Document zQjgEdZDD9Ov3BnBgxbbGoGjg

the society of the plastics industry. INC. 250 PARK AVENUE NEW YORK. NEW YORK 10017 212/573-9400 MINUTES BOARD OF DIRECTORS MEETING OF THE SOCIETY OF THE PLASTICS INDUSTRY. INC. The Mayflower Hotel Washington, D. C. April 29, 1975 SPI-22519 THE SOCIETY OF THE PLASTICS INDUSTRY. INC. 290 PARK AVENUE NEW YORK. NEW YORK 10017 . 212/573-9*00 April 29. 1975 Directors Present: A. A. Andrews Fritz Backachelder Welter Becker Donald Bryan DeVitt Cheney Janes J. Coleman Robert Cook Robert Elliott Reed Estabrook Jack Flynn Jerome Forao Iver Freeaan Robert Gerdes Charles Grant Robert Hoffer Harry Katz Robert Kittredge Josef Kllngler Leonard Lane Jean Malone Robert Morrison LaVern Niedfeldt Charlea O'Connell Donald Pollock John Relb Clyde Rushing C. Rex Scott Stanford K. Shan Sanuel Smith Fred C. Sutro William Wlllert SPT BQARQ op DIRECTORS MEETING MINUTES Mayflower Hotel Washington, D. C. Monsanto Recto Molded Products Mobay Chemical Corporation Mobay Chemical Corporation Allied Chemical Corporation ICI America Plastic Industries, Inc. Pronto Plastics Brook Molding Corporation Dow Chesdeal U.S.A. Plasties, Inc. Package Machinery Co. Plastics Moldings Corporation Hercules, Inc. Hoffer Plasties Corporation Variform Plasties, Inc. Fabrl-Kal Corporation Janler Plastic Mold Corporation Icore International B. F. Goodrich Chemical Co. Molded Fiber Glass Companies Technical Plastics Corporation Gulf Oil Chemicals Company Consupak, Ine. Conair, Inc. Peco, Inc. Phillips Petroleum Company Shaw Plastics Corporation Van Dorn Plastle Machinery Co. USS Chemicals Egan Machinery Co. DIRECTORS ABSENT: Robert L. Chlekey J. F. Cogdell Robert Daily Dan J. Edwards Jack E. Glatt John A. Larkin Kusan, Inc. E. I. duFont de Nemours & Co. General Electrie Corporation Dennis Chemical Co. Keolyn Plastics, Inc. W. R. Grace & Co. SPI-22520 2 PI SECTORS ABS1MT (coat.) Vernon L. Larson Miles Powell Seymour Rosenhouse Gerald A. Schultz Robert Stllllnger Eugene H. Wierd Harold Wright GUESTS PRESEHTs Jsmes Alberts John Brought Kenneth Broo A, Clerk David Clavadetscher (Monday Only) William Driver Martin Haley James Bearons William Kennel James Kiss Ronald McCreary William Miller Richard Moore John Myers Saul Ricklin Edward Slatcher Matt Swetonlc Kenneth Vallesloey Ned Wllgus SP1 STAFF PRESET: Lloyd Darden Charles Elsala Calvin Green Ralph L. Harding, Jr, Jerome H. Hednsm Laura E. Jones John Lavrenea Thomas J. McGrath E. S. Nuspllger Robert Sherman Robert R. Tlernan Charles Titus Union Carbide Corporation Chemplaet, Inc. Vydel Corporation Noury Chemical Corp. Crown Molding Co. Ren Plasties Shenandoah Plasties Corp. Dart Industries USS Chemicals Boonton Molding Co. Manufacturing Chemists' Association Premix, Inc. Manufacturing Chemists' Association Martin Ryan Haley Associates Owens-Corning Flberglas Amoco Chemicals Corp. Hill and Kaowlton D-M-E Corporation Johnson Rubber Company W. R. Grace Container Corporation of America Dixon Industries Corp. Container Corporation of America Hill and Knowlton Mastic Corporation Omega Plastics Western Regional Manager Director of Finance and Admlnistrati Manager of Public Relations President SPI General Counsel Secretary to the Board of Directors Technical Director General Manager Director of Public Affairs Midwest Regional Manager SPI Legal Counsel Washington, D. C. Manager SPl-22521 - 3- Chairman Seotc called the meeting to order at 8:45 a.m. and asked for selfIntroductions. Mr. Scott asked for approval of the Minutes of the last Board Meeting, which were mailed previously to all Directors. There being no additions or corrections, Mr. Gardes moved that the minutes be approved, Mr. Coleman seconded the motion and the Board approved them. gTgffiiTTW CCMMITTBg REPORT Mr. Scott reported that the topics discussed at the Executive Coenlttee Breakfast would be covered In the Board Conlttee Reports. He moved that Mr. Hoffer (as Chairman), assisted by Messrs.Elliott and Rats be approved as Inspectors of Election. Mr. Freeman seconded the motion and the Board approved It. Mr. Hoffer then reported on the results of the ballots cast by the membership as follows: 1. 563 proxy statements were received. 2. 533 ballots were cast for the re-election of the four officers, Messrs. Scott, Chairman, Shaw, Vice Chairman, Wlllert, Secretary, and Yledfeldt, Treasurer and for the election of the six Directors at Large: Messrs. Gardes, Grant, Herons, Lana, Malnna and ******* (tha 30 ballot difference between those received and those cast for the election of Offieera and Dlractora at Largs la dua to tha fact that tha ballots wars Incomplata and tharafors couldn't ba counted). 3. The following are tha votaa of tha four Bylaw Amendments: Proposal 1 - to enable foreign companies sailing to tha United States plaatlea Industry to beeoms Class 1 voting members of Tha Society: Yes 389 llo 94 Proposal 2 - To speed up new membership approval procedures: Yaa 476 Mo 8 Proposal 3 - Delation of all references to "International Affiliates" since SPI-Canada la now totally Independent: Yea 478 Mo 4 Proposal 4 - Substitution of "Director of Flnanee" for "Controller" to align the Bylaws with tha present organization structure: Yes 484 Mo 1 Mr. Chaney moved to accept the report of the Tellers of Election, Mr. Lane seconded the motion and it was approved by tha Board. SPI-22522 - 4- Mr. Scott announced that the 1975-1976 Executive Committee would conalat of Meters. Shaw, tflllert, Nledfeldt, Hoffer, Freeman, Sutro,O'Connell and Estabrook. Mr. Elliott motioned that the Executive Cosmlttee for 1975-1976 be approved, Mr. Cerdee seconded the motion and It was approved. Mr. Scott announced that he had appointed Mr. Gardes to serve as Chairisen of the Processors CoMlttee. FINANCE CatlTTEE REPORT Mr. Nledfeldt reviewed the 9-month Financial Statement which he up-dated by reference as capered to the 10-month statement, which had just been prepared and therefore could not be distributed to the Directors. Based on the 10-aonth statement the year-end projection of excess revenue over expenses Is estimated to be approximately $410,000. There is a favorable variance of $282,175.in the expenses versus budget category. The 10-aonth statement shove Class 1 dues of $3,145,000 have been pledged; $3,063,000 have been collected and a balance of $62,000 is outstanding. It is the opinion of the Director of Finance that all but $10,000 or $12,00 would be collected. Mr. Nledfeldt then reviewed the 1975-1976 proposed budget, which was set st $3,615,000. Class 1 membership dues are expected to be $3,230,000. He said that this proposed budget was a very tight budget. The only significant increase compared to the 1974-1975 budget would be la the FAC segment. In 1974-1975 the FAC budget was $900,000. This has been increased to $1,200,000. One million alnty-flve thousand dollars of these funds is SFI dues money and $105,000 is the remaining balance of the self-funded Public Affairs Council that relinquished their funds to SFI as of December 31, 1973. In addition, Mr. Nledfeldt said that the operating expenses had to be increased by approximately 71 which speaks well for the staff In controlling expenses. Mr. Nledfeldt moved that the Board adopt the proposed 1975-1976 budget. Mr. Flynn seconded the motion and the motion carried. Mr. Nledfeldt submitted the following resolution, which had the approval of the Finance Committee for adoption: 1. Be It Besolued that the SPX available Reserve Fuad for emergency actions and operating Income and expense variations be governed by a minimum/ maxlmma rule, and that this rule be a 251 minimum and a 501 --of the current year's operating budget. Authority to go below the minimum reserve shall be the responsibility of the President and the Executive CoanhLttee. Mr. Gardes seconded the motion and the Board approved it. SPI-22523 2. Be it Resolved that $28,000 be appropriated for capital expenditures for office furniture and furnishings in connection with the move to the new office space in New York City. Mr. Lane seconded the notion and the Board approved it. Mr. Niedfeldt reported that it was the consensus of the Finance Coonittee that there will be no carry over of SP1 funds from one year to the next except in the case of self-funded groups. Mr. Niedfeldt thanked the Finance Coonittee for their help and cooperation during the past year. Mr. Kata motioned that the Finance Coosittee report be accepted, Mr. Cheney seconded the motion and the Board approved it. MEMBERSHIP DEVELOPMENT CQftilTTEE REPORT Mr. Willert reported on the membership changes since the February Board Meeting. The total Class I membership is 1,209 companies. This figure Includes 24 new members and 26 resignations (Of chose 26 resignations 4 companies went out of business and 6 cooq>enie* merged). Under Class II membership there were two new members and 2 resignations. Class III membership showed a gain of 4 new members and no resignations and Class IV Membership showed a loss of 3 members. Mr. tflllert motioned that all membership changes, including those changes listed on the addendum be approved by the Board, Mr. Flynn seconded the motion and the Board approved it. Mr. Wlllert reported that the Membership Development Comsaittee discussed a new associate membership classification for captive processors, l.e. Ford, General Motors, IBM, Johnson & Johnson, etc. The many ramlficationa Involved need to be resolved by the Membership Development Cosnltee* It was decided to form an ad hoc coosittee consisting of membsrs from Che Planning, Finance and Membership Development CoMdttees. The formation of this ad hoc coortttee was approved by the Executive Conittea. The Membership Development CooUttee proposed a change in Class II Associate Member dues. At present their dues range from $100 to $825. This would be changed from a $200 minimum and a $3,000 maximum. Due to errors sad omissions in the new mini directory, the Committee recommends that the revised mini directory be reprinted 90 days after June 1 Instead of reprinting in December. SPI-22524 -6- The Committee further reconaended that an additional advertising program-be initiated for the coming year and included In the budget ($25,000). This program la the result of the favorable response obtained from the limited advertising that was done to date. In addition