Manufacturers in Regulatory Limbo as TWIC Reader Rule Fuels Compliance Crisis

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Across the nation, manufacturers have demonstrated a firm resolve in protecting critical infrastructure, their facilities and key assets from natural disasters, manmade hazards and terrorism. The industry prudently engages in risk management planning and invests in security as a necessary component of its business operations. To achieve this, manufacturers need regulatory certainty to make appropriate, economically justifiable long-term investments to protect facilities’ threat and vulnerability conditions. Unfortunately, the U.S. Coast Guard (USCG)’s Transportation Worker Identification Credential (TWIC) Reader Requirements Final Rule (Final Rule) runs counter to manufacturers’ efforts to efficiently and effectively protect their facilities. In four short months, manufacturers must comply with a Final Rule that not only lacks regulatory certainty, but also creates significant logistical challenges for the regulated community.

The TWIC reader rulemaking was a long time in coming, as it took the USCG several years to study readers’ performance, solicit and evaluate stakeholder feedback and develop the rule. But when it emerged, the Final Rule was alarmingly flawed. Without notice, the scope of the Final Rule was expanded beyond what was initially proposed and departed from established Coast Guard policy (PAC 20-04). Specifically, the Final Rule requires electronic TWIC inspections at facilities that only receive Certain Dangerous Cargoes (CDCs) by non-maritime modes of transportation, such as truck or rail. It also requires electronic inspections at facilities that only receive, but do not unload, vessels containing CDCs. These changes did not go through public notice and comment—a clear violation of the Administrative Procedure Act.

Moreover, the TWIC Reader Rule is out of step with the new administration’s regulatory-reduction efforts. The rule runs counter to the White House executive order to reduce regulation burdens, as it would create substantial new regulatory burdens for manufacturing sites and for thousands of workers nationwide.

Congressionally mandated assessments have called into question the effectiveness of the TWIC reader program. In May 2013, the Government Accountability Office (GAO) issued a report (GAO 13-198) that raised concerns about the TWIC reader program’s effectiveness in enhancing security. As a result, the GAO called on Congress to halt the promulgation of a Final Rule until the assessment is completed. In December 2016, Congress passed legislation (PL 114-278) that requires the Department of Homeland Security (DHS) to conduct an assessment of the effectiveness of the TWIC program. The DHS has yet to complete this critical assessment, but it is still moving forward and requiring that more TWIC readers be installed at more facilities and in more locations despite uncertainty about their benefits. This situation is creating logistical challenges for facilities that are already in compliance with TWIC visual inspection requirements.

Importantly, for many months, the industry expressed its concerns to the DHS, the USCG and Congress that the rulemaking process was undeniably flawed. The regulated community has relied on representations by the USCG that it would extend the Final Rule’s compliance date by three years, but this extension has not materialized. The industry is very concerned at the rapidly approaching deadline for the new rule, as manufacturers now lack the required lead time to sufficiently plan and install new equipment, infrastructure and software and to train new employees.

Facility security remains a top priority for manufacturers and they want to ensure that their facilities are in compliance with all DHS and USCG regulations. With the compliance deadline looming, manufacturers’ concerns are growing as they remain in limbo. This flawed rule’s compliance deadline must be delayed while the USCG addresses the critical issues regarding effectiveness of the new requirements and the scope of coverage.

New Report Analyzes the Impact of Proxy Advisory Firms on Public Companies

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An important new report highlights the influence of proxy advisory firms, largely unregulated entities that shape decision-making at public companies.

The Conflicted Role of Proxy Advisors, released by the American Council for Capital Formation, explores proxy firms’ conflicts of interest and lack of transparency.

These firms advise institutional investors, such as pension funds and mutual funds, on how to vote shares of public company stock held by the funds. That grants the firms significant power over millions of workers’ retirement accounts.

Because of their substantial influence, the report identifies proxy advisors as “quasi-regulators with unchecked power” and makes the case for bringing them within the oversight of the Securities and Exchange Commission (SEC).  The report specifically quotes former SEC commissioner Daniel Gallagher, who called for the firms to be “subject to oversight and accountability commensurate with their role.”

Bringing proxy advisory firms under SEC regulation is a longstanding goal of the National Association of Manufacturers. In particular, manufacturers support the Corporate Governance Reform and Transparency Act (H.R. 4015), bipartisan legislation sponsored by Reps. Sean Duffy (R-WI) and Gregory Meeks (D-NY) that was recently approved by the House of Representatives. The bill would increase transparency around the firms’ standard-setting processes, allow public companies to respond to errors in voting recommendations, improve the quality of information available to investors and require the firms to disclose and mitigate conflicts of interest.

As the report makes clear, the proxy advisory firms need accountability, transparency, responsiveness and competition.

NAM Members Tackle Skills Gap in House Testimony

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Approximately 426,000 U.S. manufacturing jobs are going unfilled today because there simply are not enough qualified applicants to fill them. This is a big problem, the so-called “skills gap,” and it threatens not only the future of the manufacturing industry but of our economy more broadly. Worse, unless we do something to reverse this trend, that number of unfilled jobs is projected to rise to 2 million over a 10-year period. So what can we do?

That was the question before lawmakers today at a House of Representatives committee hearing titled “Jobs and Opportunity: Employer Perspectives on the Jobs Gap.” Among the expert witnesses called to testify before the Ways and Means Subcommittee on Human Resources were representatives of several National Association of Manufacturers (NAM) member companies.

