Furniture suppliers unsure how to comply with new formaldehyde rules

Issues include pricing and documentation

Heath Combs -- Furniture Today, August 25, 2008

LAS VEGAS - Furniture suppliers share a common emotion when it comes to California's new formaldehyde regulations: confusion.

The new law will restrict the amount of formaldehyde that can be emitted from composite wood panels like plywood or MDF board.

Sources such as Martin Furniture and Aspenhome report that big-box retailers like Wal-Mart and Costco have sent out notification letters about compliance with the law.

But many suppliers report a troubling sign: With an 18-month countdown starting in January for California retailers to get rid of non-compliant inventories, many exhibitors at the recent Las Vegas Market said independent stores aren't asking much about the regulation.

The rule will be enforced by the state's air quality regulator, the California Air Resources Board, or CARB. It will require that manufacturers of composite panel have their product certified as compliant by a third party, with in-plant quality control testing.

Aspenhome has been working on compliance with the regulation since January, said Bill Reece, vice president of import manufacturing for the full-line furniture source.

Reece said that keeping records will be the key to compliance, since enforcement is based on chain-of-custody documentation of emissions testing. The new law requires that boards be traced back to their mills.

"The paper trail is going to be the key to success in this whole story," he said.

Many vendors say they don't know what represents a fair price for low-emission wood boards that will comply with the new law. They are also confused over where the board can be purchased, and wonder how the law will be enforced.

Reece said Aspenhome has priced low-emission European E1 grade particleboard so the company can gauge how much the rough U.S. equivalent will cost. The hard part has been estimating the correct upcharge that furniture factories will be paying for CARB-certified board, he said.

In general, using the E1 board adds 10% to 15% to product costs based on a 6% to 7% increase in material costs to board suppliers, he said.

But CARB-certified board, as required under the new law, could add up to 35% more in material costs, said Reece. This may reflect some padding by suppliers hoping to gain margin after holding prices lower this year, even as commodity price hikes forced the prices of many durable goods higher, he added.

E1 board may meet the requirements CARB certified board, but CARB requires third-party certification.

Estimated emission values from E1 particleboard and E1 medium-density fiberboard are likely to be lower than their respective CARB standards for the first phase of implementation but E1 hardwood plywood probably will not, said Brent Takemoto, staff air pollution specialist for CARB.

And the products still must undergo verification of emission levels using primary and secondary testing methods, he said.

"Manufacturers of particleboard, MDF and hardwood plywood need to have an agreement with a CARB-approved third party certifier who emission-tests their products and inspects their manufacturing plants. As such, a board stamped as E1 would not be considered as a compliant product for purposes of the California regulation," said Takemoto.

Later this year, Aspenhome will release a corporate statement on the formaldehyde standard, Reece said. New items will be priced to E1 board costs.

"When a state that populous creates a regulation for the benefit of the people we need to recognize it," he said. "We need to be on front end, rather than pulled along by regulations."

Companies are still having trouble with is interpreting the law, he said.

"Time is getting short. It's our responsibility to protect our dealer," he added.

Perhaps one of the most significant, and most misunderstood, concepts of the new regulation is strict liability, said Ashley Chairman Ron Wanek. The California rule says that all handlers of items containing composite panel will be held liable for compliance, and that regardless of precautions, those carrying non-compliant board will be subject to enforcement.

California-based Powell Co. also plans to convert to E1 specs on all products, said Bill Benton, president of the dining, occasional and youth bedroom specialist.

"Someone's got to take the lead and bite the bullet. Some might vacate California but we're not. It's shortsighted," he said.

Benton said few California retailers have asked about the regulation. That sentiment was shared by Joff Roy, president of casual dining specialist Jofran.

Roy also said he'd like to see the enforcement deadlines extended, to give furniture suppliers more time to seek efficiencies. "We would love to see more leadership to lobby the California government," he said.

Manufacturers also said that the prospect of finding certified board in Asia is challenging because there currently are few CARB approved board certifiers there.

"We're still trying to figure out how to comply and who do we hire to measure. We don't use particle board but we do use solid wood veneer core," said Tom Underhill, co-president of bedroom and dining producer Tradewins Furniture. "We don't have a ton of answers."