to Membership Promotion, It is felt that the new prograai should be aimed at Improving SPI's image la the Industry. Mr. Wlllert called the Board's attention to the brochure prepared by Bob Sherman on "SFI Activities and Services." The Conlttee felt chat the same format should be used in the SPI Annual Report. Mr. Willert them appealed to the Board and to every member to help promote membership. He expressed appreciation for everyone's continued cooperation. Mr. Smith motioned to accept the report of the Membership Development Comittee. Mr. Kllngier seconded the motion and the Board approved it. PLANNING COMMITTEE REPORT Mr. Shaw stated that the Planning Committee discussed many Important topics concerning the future of SPI. The Coomittee again reviewed the matter of the frequency of Board of Directors Meetings and offered the following recommendations That the Board of Directors in accordance with the Bylaws of SPI hold three meetings a year, one of which will be the Annual Meeting In the spring. The other two meetings will be held in conformity with the usual format. The Comaittee reconended Chet the various Board Committees meet as frequently as they deem necessary at whatever location the staff and the individual committees choose. It wes further recomended that the poliey of three Board Meetings per year be initiated in fiscal 1976. Thtrefore, the meetings scheduled for Williamsburg, Innisbrook and Dal Monte Lodge will not ba changed. Mr. Shew aald that the Coslttae had dlacuaaad the memorabilia which la now located at SPI. The Planning Committee recommended that further discussions be held to decide how this historical data can bast be used to enhance the image of the plastics industry. Mr. Harding reported that there have bean soma discussions with several Museums including the Smithsonian, The Chicago Museum of Science end Industry and the Boston Industry Museum about housing the memorabilia, however, the coats involved sre exorbitant. Mr. Katz motiommd to accept the Planning Committee report, Mr. Gardes seconded the motion and the Board approved it. PUBLIC AFFAIRS CCHMITTEB REPORT Mr. Sutro stated that the increase of $200,000 in the PAC 1975-1976 budget would be spent primarily for the public affairs positive publicity program in the key issue areas of Snergy and Feedstocks, Combustibility, Toxicity, Product Safety and Solid Waste. SPI-22525 7 Hr. Haley reported on the legislative surveillance activities during the current year. He stated that the Congress was accelerating its work with 75,000 bills Introduced. In addition, there were 110,000 bills Introduced into State legislatures and of these 1,500 bills were of importance to SPI. In the following seven states there was intense activity: New York, Massachusetts, New Jersey, South Carolina, Minnesota, Vermont and Oregon. There are some 200 bills at the state level that are of priority Interest to SPI. There is a definite build-up of container legislation. However, at this point the industry has sustained no significant legislative loss. Mr. Haley Informed the Board that the industry support system was reasonably complete with approximately 225 coi^>anles participating. Mr. Heclasan reported on the legal activities of Keller and Heckman on behalf of SPI: 1. Mr. Heckman felt that the NPE Tax ease would go to court and it may well be a landmark decision. Cohen and (Jretz, SPI's attorneys are optimistic about the outcome. 2. Mr. Heclnen reported that the Supreme Court had denied the industry's petition for a stay of the OSHA VCM standard. The petition for a writ of Certiorari is still pending. EPA is currently treating PVC as an air pollutant rather than a water pollution problem. Keller and Heckman continue to work closely with the FDA on the PVC situation. 3. With respect to the Housewares Exemption, Mr. Heckman reported that it does not look like the ruling will be forthcoming.very soon, and it is hoped that when the ruling is made, there will be an exemption for repeated use articles such as plastic pipe. 4. With respect to Plastic Bottles for Carbonated Beverage and Beer Use, Mr. Heckman reported that a draft envlroomental i^>act statement was Issued by the FDA. The document states that FDA is of the opinion that its Jurisdiction is to determine if a material will be injurious to people's health and not whether they will cause litter problems or genersl environmental concerns. Thus, the issue of the returnable bottle: versus the non-returnable bottle should be decided by the legislative branch. The FDA has Invited lew suits from interested parties about its action in order to clear up any "gray areas" in the law; however, the FDA will have to defend its position if a law suit is instituted, and we will have to monitor this elosely. 5. Mr. Heckman reported that Vermont has passed a law banning six-pack hlghcones along with cans and any other non-returnables. In Minnesota SPI is involved in a law suit with other trade associations against the State which passed a law stating that if any change is made SPl-22526 -8- la * package or produce which may be vharmful to the environment, ehii change oust be reviewed end approved by the Minnesota Pollution Control Agency. Ve believe thie lew exceeds the authority of the Federal EPA, FDA and 06HA. In Massachusetts several paper companies have Instituted a Declaratory Judgement suit not to allow the Food and Drug Administration to call anything that night cone Into contact with food - a food additive. This Iswmuld enpower the FDA to seise and inspect factories, trucks, etc. and do all the other things you can do relative to a food. This ease presently, is being appealed in Massachusetts and Mr. Heckman will be arguing It on behalf of the paper companies. Mr. Sutro reviewed the packet of aaterial on SPI's energy position and the de regulation of new natural gas. Mr. Dick Titus was introduced to the Board as the new Washington Office Manager. Mr. Gardes actioned, to accept the report of the Public Affairs Committee, Mr. Cook seconded the notion and the Board approved it. SPE Mr. Meyers reported on the activities of SPE for the pest few nonths. Presently, it Is estimated that between 2,400 end 2,700 people will attend the SPE ANTEC in Atlanta. One hundred twenty-three display bootha have been sold. SPE will be developing an energy statement which will parallel SPl's effort. In addition, SPE haa been engaging In many activities on a joint basis with other aesociatlons both domestic and foreign. The SPE has joined the Federation of Materials Society - an organization heavily involved In materials supply and manpower problema. A joint masting will be held with RAFBA In 1977, end areas of cosmsm Intaraat ara balng discussed with the German Society of Plastics Engineers end also with tha Yugoslavian Society. MCA Mr. Driver stated that he was delighted to be a guest at tha SP1 Board and Annual Meeting. He said that prssantly, a grsat daal of his tins is occupied by the concern over toxic substances. MCA has attempted to Improve the Senate version of the Toxic Substances Bill. He exprsssad the hope that SP1 and MCA will work together in mutually beneficial ways. PROCESSORS COMMITTEE Mr. Katz stated that the Processors Comaictee did not hold a meeting due to the tight time schedule of the Board end Annual Masting. In addition, there ere no pressing issues to be brought before the Board. SPI-22527 - 9- OPERATING UNIT REPORTS MIDWEST SECTION Mr, Sherman reported that the Midwest Conference would be held on June 8 - 10 et Nordic Hills with the theme, "How to Survive In 1975 and Plan for 1976." Dr. Walter Heller will be the keynote speaker. WESTERN SECTION Mr. Elliott reported that approximately 800 people attended the Western Conference In San Francisco. Mr. Darden added that the Western Section Man of the Year Award was given to Leonard Lane. PPI Mr. Harding stated that the Plastic Pipe Institute held a very successful Annual Meeting comemoratlng the plastic pipe industry's 25th anniversary. FURNITURE DIVISION Mr. Cook introduced the following resolution on behalf of the Pumiture Division: Whereas Article III, Section 2 of the SPI Bylaws require Board of Directors approval for specific project funds in excess of $2000 and. Whereas the Styrene Producers Ad Hoc Committee of the Furniture Division wishes to undertake a separately funded testing program for the purpose of obtaining data for PAC use in formulating a response to a petition filed by Brady Wllllasuon with the Consumer Product Safety Coimsission if and when it is deemed appropriate and Whereas the estimated project ooat is in excess of $2,000 and Whereas the seven companies who constitute the Ad Hoe Committee have unanimously approved the project Be It Resolved that the Furniture Division be granted Board approval to undertake the separately funded testing program. Mr. Flynn motioned that the resolution be approved, Mr. Klttredge seconded the motion and the Beard approved it. HOLDERS MAHAGPgMT DIVISION Mr. Cerdas read the following statement to the Board regarding tax reform: "It la iterative for SPI to take an active position on tax reform rate legislation. The future growth of our industry, particularly during periods of high money coots requires tax relief for small businesses. SPI-22528 10 - 1. The rising cose of capital equipment mandates the establishment of a stable investment credit for business at an over-all 101 level without the present $35,000 limit. 2. Because of rapid changing technology, early equipment obsolescence and the effects of inflation on replacement coats, depreciation provisions and tax laws need to be liberalized and si^lifled. We acknowledge and appreciate current actions on business income tax. It is too early to assess the results and therefore have no recommendation on tax relief at this time." CELLULAR PLASTICS DIVISION Mr. Becker stated that Mr. Charles Lappen, a consultant for the Cellular Plastics Division was named Man of the YNr by the Bedding Industry. VCM and FVC PRODUCERS COMITTEE Mr. Harding stated that this Committee is becoming a long-term, self-funded SP1 Committee. They have already spent approximately $575,000 of their own funds. COO&DIHATIHG COMMITTEE OH CONSUMER SAFETY Mr. Lawrence reported that at the last meeting of this group there was a record attendance of approximately 160 people. INTEMtATIOHAL CCMHITTEE Mr. Harding reported that William Christopher, Chairman of the International Committee had testified at the recent hearings on tariffs. The Button Group in addition, filed a separate statement on the Inroads made by foreign producers in the domestic button industry. However, SP1 la still cooperating and working through the Office of the Chemical Industry Trade Advisor under the auspices of MCA. Mr. Harding informed the Board that there was still exhibitor space available at the R- 75 Show in Itasseldorf. A tour package is also available and the brochure with the details has been mailed to all SPI member co^anies. NATIONAL PLASTICS IXP0SITI0M AMD COHFERElfCK Mr. McCreary stated that the NFE prospectus will be mailed early in May. A meeting will be held late in May to select the show contractor. The NFS drawing will be held at the Waldorf Astoria Hotel on September 24, 1975. PLASTICS IN CONSTRUCTION COUNCIL Mr. Harding stated that an article detrimental to plastics used in construction had been published in the New York Tisws. The Times later published a rebuttal written by Joe McDermott. SPI-22529 Il COMTEHTS 1. Report on Current Status of HPS Tsx Case 2. Report on the Regulatory Status of Vinyl Chloride and Polyvinyl Chloride 3. Report on the Proposed "Hbusevarea Exemption" Rule making and Related Activity 4. Report on the Status of Activity With Respect to Plastic Bottles for Carbonated Beverage and Beer Use 5. Status of Solid Waste Legislative Matters 6. Status of the Federal Trade Comission Combustibility Proceedings and Related Civil Suits 7. Plastics Combustibility Issues at the Consumer Product Safety Comliaian and the Federal Aviation Administration 8. Plastics Material Avail Ability 9. Traffic Comittee Activities Report to the Board of Directors PAGES 1 -k 5-7 8 - 10 11 - 12 13 - 21 22 - 26 27 - 30 31 - 32 33 - 3b SPI-22531 Page 1 "REPORT ON CURRENT STATUS OF NPE TAX CASE" ** In general, the Internal Revenue Service has asserted that the income derived by the Society from the Twelfth National Plastics Exposition held in November, 1968, ("1968 NPE") is subject to unrelated business income tax. Messrs. Cohen and Uretz, special tax counsel to the Society, on behalf of the Society, filed a Petition in the Tax Court on February 15, 1974, contesting the I.R.S. determination. The Petition sets forth assignments of error which the Society contends were committed by the Commissioner of Internal Revenue in his determination of the deficiency. The Society maintains that its gross income from the 1968 NPE did not constitute unrelated business taxable income. This conten tion represents the primary position taken by the Society during the administrative proceedings in connection with this matter. The Society also contends that the determination of deficiency by the Commissioner was invalid and void. In particular, the Society contends that (1) the determination of deficiency violated the Society's right to due process of law because the Commissioner failed to follow his own estab lished rules and procedures; (2) in the determination of deficiency, the Commissioner acted arbitrarily and capri ciously and abused his discretion in applying a change in his rules and procedures retroactively with respect to the Society; and (3) in determining that the amounts received by the Society from the 1968 NPE constituted unrelated business taxable in come, the Commissioner discriminated unlawfully between the Society and other similarly situated organizations. These theories of discrimination and violation of due process of law as applied to the tax law represent new and developing areas of the law. */ Prepared for inclusion in Advance Report by Jerome H. Heckman, SPI general counsel, for the SPI Board of Directors meeting to be held at the Mayflower Hotel, Washington, D. C.-f April 28-30, 1975. This Report was drafted with the assistance of specially retained tax counsel, Messrs. Cohen and Uretz of Washington, D.C. Any developments which occur subsequent to the preparation of this Advance Report, will be included in a current Report prepared for the Meeting. SPI-22532 Page 2 Page Two These allegations derive from the Internal Revenue Service's officially announced position that it will not challenge, pending the completion of a study, the tax exempt treatment of certain income derived by exempt organizations from the rental of display space at a "convention display type of trade show". The precise definition of a "convention display type of trade show", however, is not publicly avail able. The Society has taken the position that the 1968 NPE is such a trade show and, accordingly, the determination of deficiency results in discrimination against the Society without a rational basis therefor. In the alternative to the assignments of errors dis cussed above, the Society contends in the Petition that if its gross income from the 1968 NPE was determined to be derived from an unrelated trade or business, certain expenses were erroneously not allowed as deductions by the Commissioner. These expenses, it is contended, should have been allowed by the Commissioner as deductions because they were directly connected with the carrying on of the 1968 NPE. The Government filed its Answer to the Petition on April 18, 1974, generally denying all of the substantive allegations. The I.R.S. attorney assigned to the case, after preliminary discussions with Messrs. Cohen and Uretz, agreed to send the case to the National Office of the Internal Revenue Service for technical advice. This procedure is followed for the purpose of assuring consistency in the national policy of the Internal Revenue Service with regard to important issues. The National Office of the Internal Revenue Service issued technical advice and directed Regional Counsel to proceed with this case. After consultation with Jerome H. Heckman, general counsel to SP1, and with the approval of the Society, Messrs. Cohen and Uretz have begun preparation for trial. A trial of this matter will entail the normal conferences (for purposes of exploring settlement or stipulating facts), witness and document preparation for trial preparation, presentation of evidence at trial and post-trial briefing. In addition, in order to support the Society's claim that it is being unfairly discriminated against by the Government, the Society has commenced discovery under the new Tax Court discovery procedures. These discovery procedures could be Important to the outcome of this case and could involve a substantial controversy over SPI-22533 Ptge 3 Page Three collateral legal issues if cooperation is not forthcoming in this regard from the Internal Revenue Service. Because the Government's case appears to rest primarily upon the factual assertion of selling activities during the 1968 NPE, Messrs. Cohen and Uretz have advised that settle ment discussions during the course of trial preparation are still warranted, and have commenced such discussions. At a conference with the Internal Revenue Service held on March 4, 1975, Messrs. Cohen and Uretz were informed of the basis upon which the National Office issued technical advice on this case. The National Office takes the position that income derived from a trade show is not exempt from the tax on unrelated business taxable income if any one of the following three elements is present: 1. The existence of advertising for the show indi cating that sales may be made or orders may be taken; 2. The condoning, either openly or clandestinely, by the host organization, of sales or order-taking; or 3. The occurrence of substantial sales or order-taking at the show. In this connection, the I.R.S. attorney handling the case has taken the position that selling activities were engaged in during the 1968 NPE. Re indicated, however, that he had no concrete evidence of such selling activities at this time. Messrs. Cohen and Uretz maintained that no substantial selling activities were conducted at the 1968 NPE, making reference to numerous affidavits relating to lack of sales activity, which had been submitted previously to the I.R.S. The I.R.S. attorney agreed to present to Messrs. Cohen and Uretz at their next conference evidence, if he had any, of the non-exempt conduct of the show. He also indicated that he would recommend not proceeding to trial in the event he did not have such evidence. He made no commitments in this regard, however, and there can be no assurance that he will maintain this position after he concludes his factual investigation. SPI-22534 Pae 4 Page Four 1 In addition, he has taken the position chat the I.R.S.' policy with regard to convention displays is not applicable in the Societyrs case because the 1968 NPE was not a conven tion display. However, he has agreed to submit a memorandum by Messrs. Cohen and Uretz on the subject to the National Office without negative or positive comment. Messrs. Cohen and Uretz have prepared this memorandum and will submit it, together with certain materials requested by the I.R.S., at their next conference to be held in the latter part of April Messrs. Cohen and Uretz have advised that the factual nature of the issue could provide a basis both for disposing of the controversy concerning previously conducted National Plastics Expositions and for removing the continuing nature of the issue by modifying the conduct of future Expositions in a manner acceptable to the Society and to the Internal Revenue Service. This case is important to the Society. The amount of taxes involved is substantial. The Commissioner has deter mined a deficiency in income taxes for the fiscal year ended May 31, 1968, in the amount of $192,762.00. Moreover, the issue raised by the Internal Revenue Service is a continuing one because the Society holds an Exposition approximately every two and one-half years. SPI-22535 pM 5 Report on the Regulatory Status of Vinyl Chloride and Polyvinyl Chloride*/ As previously reported, what was once a problem involving potential ingestion of vinyl chloride which had migrated from finished polyvinyl chloride (PVC) into pack aged spirits or food, has become, since early 1974, a more serious and complicated matter involving both the inhalation and ingestion of vinyl chloride by industrial workers and the general public. Following the January, 1974 report of 13 production worker deaths from occupational exposure to vinyl chloride monomer (VCM), the Occupational Safety and Health Adminis tration (OSHA) embarked on a course which ultimately lead to the promulgation, on October 4, 1974, of an Occupational Exposure Standard for Vinyl Chloride. On the grounds that this Standard was both technologically infeasible to achieve and unsupported by the medical evidence, SPI through the Vinyl Chloride and Polyvinyl Chloride Producers Committee, an ad hoc group dealing with problems related to VCM and PVC, and several individual member companies Petitioned for Re view of the OSHA Standard by the United States Court of Appeals for the Second Circuit. The suit was filed in October, argued in December, and, on January 31, 197S, the Second Circuit delivered its unanimous opinion upholding the OSHA Standard and giving industry 60 days lead-time before compliance would be required. On February 18, 1975 the VCM and PVC Producers Committee voted to try to appeal the Second Circuit decision to the United States Supreme Court. That same day a Peti tion for a Stay of the Mandate and Stay of Effective Date Pending Application for Writ of Certiorari was filed in the Second Circuit. This Petition was denied on March 4. Subsequently, the industry's Petition to the United States Supreme Court for a Writ of Certiorari was filed on March 19, supported by Amicus Curiae Briefs filed by both the National Association of Manufacturers and the United States Chamber of Commerce. On March 24 a new Motion for *7 Prepared on April 10, ITT5 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre pared for the use of the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D.C. on April 28-29, 1975. SPI-22536 -2 Pae 6 a Stay was filed with the Supreme Court. This "Applica tion to Recall and Stay Mandate of the United States Court of Appeals for the Second Circuit and to Stay Effective Date of Final Standard Regulating Occupational Exposure to Vinyl Chloride Pending This Court's Disposition of the Petition for Writ of Certiorari and its Final Disposition of This Case" was denied on March 31 after having been re ferred by Justice Thurgood Marshall to the entire Supreme Court. 1/ As a result of the foregoing, the OSHA Standard for Occupational Exposure to Vinyl Chloride became effective on April 1, 1975, but the Petition for a Writ of Certiorari remains pending before the United States Supreme Court. On the OSHA front, the Agency's Program Directive, written as a guideline for the OSHA field offices, is now all but complete. Inasmuch as this document is the "official" interpretation of the Standard and how it should be enforced, copies will be distributed to the entire VCM and PVC industry when we are permitted to distribute it. In the meantime, the Variance and Amendment pro cedures are being employed by individual companies with specific problems and by the industry-at-large with regard to the reasonable labeling of transportation equipment and packaged materials. California and Colorado already having been heard from, it is now to be anticipated that many states will pro ceed to conform local regulations with the federal Standard. As matters now stand at the Food and Drug Adminis tration (FDA), that Agency is not expected to propose significant modifications to its current "inside" (still never published) draft proposal. This draft proposal would reaffirm the "prior-sanctioned" status of PVC food contact surfaces and materials, subject to a limitation that no de tectable vinyl chloride be extracted by food simulating solvents with a method sensitive to 50 ppb. The regulatory aim of the Agency remains' to assure that no VCM will enter the food or drug supply under the intended conditions of 1/ The Supreme Court Order denying this Motion noted that Justices Douglas and Powell did not participate in the de cision. SPI-22537 -3- Pae 7 use. Considering the fact that Professor Maltoni has now reported angiosarcomas in rats fed vinyl chloride monomer by intubation and has discussed his findings with some of the FDA Staff, the latter, having held up further considera tion of the draft pending evaluation of the Maltoni findings, are not known, fortunately, to be changing course on the basis of this latest information. This is hopefully attri butable to the fact that FDA's Staff realizes that the levels used in the Maltoni studies have no reasonable relationship to actual human ingestion. While all the foregoing has been going on, the United States Environmental Protection Agency (EPA) has been studying vinyl chloride with a view towards regulating it as a hazardous air pollutant. In order to assist the VCM and PVC Producers Committee and to direct it in its dealings with EPA, the law firm of Ruckelshaus, Beveridge and Fairbanks was retained as SPI Associate Counsel. Mr. Ruckelshaus, former Administrator of the EPA, and his law firm initially organized technical level meetings between industry and EPA personnel. The very productive liaison thus set up enabled industry to make an effective presenta tion to critique the EPA draft [Vinyl Chloride Regulation! Support Document at the March 25 meeting of the National Air Pollution Control Techniques Advisory Committee. The purpose of this presentation was to address technical issues in EPA's draft proposed regulation which is due to be pub lished in the Federal Register in June and, after hearings and comments on the proposal, finalized by December, 1975. With many of the technical issues raised by industry now being reconsidered by EPA, the Ruckelshaus firm intends to proceed to the issues of economics and medical evidence. At present, in depth analyses of these subjects as presented in the draft-Support Document are being prepared to provide more input as the Agency prepares to redraft its initial proposal. SPI-22538 Page 6 Report on the Proposed "Housewares Exemption" Rulemaking and Related Activity^/ In April, 1974 the Food and Drug Administration (FDA) published a Notice of Proposed Rulemaking to the effect that it assert Food Additives Amendment pre-clearance jurisdiction over housewares and other items that might con tact food. Previously, of course, housewares and related food contact items used in the home, restaurants, and in some industrial applications have not been considered subject to the Food Additives Amendment because of an explicit statement of Congressional intent that the legislation did not apply to components of dinnerware or ordinary eating utensils. However, due to problems associated with nylon oven bags alleged to contain uncleared food additive com ponents and a seizure case involving heavy metals migrating from colorants employed in improperly glazed pottery, FDA decided to assert petition-regulation jurisdiction over all of these exempt items. The SPI Food, Drug and Cosmetic Packaging Materials Committee Filed Comments on the Proposal in June, 1974. The Comments noted that the scheme to abolish the "housewares exemption," although designed to accomplish what otherwise might be a worthwhile objective, was too broad, violative of Congressional intent, unenforceable, and failed to address the critical issue of when a substance may not reasonably be expected to become a component of food. The Proposal was scheduled to be finalized during the fall of 1974 and, by the first of 1975, a procedure was to be established for pre-clearing houseware components with FDA. However, the Agency has not moved as yet and the original December 31, 1974 deadline has passed. In the meantime, important progress has been made in educating the FDA Staff about the comolexities involved V' Prepared on April 10, 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre pared for the use of the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D.C. on April 20-29, 1975. SPI-22539 2- - Page 9 and the long-standing background controversy over just exactly what is "no migration." Nonetheless, a draft of a final Regulation is understood to be circulating between the office of General Counsel and the Bureau of Foods. Current intelligence is that this draft is a much more reasonable version of the initial Proposal, specifically directed at problem areas and eschewing a broad Regulation that would put countertops and refrigerator shelves in the same pre-clearance category as food packaging materials. Although a new final draft is being considered, in light of the need for careful FDA handling of problems re lated to repeated use articles, the "no migration" concept, and some very strong comments by SPI and other parties, no reasonable prediction as to when a final Regulation will be promulgated can be made. Tangentially related to the "housewares exemption" matter is a case recently litigated in a U.S. District Court in Massachusetts, Natick Paper Board v. Weinberger. Though not a party of record, SPI has an important interest in this case. It concerns whether a substance which might become a food additive when it is employed to package food can be seized by FDA as an adulterated food before it is used or even dedicated as a component of or for a food packaging material. The initial March 4, 1975 decision in this case ruled very narrowly and stuck specifically to the facts in the case. The Court said that FDA had the authority to recommend seizure of paper food packaging material con taining polychlorinated biphenyls (PCB's) in excess of 10 parts per million as adulterated food because the PCB's might get into food. Unfortunately, the Court did not deal with the two basic issues which relate to the entire "housewares exemption" matter: (1) is a food packaging or food contact material a food, and (2) if a packaging mate rial or food contact material is a food, can it be seized as adulterated food prior to its dedication to food contact use. An appeal from this decision is being considered, is likely, and may lead to a more definitive discussion SPI-22540 rage xu -3of, the basic questions involved. In all fairness, how ever, it should be said that the likelihood of an appellate court reaching basis issues unnecessarily is never a good one. SPI-22541 Pae IX Report on the Status of Activity With Respect to Plastic Eottles for Carbonated Beverage and Beer Use*/ The long-awaited draft Environmental