Glenn Johnson, manufacturing workforce development leader at BASF Corporation, helped identify the challenge in his testimony:

“Recently, there has been national discussion around the ‘Jobs Gap.’ There are numerous studies announcing the shortage of American workers that possess hirable skills within manufacturing and other industries with technology roles. However, if we are to solve this issue, we must treat the root cause, not the symptom. The lack of skilled workers, for example, is a symptom. The root cause, however, is much more basic. In this country, we have allowed a narrative to develop that the “best” jobs are no longer in manufacturing, but in white-collar, office settings – although these jobs are also essential to manufacturing.”

This, of course, is a real problem. And yet, as Fiat Chrysler’s Head of Human Resources Barb Pilarski explained in her comments:

“First, our high school education system does not adequately expose students – especially those who may not be interested in a four-year college degree – to the manufacturing sector and the attractions of careers in this area. Second, this same education system has been inconsistent in terms of providing all graduating students with the skills to keep pace with the evolution of the [industry]….”

Both Johnson and Pilarski offered ideas on how to overcome these problems. So did Steve Staub, president of a small manufacturing company called Staub Manufacturing Solutions in Dayton, Ohio. You may remember Steve from his appearance at the State of the Union earlier this year as a guest of the First Lady. Well, as Steve explained in his testimony, small companies like his are roaring back and growing at a rapid pace—thanks in many ways to pro-growth policies out of Washington, like tax reform—but they simply are not able to find enough workers to keep pace with all the new openings they need to fill. And, as Steve reminded us:

Today’s manufacturing industry is modern, high tech, alive and growing, and it offers many promising career options—often, I should add, without the financial burdens that students and families face today….The average manufacturing worker earns about 27 percent more in wages and benefits than the average worker across all sectors.”

He explained what companies like his, educational institutions, organizations like the NAM and others are doing to take on the “skills gap” challenge as well as what Congress can do to help. I hope you’ll take a moment to check out his full testimony here. 

Annual Conference Highlights Bipartisan Support for Ex-Im Bank

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Over the past two days, leaders in business, policy and both political parties have joined together to discuss the importance of the Export-Import (Ex-Im) Bank at the EXIM Annual Conference 2018.

They heard from many keynote speakers like Secretary of Commerce Wilbur Ross, a Republican. Secretary Ross spoke on the importance of the Ex-Im Bank in helping U.S. small businesses sell more exports. He also warned how, without a functioning Ex-Im Bank, the United States would continue to cede jobs, growth and geopolitical power to China as Beijing expands in overseas markets at America’s expense. Another keynote speaker was Sen, Heidi Heitkamp, a Democrat. She agreed. “We have got to have the institution of the Ex-Im Bank up and running to be competitive,” Sen. Heitkamp said, noting that 82 other countries have a similar agency. Both Secretary Ross and Sen. Heitkamp, and the many other business and Hill voices, are absolutely right.

These latest bipartisan expressions of support for the Ex-Im Bank come on the heels of recent positive comments from policymakers as varied as Sen. Sherrod Brown (D-OH) and President Donald Trump, and they underline the critical role it plays for manufacturers in the United States—especially small manufacturers, given that more than 90 percent of the bank’s transactions in fiscal 2016 directly supported small businesses. The bank enables U.S. exporters to compete on a global scale for the 95 percent of consumers who are located outside our borders. In short, the Ex-Im Bank helps level the playing field for our businesses competing against foreign companies. But it cannot continue to level the playing field if it is not even allowed to function properly, which is the situation manufacturers face right now. Indeed, the bank lacks a quorum on its board of directors, and thus is unable to even consider many transactions much less support American jobs.

Manufacturers and the many Americans whose jobs depend on the Ex-Im Bank need the Senate to act to restore a quorum on the bank’s board of directors.  That’s what we have repeatedly urged. That’s what members of both parties understand and are echoing at this week’s conference. That’s what our country needs as soon as possible.

Small Manufacturing Leader Chuck Wetherington Testifies on State of Trade

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Today, the U.S. House Committee on Small Business heard from BTE Technologies President and NAM Executive Committee member Chuck Wetherington about how small business manufacturers like BTE can compete and succeed in markets around the world. Here were his key recommendations:

  • A positive outcome on NAFTA talks
  • Senate confirmation of the pending board nominees to return the Export-Import Bank to full functionality
  • More export promotion assistance programs

Wetherington—a leading voice for small manufacturers in America—also shared some of his own experiences competing overseas:

  • About how his company, which consistently focuses on expanding to new markets every two to four years, recently expanded to the Gulf Cooperation Council and saw its exports to those six Middle Eastern countries grow from virtually nothing to 20 percent of its exports in three years
  • About how he, having just returned from China—a country that recently undertook major overhauls to its medical device regulations but is rolling those updates out piecemeal and without any clear path to follow toward compliance—saw firsthand why regulatory harmonization needs to be an important part of U.S. trade strategy
  • About how BTE—like many other small business manufacturers—has benefited significantly from market-opening agreements like NAFTA and the U.S.–Korea Free Trade Agreement, with BTE alone seeing 130 percent growth in its exports to South Korea following ratification of our free trade agreement with that country.

Here’s his statement to the committee: