and a honeycomb of paper;

- The sides of the chest are with the same veneer, same edge material
and same paper on the inner surface as above but instead of the honey comb
construction a particleboard is used;

- The drawer front has the same veneer, same edge material and
same particleboard as previous but no paper;

- The handles for the drawers are made of oak;

- The drawer sides and the drawer back are made of the same
particleboard but with melamine paper;

- The drawer bottom is made of hardboard with melamine paper; and

- The back is hardboard.

In this example the particleboard is reported four times, the melamine paper two
times, the hardboard three times, the edge material three times, the veneer three
times. If all potential species, including those which may occur with less than 1%
of the total amount, the reporting will be extremely extensive for board materials
and paper.

To multiple the above reporting by the specific component reporting requirement,
particle board is made with between five to twenty different species from five to
fifteen countries of harvest. The melamine paper which is made of pulp which
could be purchased from anywhere in the world could have five to over one
hundred fifty species listed from one hundred or more possible countries of
harvest. Do this for the hardboard, edging materials, and the veneer could
produce a declaration with an average of eight thousand four hundred ten lines of
information for one simple piece of furniture. (See example on page 8 of this
letter.)

IKEA strongly suggests that each material is reported separately instead of trying
to split a complex product into parts and then report the materials of these parts.
This will also simplify a future tracking system where raw material providers will be
able to report electronically all necessary information for each material and each
step in the advancing supply chain can compile this information for inclusion in the
finished product.

7)Implementation

a)Time frame for Implementation

Businesses are expected to have a system ready and fully operational in a very
short time without having received clear information regarding the exact data
needed and format in which this information would be expected. This means that
any reporting must be handled manually from the source of the plant material to
the importer of the goods. This will severely affect the cost for doing business as
these suppliers must develop data bases, start tracking and recording this
information to fulfill requirements that may be for a small percentage of their
products produced.

IKEA would suggest that the reporting requirements be extended for 12 months to
allow importers the opportunity to not only develop their own tracking system and
record keeping systems to handle these new requirements. This time would also
allow importers to work back through their supply chains to educate and better
insure the information being provided from their suppliers and sub-suppliers is
accurate and in compliance with the legislative requirements.

b)Products produced prior to amendments to the Lacey Act
The requirements of the Act should not apply to products that were in production
or already produced prior to the enactment of the amendments to the Lacey Act
as it would be extremely difficult, if not impossible, to have suppliers,
manufacturers, and retailers provide information that had not previously been
required. Furthermore, the additional costs to the importers and suppliers to
reconstruct this information with any accuracy is immense.

IKEA suggests an exception for those products already produced prior to the
enactment of the 2008 amendments of the Lacey Act, since this legislation
requires the tracking through the entire supply chain.

8)Additional questions raised by Lacey Act regulations and information

IKEA’s project team is organizing the best method to collect information to
comply with the April 1, 2009 deadline for mandatory filing. In order to do this
timely, IKEA needs a more concise definition of “common cultivar.” What exactly
is included and excluded within the scope of the Act? The Webster Dictionary
defines cultivar as “an organism and especially one of an agricultural or
horticultural variety or strain originating and persistent under cultivation”. In
keeping with this common definition IKEA would suggest that all agricultural
plants as well as flax, hemp and similar plants grown for fiber be included under
the common cultivar exemption.

The draft declaration form for reporting indicates the quantity of plant material in
field 17 contradicts the sample provided on the bottom of page 2. In this sample
the quantity of plant material for the tables indicates the number of finished units,
not the total plant components used to produce these tables. As indicated in
section 5 of this letter, there are several components in one piece of furniture.
What is the correct reporting quantity?

IKEA would suggest that this reporting be done using the finished units. (Please
see example and additional suggestion on pages 9 and 10 of this letter)

Are U.S. produced goods which have been exported and then at a later date
imported back into the United States exempt from this reporting requirement?
Currently domestic manufacturers are not legislatively required to provide this
information for product moving intrastate, interstate or being exported from the
United States. However as previously mentioned, those U.S. manufacturers who
supply components to foreign manufacturers will indirectly be required to track
and keep records to provide to their foreign customers. If this product is not
exempt will special legislation be enacted to allow for this exemption under
Chapter 98 or 99 of the HTSUS?

IKEA would suggest that U.S. produced goods exported and later imported in the
same condition be exempt from the reporting requirements. IKEA would also
suggest that similar to our recycled plant material suggestion that importers be
allowed to report what percentage was U.S. origin. This would allow some relief to
U.S. domestic producers of the tracking and record keeping requirements this
legislation indirectly has applied to them.