Imoact State ment (EIS) was scheduled to be released by the Food and Drug Administration (FDA) at the time of preparation of this report; we were advised/ however, that a "printing error" had delayed its circulation very temporarily. The draft EIS follows the FDA December 6, 1973 Notice request ing Environmental Impact Analysis Reports (EIAR) on plastic bottles for carbonated beverage and beer use. At this juncture, the draft EIS had been out of the hands of the staff members who wrote most of it for so long, and was being dealt with so delicately, that we have been unable to obtain any worthwhile indication as to critical con clusions if, indeed, the document contains critical ones. The lack of "hard intelligence" is very likely to have been remedied by the time the Board of Directors actually meets. As previously reported, FDA also issued a Notice of Proposed Rulemaking on November 4, 1974 which would add two new sections to the Food Additive Regulations to cover all acrylonitrile (AN) copolymers intended for use in con tact with foods. That proposal would reaffirm such long standing "prior sanctions" as exist for various ABS resins but condition the continuation of the prior sanctioned status on specific migration limitations, and require additional toxicity studies. SPI filed extensive Comments in this proceeding stating, among other things, that the toxicity studies were understood to have been undertaken already by other parties which will be reporting the re sults to FDA. Another basic position advanced was that the proposed monomer extraction limitation of 0.3 ppm is unnecessarily restrictive in light of the existing toxi cological evidence of safety and the limited conditions of intended use for the resins. In support of the argument that the nitrile resins are only currently used and intended in the future for use J7 Prepared on April 10, 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre pared for the use of the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D.C. on April 28-29, 1975. SPI-22542 2- - Pae 12 under relatively limited conditions, SPI proposed in its Comments that the Rulemaking Record be kept open pending a survey of present and projected uses of the resins. Accordingly, a survey of AM polymers/type food contact applications was conducted by SPI and submitted to FDA. The responses accounted for 95% of 1974 domestic AN copolymer production; 33 of the 34 million pounds of sales for food contact applications were identified with specific uses. The survey revealed that AN polymers may come in contact with as much as 0.02% of the human diet; this could increase to 3% by 1985. Assuming exaggerated conditions of use, these figures increase to 12% and 22% of the diet for 1974 and 1985, respectively. The increase is predicted primarily on AN usage for beverage containers. In light of the fact that the survey was delivered to FDA on March 31, we would not expect any formal final action on this rulemaking until early summer. In the meantime, the Ad Hoc Nitrile Resins Commit tee will be revitalized to prepare Comments on FDA's draft EIS when it is made available. $pi-22543 page 13 Status of Solid Waste Legislative Matters*/ As predicted in our last several reports, 1975 and 1976 are turning out to be extremely active legislatively with an increased number of anti-chemical and plastics in dustry proposals. Federal Legislation With both Houses of the Congress preoccupied with matters pertaining to economics and foreign affairs, solid w'aste-type legislation has taken a back seat and is even running a poor third among environmental measures when the proposed Clean Air Act amendments and energy measures are considered. On the Senate side, both the Commerce and Public Works Committees will soon begin wrestling with various draft measures that would exhume some of the major outstand ing measures left over at the end of the last Congress. Currently, the "Solid Waste Utilization Act of 1975," a staff working paper, and S.946, the Energy and Resource Recovery Act of 1975 (Hart-Tunney) are the only two items that are scheduled to come up for hearings before the Public Works Committee in the near future. No action on solid waste legislation has as yet been scheduled for consideration by the Commerce Committee. Furthermore, the Committee has decided not to conduct new hearings on the non-returnable bottle bills such as S.613 (Hatfield) since hearings on this topic were held late in the last session. As to other Senate measures of concern, as we pre dicted in our last report, the "Toxic Substances Control Act" (Tunney-Hart-Magnusen) was reintroduced on February 20, 1975. The Senate Commerce Committee Subcommittee on the Environment held hearings on the bill, S.776, and the HartNelson amendment which would put the burden on industry to V' Prepared on April 10, 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre pared for the use of the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D.C. on April 28-29, 1975. SPI-22544 -2- Page 14 prove that particular chemicals or chemical processes present no environmental or other hazards. More recently, the Senate Government Operations Committee reported out S.200, the Agency for Consumer Advocacy measure. This bill, formerly referred to as the Consumer Protection Agency Bill, is rated as a very likely candidate for passage this session. Another bill, S.1000, has been introduced to strengthen the enforcement and stan dards provisions of the Consumer Product Safety Act. On the south side of the Hill, the House Interstate and Foreign Commerce Committee Subcommittee on Transporta tion and Commerce has just begun extended hearings on H.R. 5487, the Waste Control Act of 1975 (Rogers), and other "ban-the-can" type bills. Finally, the Environmental Protection Agency (EPA) recently held a Conference on Waste Reduction in Washington. At that meeting, Mr. Arsen Darnay of the Office of Solid Waste Management reaffirmed the EPA position in favor of source reduction and mentioned, as a possible additional approach, a tax to influence widespread consumer choice as a possible means for the regulation of product packaging. In general, plastics packaging, and plastic bottles in par ticular, received favorable mention in the Technical Options segment of the Conference. A more detailed report on this Conference prepared by Peter Smith of our office is attached hereto. State Legislation Mas s achus etts As predicted, 1975 is already a very busy legisla tive year in Massachusetts. Over a dozen restrictive packaging bills and four bills that would regulate the flammability characteristics of plastics, especially poly urethanes, have been introduced. Of the bills that have come up for a hearing, Massachusetts counsel reports that one Oregon-type bill, one clear tray bill, and all the flammability bills have been reported adversely by the various committees assigned to consider them and, thus, may be considered dead for this legislative session. SPI-22545 -3- Page 15 Minnesota In Minnesota, S.F.15, a modified Oregon-type bill has been killed by the Natural Resources and Agriculture Committee but H.F. 33, a Vermont-type mandatory deposit bill with a pull-tab ban, and H.F. 99, another anti-pull tab bill, have passed the Environmental Protection Subcom mittee and been referred to the full House Environmental Committee. In the meantime, H.455 which would have banned the all-aluminum can was tabled and H.F. 627 which would have banned beverage containers other than fifty-trip returnable glass and all-steel cans was laid over. Both of these bills, therefore, are dead for this session. Introduced again this year is a substantially modified version of the so-called "Environmental Rights for Labor Act," H.F. 316. Minnesota counsel advises that this bill has limited support and that no hearings are scheduled as of this time. On another front, SPI has now agreed to join five other trade associations and a number of individual com panies in a suit for Declaratory Judgment designed to challenge the Minnesota Pollution Control Agency's (MPCA) "Packaging Regulations." It is anticipated that the suit will be filed in the Minnesota courts during the first part o f May. The Packaging Regulations, you may recall, are de signed to implement a May 1973 law giving the MPCA authority to regulate "new" packages based on environmental desirability and energy usage. From a mechanical point of view, these Regulations are totally unworkable and, in our view, unen forceable. Having previously expected the Agency to move against some plastic package, current intelligence is that the Agency does not intend to take precipitous action prior to the resolution of its authority by the courts. This does not mean, however, that some individual or public interest/environmental group will not submit a package for review during the interim. This background, along with the current willingness of other trade associations to share the cost of the legal activity, should indicate why we are moving ahead in Minnesota as expeditiously as possible. SPl-22546 -4- Pe 16 New York As usual, New York can be counted on for the largest number and variety of proposals affecting the plastics industry. This year, despite the fact that over a dozen bills that would regulate packaging have been intro duced and, in effect, recommended for passage by the State Council of Environmental Advisors, the indication from special counsel in New York is that, because of the general economic situation, no anti-packaging legislation is ex pected to pass this session. Hopefully, the concern over the state of the economy will carry-over to help defeat other bills that would ban plastic loops which hold beverage containers together and the dozen clear tray bills now pending. On a slightly different front, Rosemary Pooler, Syracuse Counselwoman and attorney for the New York Public Interest Research Group (A Nader organization) has been nominated by the Governor as Chairwoman and Executive Director of the New York State Consumer Protection Board. This sets her up as the likely candidate to be the Commis sioner for the Governor's proposed Division of Consumer Affairs (A. 2322). Vermont With all the activity in Vermont coming from the House so far this year, the Oregon-type bill, and a bill that would ban plastic milk bottles all appear to be dead or dying as a result of Committee action. One bill that would ban both the pull-tabs on metal cans and the plastic rings that hold them together (H. 228) has been reported out favorably by the House Government Operations Committee and is now viewed as likely to pass. The remaining bills still of some concern are one which would raise the litter levy on non-returnables and reduce the deposits for refillable containers (H. 164), another that would impose a resource recovery tax on all containers except those for spirits and wine (H. 248). Based on legislative counsel's continuing success in side tracking anti-packaging legislation, we are hopeful that these last two bills will go the way of those that preceeded them. SPI-22547 report on environmental PROTECTION AGENCY WASTE REDUCTION CONFERENCE April, 1975 by Peter Thomas Smith Keller and Heckman Washington, D.C. ?ae 17 The first national Conference on Waste Reduction sponsored by the Environmental Protection Agency (EPA) on April 2-3, 1975 saw environmentalists generate a great deal of emotional heat about the magnitude of the waste management problem and industry shed some light on the problem's complexity and the steps that are being taken to solve it. ^ The participants also added over 91 pages of press releases to the solid waste stream. The opening Conference session involving government plans, prospectives, and programs provided the most signifi cant new information. Staff members from federal regulatory agencies and the Senate Committees on Commerce and the Public Works presented their respective governmental views on the solid waste problem and discussed current regulatory or legislative activity. 1/ The points-of view presented over the two days of conference included federal and state regulators, citizens action groups, environmentalists, industry, and labor. It is interesting to note that the citizens action groups and the state regulators who attended seemed to be financed or subsidized by EPA. SPI-22548 2- - Page 18 Mr. Arsen Darnay of EPA's Office of Solid Waste Management stated that his agency had been mandated to investigate waste reduction and had concluded that source reduction, as opposed to resource recovery, was the best possible way to manage the problem, if it could be imple mented. Mr. Darnay included a tax to influence consumer choice and the regulation of specific packaging products as two of the possible approaches to the solid waste problem. In the questioning that followed, however, Mr. Darnay rejected the suggestion that EPA disregard the cost of source reduction to industry stating that he felt it was not EPA's role to push for a position regardless of the facts, but to responsibly balance all aspects of the situation. In further considering the costs of source reduction, Mr. Darnay also stated that the concept of compensation to industry should be explored, particularly where an industry loss results solely from a national policy decision. The legislative view presented by Linda Ann McCorkel, Staff Counsel, United States Senate Commerce Committee and Richard Heilman, Minority Counsel for the Senate Public Works Committee generally endorsed the resource conservation effort of source reduction and recognized the possibility of SPI-22549 - 3- Pa^e 19 new legislative proposals. Both speakers# however, indicated that resource recovery is still the primary Congressional focus. Ms. McCorkel stated that the Senate Commerce Committee is committed to a products standard type of bill setting specific criteria that would improve reuse or recyclability and she also indicated that her Committee is presently soliciting comments on the so-called Hatfield Bill (S.613) which would require a five cent deposit on all beverage con tainers in an effort to decide if additional hearings are necessary. The Conference participants generally viewed plastic packaging materials in a complimentary light. Although plastic packaging shares the general animosity environmentalists have for all packaging, e.g. "packaging is a nuisance, not a convenience....", it was not singled out as more onerous than any of the others. In fact, plastic coated glass bottles were singled out as an example of resource conserving packaging because of the savings that occur in glass, paper and aluminum, and as an energy conserving package since its lighter weight makes for more efficient use of fuel in transportation. In addition, a Stanford Research Institute study was SPI-22550 -4- Page 20 cited as recommending that McDonalds, the hamburger people, shift from paper to plastic packaging because the plastic requires less energy to produce, is lighter in weight and is more suitable for recycling. Acrylo nitrile bottles were not specifically mentioned during the Conference, although plastic bottles were generally estimated to reduce empty bottle weight by as much as 80%. During the course of his presentation, the repre sentative of Red Owl Stores, a mid-west grocery chain, proposed that the Conference participants adopt a reso lution asking EPA to develop and coordinate regional seminars on the solid waste problem involving industry, labor, environmentalists, and citizens action groups. This concept was endorsed by Henry B. King, President of the U.S. Brewers Association, who also offered to give the environmentalist groups all the information his organization has on the solid waste problem, including the effect of bottle bill legislation on jobs and prices. At the close of the regularly scheduled Conference, an ancillary meeting was held on the EPA Seminar proposal and an appropriate resolution was adopted that suggested implementation of the plan within three months. Despite the rhetoric that constantly came into the presentations, the Conference did seem to begin a SPI-22551 -5- Page 21 dialogue between industry, labor, environmentalists, and regulators that could reduce the polarization on the solid waste issues. The Seminar Proposal Committee, for instance# was equally influenced by both industry and environmentalists in wording the final resolution and there did seem to be a recognition of the complexity of the problems. SPI-22552 Pae 22 Status of the Federal Trade Commission Combustibility Proceedings and Related Civil Suits*/ This report is intended to cover recent develop ments concerning the Federal Trade Commission Consent Order, the Commission's proposed Trade Regulation Rule, and the related products liability suits involving SPI. With respect to the Federal Trade Commission's Consent Order, SPI has been implementing the provisions of the Order in a timely fashion and has now completed its internal reporting require ments as required by the Order. The Trade Regulation Rule proceedings have been officially dormant during this re porting period? however, numerous informal discussions have occurred among FTC staffers and SPI representatives. The related civil suits are presently pending in various stages, with one suit taking a significant turn favorable to the Society. FTC Consent Order Compliance Program As regards the compliance program, the Society acting on its own behalf and in coordination with each of the other Respondents, has been implementing and has now virtually completed its initial obligations under the terms of the Consent Order. As the Board of Directors will recall, one of SPI's main functions under the Order is to coordinate and effect the Appendix B notification requirements on be half of the individual Respondents, as well as provide notification to its own employees. In addition, the Society is charged with the responsibility of providing administra tive support to the Products Research Committee organized under the Order. Finally, SPI is enjoined from using certain descriptive terminology under the substantive terms of the Order. As regards use of the descriptive terminology pro scribed by the Order, all of the Society's publications have been or are in the process of being reviewed to delete the prohibited language and to add the required disclaimer *7 Prepared on April 10, 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre pared for the use of the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D.C. on April 20-29, 1975. SPI-22553 2- - Pae 23 where necessary. Thus with respect to the marketing of plastics products covered by the FTC Order, no SPI publi cation will be distributed containing such terminology or expressions as non-burning, self-extinguishing, non combustible, or any other term, expression, or product designation of substantially the same meaning. In the case of reference to flame spread ratings, such reference will be accompanied by the following statement: This numerical flame spread rating is not intended to reflect hazards pre sented by this or any other material under actual fire conditions. All SPI employees have been notified of their duty to comply with the above requirements. In this regard, each SPI employee, including outside consultants, received a memorandum on December 12, 1974 explaining the significance of these provisions of the Order and each has returned writ ten assurance of his or her intention to comply. SPI has offered to each Respondent either to (1) sup ply it with as many Appendix B Notices as are ordered for direct distribution by that Respondent to its own past customers or (2) distribute Appendix B Notices to that Respondent's past customers based on a mailing list supplied by the Respondent. To date, SPI has supplied 13 Respondents with Appendix B Notices for direct distribution to their own customers, with 21,250 Notices being distributed by this method. SPI, also, has distributed, through the services of Tyme Letter Service Corp., Appendix B Notices to the past customers of 11 Respondents, based on mailing lists (not disclosed to SPI) which were provided by each Respondent and sent directly to Tyme. Under this procedure, 27,029 Notices were distributed. (One Respondent used both methods of distribution while two Respondents did not use SPI's services in distributing the Notices to their past customers.) SPI, in conjunction with the other Respondents, has caused the Appendix B Notice (Appendix B-l where specified) to be published in most of the journals listed in Appendix C of the Order. To