Does APHIS have a specific point at which reporting will cease when a plant
material is substantially transformed in to a new form i.e. is processed from plant
material in to a chemical or a plastic? I.e. when is it no longer seen as a plant
material

There is also a concern that Customs and Border Protection and APHIS systems
would be able to handle the sheer volume of increased information. Please
consider the following scenario. Using the above mentioned chest of drawers as a
simple manufactured article in which an importer would have to breakdown the
finished good to its parts and then make the declaration of the materials for those
parts would look like the following;

Particle board
from 5 to 20 species averaged to 10, multiplied by the 5 to 15 countries of harvest
averaged to 7, multiplied by the number of declarations which would be 4 equals
280 lines of data. 10x7=70, 70x4=280.

Melamine paper
From 5 to 150 species, averaged to 75, multiplied by the 100 or more countries of
harvest averaged down to 50, multiplied by the number of declaration which would
be 2, equals 7500 lines of data. 75x50=3750, 3750x2=7500.

Hardboard
from 5 to 20 species averaged to 10, multiplied by the 5 to 15 countries of harvest
averaged to 7, multiplied by the number of declarations which would be 3 equals
210 lines of data. 10x7=70, 70x3=210

Edging materials
from 5 to 20 species averaged to 10, multiplied by the 5 to 15 countries of harvest
averaged to 7, multiplied by the number of declarations which would be 3 equals
210 lines of data. 10x7=70, 70x3=210

Veneer
from 5 to 20 species averaged to 10, multiplied by the 5 to 15 countries of harvest
averaged to 7, multiplied by the number of declarations which would be 3 equals
210 lines of data. 10x7=70, 70x3=210

This would give our simple manufactured chest of drawers the 8410 lines of data
for one article.

Now take this and apply it to the 200,000 Customs entries file in fiscal year 2008
for IKEA. Each of these entries had an average of 25 lines per entry. This would
come out to be 5 million lines for 2008. If IKEA had to make a declaration on 80%
of those 5 million entry lines that would be 4 million declarations. Multiply this by
the 8410 lines per article equals an additional thirty three billion six hundred forty
million lines of data for one company for one year.

Now if these declarations were to be in paper form, it is estimated, depending on
complexity of the product, it would take from 15 minutes to one hour to complete
a declaration. Based on the number of entries IKEA had for 2008 IKEA would
have to add 32 to 128 employees doing nothing but completing declarations.

This information, in turn would need to be reviewed by the APHIS staff. This large
amount of information is for one company doing business with only 35 stores;
multiply it by the number of importers, suppliers, manufacturers and retailers
doing business in the United States and the volume of information is truly
astronomical.

IKEA suggests the adaption of a finished unit reporting for quantity in conjunction
with the de minimis limit for reporting purposes be employed to capture the largest
percentage of plant products. Using the IKEA’s chest of drawers sample, this
method would reduce the number of lines of data being transmitted to Customs
and Border Protection and APHIS from 8410 lines for this one article to 584. This
is achieved in the following way;

Particle board
Would now report the 3 species which make up 97% of the board
multiplied by the average number of possible countries of harvest which in this
case is 7, to equal 21 lines of data ( 3x7=21).

Melamine Paper
Would now be 20 species making up 90% of the paper, multiplied by
average number of possible countries of harvest which the same as above would
be 25, to equal 500 lines of data (20x25=500).

Hardboard
Would now report the 3 species which make up 97% of the board,
multiplied by the average number of possible countries of harvest which in this
case is 7, to equal 21 lines of data ( 3x7=21).

Edging materials
Would now report the 3 species which make up 97% of the edging
material, multiplied by the average number of possible countries of harvest which
in this case is 7, to equal 21 lines of data ( 3x7=21).

Veneer
Would now report the 3 species which make up 97% of the veneer, multiplied by
the average number of possible countries of harvest which in this case is 7, to
equal 21 lines of data ( 3x7=21).

This would now give the simple chest of drawers 584 lines of data for one article.
While this could still be seen as a large amount of data for one article this is a
much more manageable reporting, record keeping, and transmittable amount of
information.

This would cause the number of lines of data transmitted over the course of a year
to drop from thirty three billion six hundred forty million lines (33,640,000,000) to
two billion three hundred thirty six million lines of data (2,336,000,000).

Thank you for the opportunity to provide IKEA’s comments and concerns on this
matter.

Sincerely,

Christopher Smith
N.A. Compliance Specialist
IKEA Wholesale Inc

Attachments

 (1)

Comment from Christopher Smith

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Comment Period Closed
Dec 8 2008, at 11:59 PM ET
ID: APHIS-2008-0119-0047
Tracking Number: 807ced73

Document Information

Date Posted: Dec 6, 2008
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Submitter Information

Submitter Name: Christopher Smith
City: Westampton
Country: United States
State or Province: NJ
Organization Name: IKEA Wholesale Inc