date, the Notices have appeared in 21 of the 28 designated publications. Due to an error by the printer. Appendix B Notices were printed incorrectly in six journals and pursuant to a request from the Commission, SPI has now taken steps to republish corrected versions of the six advertisements (at no added expense to the Society). SPI-22554 -3- Page 2k SPI, in conjunction with the other Respondents# has distributed the Appendix B Notice to numerous govern mental bodies and parties in the fire# insurance and building code communities. The Appendix B Notice was sent to over 1#000 organizations including federal agencies# model building code bodies# fire associations and insurance underwriters. SPI has received evidence of receipt of such Notices from (1) 13 federal agencies, (2) the three major model building code organizations with a distribution totaling 12,400 (3) various fire protection organizations with a total distribution of over 40,000, and (4) 220 in surance underwriters. SPI was advised by FTC that evidence in the SPI Report of compliance with this aspect of the Order would fulfill this part of the reporting requirements of all of the other Respondents. In light of the immense documentation involved, this provided a considerable savings in time and effort to the other Respondents. SPI's mailing of the Appendix B Notice to the roughly 23,000 members of ASTM was already indicated in our previous report. As an additional duty, the Appendix B and B-l Notices state that SPI should be contacted for further information regarding matters contained in those Notices. As a result, numerous parties have contacted SPI with plastics combustibility inquiries. In all instances where those making inquiries have so requested, SPI has supplied them with a Response Packet. Finally, SPI has been fulfilling all of its obliga tions to provide administrative support for the Products Research Committee including the collection of research funds from the Respondents. In addition, the Society is preparing to respond to a request for research proposals from the PRC. It is the intention here to gain as much credit as possible for SPI combustibility research pro grams as an offset against the research program funds otherwise due to the PRC from the Respondents. Trade Regulation Rule The proceedings involving the Federal Trade Commis sion's proposed Trade Regulation Rule are still formally in a pending status. By way of brief background, the proposed SPI-22555 -4- Page 25 Rule was published in the August 6, 1974 Federal Register, with the deadline for Comments extended to December 10, 1974 and hearings scheduled to commence on January 13, 1975. However, the enactment of the Warranty/FTC Improvement Act which, among other things, establishes new procedural re quirements in FTC rulemaking cases, has delayed further progress in these proceedings. Accordingly, the Commission indefinitely postponed the rulemaking until the FTC pro cedural Rules are revised to comply with the new law. FTC published its procedural rules on April 4, 1975 with some provision to become effective immediately and others pro posed for comment. We are now evaluating the proposed pro cedural rules to determine whether they may warrant comment by SPI. In the meantime, FTC staffers have been informally discussing the merits of the substantive plastics industry trade regulation rule proposal with SPI representatives. It apparently is the intention of the staff, subject to clearance by the Conmissioners, to republish the proposed Trade Regula tion Rule in a revised form in the near future. Related Civil Suits The series of suits referred to as the Staten Island tank cases are in various stages of pendency awaiting actual trial with the court indicating that it intends to try one of the cases, Eria v. Texas Eastern Transmission Corp., et al., as a "lead case" to use as a model regarding the remaining actions. Since SPI is not a defendant in Eria, it will not be participating in the trial. Events in the Sunshine Mine Cases, House, et al. v. Mine Safety Appliance, et al., have taken a very favorable turn for SPI. Plaintiffs in these cases had originally pleaded traditional causes of negligence and breach of war ranty against all of the defendants including SPI. These counts seeaed particularly specious against the Society since both causes of action normally require the manufacture and/or sale of products, activities in which SPI of course is not engaged, to establish culpability. Accordingly, we were optimistic about the prospects of obtaining a dismissal of the Society from the case based on the granting of a motion for summary judgment. SPl-22556 -5- Page 26 However, at this point, the plaintiffs attempted to amend their complaint to include a count of joint or industry wide liability using the "blasting caps'* case theory to hold SPI along with all of the other plastics industry defendants liable. At a hearing held on March 25, 1975 in Boise, Idaho, the Court in the face of strong opposition by the defendants, dismissed the plaintiff's motion to amend the complaint to include the industry-wide liability theory by holding that no law currently exists to justify use of this theory based on the facts in the Sunshine Mine cases. The Court then ruled that manufacturers which did not provide a product used in the mine could not be held liable in the case and, accordingly, upheld an order entered earlier in the case granting a motion for a Summary Judgment by PPG, dismissing PPG from the case. (The plaintiffs subsequently appealed that ruling to the U.S. Court of Appeals for the Ninth Cir cuit.) Thus, with these developments, the Society will now take prompt steps to file the appropriate pleadings seeking dismissal from the case. SPI-22557 rae <a Plastics Combustibility Issues at the Consumer Product Safety Commission and the Federal Aviation Administration*/ In addition to the Federal Trade Commission com bustibility proceeding, certain other federal agencies are engaged in activities related to flammability that are significant to the interests of the plastics industry. Two of these are the Consumer Product Safety Commission (CPSC) and the Federal Aviation Administration (FAA). Consumer Product Safety Commission Fact Sheet No. 41 The Bureau of Information and Education of the Consumer Product Safety Commission has published over 70 fact sheets regarding the risks and hazards posed by con sumer products. Fact Sheet No. 41 entitled "Plastics", which was released in August of 1974, purports to enumerate the risks posed by various plastics products used in and around the home. However, the Fact Sheet contains numerous significant misstatements of fact, including: "Plastics... tend to release more [than traditional materials] heat and smoke when they burn...[and] release deadly fumes during fires." Among other things, it concludes that one should: "Consider the use of other less flam mable materials instead of plastics where possible." In a process established to review the contents of its publications, CPSC has been holding a series of "public meet ings" whereby interested parties are given an opportunity to comment upon the contents of the various fact sheets in a stated effort by the Commission to assure that they are kept accurate and current. Following this procedure, representatives of SPI 57 Prepared on ApriX 10", 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre pared for the use of the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D.C. on April 28-29, 1975. SPl-22558 -2 - Page 28 Staff and counsel met with the CPSC Staff on March 6, 1975. In our presentation# we pointed out that the recurrent theme of Fact Sheet No. 41 is that plastics products, as a result of their combustibility characteristics, create some type of unique fire hazard not posed by other consumer products found in and around the home when# in fact, all organic materials, including plastics, burn and, once burn ing, give off heat, smoke, and toxic gases. The presenta tion, which included our proposed written revisions to the Fact Sheet, concluded by stating that while foreseeable mis use of certain plastics products may warrant the need to provide precautionary instructions, plastics products in general, when properly used, do not pose any greater com bustibility threat than traditional materials and, in certain instances, assure greater fire safety. The SPI comments were well received and have been taken under advisement by CPSC. The Commission Staff which is redrafting its plastics fact sheet, indicated that it intends to use the information SPI provided but the extent to which such information will be used is unknown at this point. Consumer Product Safety Commission Furniture Petition On December 20, 1974, R. Brady Williamson, Professor at the University of California, filed a Petition with the Consumer Product Safety Commission (CP 75-13) requesting the establishment of a consumer product safety rule covering cellular plastics home furnishings. The Petition asked that, in light of the alleged risk of injury from fires involving them, CPSC establish a standard which would ban the use of these products unless they have been shown to be no more hazardous than comparable wooden consumer products. According to the Product Safety Act, the Commission has 120 days in which to either grant or deny the Petition. During this preliminary evaluation stage, the Commission may conduct formal and/or informal investigations and/or hearings to determine whether or not a safety standard rulemaking should be initiated. The Williamson Petition is currently pending at the Commission, with no decision having been made (even though the 120 day limit is soon to be exceeded) to either deny or grant it. Further, the type of evaluation or investigative proceeding CPSC may conduct SPI-22559 -3- Page 29 regarding the Petition us unclear; however, some type of investigation is a possibility. In light of the types of injury claims made in connection with the Williamson Petition and of the severe adverse effect likely for the industry if the recommenda tions in the Petition were ever adopted, various SPI groups have been meeting to develop data and prepare an industry response if that becomes necessary. To date, two groups have met separately, a joint Furniture Division/Appliance Council ad hoc committee, and an ad hoc committee of styrene producers to develop responses to the Petition. All other potentially affected resin suppliers and fabricators in the furniture/appliance markets are in the process of being con tacted to assist in this activity. Currently, the styrene producers ad hoc committee has taken the lead in developing an industry response. Avenues of investigation have included an analysis of the need for a standard in light of the risks, documented and potential, posed by the products, and the feasibility of modifying products to avoid these risks, where necessary. These data are still being developed with further steps to be determined responsive to subsequent CPSC action. Federal Aviation Administration Toxic Gas Advance Rulemaking The Federal Aviation Administration in the December 30, 1974 Federal Register issued an Advance Notice of Pro posed Standards on Compartment Interior Materials Toxic Gas Emission. The stated purpose of this Advance Notice was to determine whether or not it is necessary or feasible to adopt rules aimed at regulating aircraft compartment in terior materials in regard to toxic gas emissions resulting from post-crash fires. In addition, the FAA specifically asked a number of questions relating to the form and scope of the standard, the specific toxic gases involved, the availability of test methods, and the availability of mate rials if any standard were to be adopted. SPI, through its Coordinating Committee on Consumer Safety and the Public Affairs Committee, developed a response and filed its comments with FAA on March 27, 1975. In its response, SPI indicated that, while it did not disagree with SPi-22560 -4- Page 30 FAA that toxic gas emissions may constitute a problem, the Society did not believe that regulations based solely on control of materials used in aircraft interiors is the proper approach. Our filing continued by urging that pri mary emphasis should be placed on utilizing engineering techniques to control the origin of the toxicity threat, i.e. the fire source, which in many instances is the splashing of the jet fuel. Further, we urged that emphasis be placed on developing a systematic means of passenger pro tection against toxic gas emissions from any source in an aircraft fire, such as use of improved breathing apparatus and improved evacuation procedures. Only then should FAA look towards the regulation of materials used in aircraft interiors. On the latter point, we also pointed out that due to the lack of sound knowledge in the area of toxicity, a stepped-up research effort is needed prior to the issuance of any proposed standard. FAA is now evaluating these and other comments which have been filed in this proceeding. Federal Aviation Administration Smoke Emission Rulemaking On February 12, 1975, the Federal Aviation Adminis tration proposed a Rule covering Smoke Emission From Compart ment Interior Materials. The purpose of this proposed Rule is to establish standards for the smoke emission charac teristics of compartment interior materials used in trans port category airplanes. FAA stated that smoke emission standards for cabin interior materials could enhance pas senger safety and thus, proposed various smoke emission standards based on maximum smoke optical density numbers, e.g. DslOO for four minutes, which would limit the amount of smoke a designated material could emit during a fire. The SPI Coordinating Committee on Consumer Safety has this proposed Rule under advisement and is determining whether or not an industry consensus position can be de veloped and submitted to FAA. Comments on these proposed Rules are due on May 12, 1975. SPI-22561 Pae 31 Plastics Material AvailabilityV The plastics material availability situation, based on Federal Energy Administration regulations, has been in a dormant state since the last report. The system of al location of petrochemical feedstocks is set forth in the FEA Regulations granting petrochemical feedstocks priority posi tions in various categories. These categories, in their present form, were established about one year ago and have not been altered during that period of time. Since there have been no recent reports of allocation disputes between suppliers and users in the petrochemical feedstock categories and no reported FEA decisions in this area, feedstocks apparently are being supplied according to the FEA rules. Apart from FEA considerations, however, plastics materials availability vis-a-vis international trade is very likely to be affected by the tariff negotiations authorized under the Trade Act of 1974. This Act, which empowers the President for a period of five years, to enter into trade agreements with other countries, grants to the President dis cretionary authority to (1) eliminate tariffs that are below 5% and reduce tariffs above 5% by a rate of 60%, (2) eliminate or reduce non-tariff trade barriers, (3) extend duty-free treatment to U. S. imports from developing countries, and (4) lower tariff rates imposed upon imports from Communist nations. The Act also calls for the creation of the Inter national Trade Commission (ITC), which is now conducting a study on the economic effects of tariff and non-tariff trade barrier reduction or elimination on domestic industries. In response to the ITC study, SPI, through its International Committee and Plastic Button Group has petit ioned to testify and has been scheduled to appear at the ITC hearings in Washington, D. C. on April 11, 1975. The Inter national Committee will be submitting data and testimony on plastics resins, machinery, and certain fabricated articles. The International Committee will be arguing that, since imports have generally increased at greater rates than exports, U. S. trade negotiators should not readily agree to further tariff reductions until it is insured that the U. S. export 57 Prepared on April 10, 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook pre sented for use by the SPI Board of Directors at its meeting to be held at the Mayflower Hotel, Washington, D. C. on April 28-29, 1975. SPI-22562 32 2- trade will be granted equalized access to foreign markets, with specialized emphasis to be given to reducing the ef fects of foreign non-tariff trade barriers. The Plastic Button Group, in adopting an even more stringent position, will be arguing that, in light of the severe increase in button imports, especially after the Kennedy Round tariff reductions, duty rates on plastics buttons and button blanks should, at a minimum, be kept at current levels. SPI-22563 TRAFFIC COMMITTEE ACTIVITIES REPORT TO THE BOARD OF DIRECTORS */ ?*** 33 Over the past year, the Traffic Committee has been engaged in two proceedings at the Interstate Com merce Commission with the southern based rail carriers concerning the level of rates on plastic materials. These two proceedings related to the issue of whether, and if so how, rail rates applicable to raw materials moving within and into the South should be placed on a parity on a mile-for-mile basis. The intraterritorial rates are approximately 6% lower than the interterri torial rates due to the procedural method of implementing one general rate increase. One proceeding involves a complaint action seeking a reduction of approximately 6% for raw materials moving within and into the south in order to establish parity with the rate levels applicable on the intraterritorial movement. The filing of this complaint followed the action of the southern carriers of not only refusing to concur in the rate reduction which had ini tially been proposed and then approved by the carriers in the southwestern region but also announcing an intent to increase the intraterritorial rates. Upon publication of this increase in rates, amounting to about $300,000 in additional revenues annually, the Traffic Committee filed a protest with the Interstate Commerce Commission. Following a hearing before a Commission Admin istrative Law Judge, the ICC has rendered a decision requiring the carriers to cancel the proposed increase; and that decision has now become administratively final. The companion proceeding seeking a reduction of the interterritorial rates is still pending an initial de cision. The application of the OSHA Standard for Exposure to Vinyl Chloride to the transportation of PVC and VCM has generated a substantial amount of consternation in the transportation community. To date, however, there has been only one response in the nature of a proposal for a tariff change, that being a proposal to amend the motor carrier */ Prepared on April 10, 1975 by Jerome H. Heckman, SPI General Counsel, for advance inclusion in the Notebook prepared for the use of the SPI Board of Directors at its meeting to be held in Washington, D. C. April 2829, 1975. SPI-22564 Page 34 2 classification tariff to require vapor proof packaging of materials required by OSHA to bear a "Cancer-Suspect Agent" label. SPI was represented before the National Classification Board at hearings held March 25 con cerning this proposal by the Hazardous Materials Subcommittee of the Traffic Committee. The SPI position was supported by more than a dozen PVC pro ducers and two member companies which expressed concern from the standpoint of the application of the proposed rule to other chemicals, particularly the so-called 14 carcinogens. After extended discussion at the Board's hearing, it was indicated that the carriers would hold action on this proposal in abeyance, pending more de finitive indication of the impact of the OSHA Standard upon the motor carriers. The last report of the Traffic Committee activities contained an account of the initial decision rendered by the Interstate Commerce Commission in the proceeding concerning the controversy with carriers in the south-central region of the country relating to the rate levels applicable to liquor packaged in plastic bottles. As indicated in that report, the Interstate Commerce Commission had rendered a favorable ruling finding that the attempt to cancel favorable commodity rates was not shown to be just and reasonable. The carriers filed for reconsideration of that decision, and an order has been issued by the Interstate Commerce Commission dismissing the petition and affirming the initial decision. SPI-22565