Is the complexity and inefficiencies of regulations holding back manufacturing growth?
June 16, 2017-by Erik Glavich
the NAM’s Director of Legal and Regulatory Policy.
Regulatory compliance can be daunting to manufacturers, no matter their size. Small, family-run shops or start-ups that don’t have dedicated compliance staff are at risk of penalties or recalls simply because a mandate was accidentally overlooked.
Even organizations that can hire teams of legal consultants are challenged by the volume of mandates, the overlapping scopes and complicated reporting and record keeping requirements. Outside assistance is almost always hired for some federal regulations like those governing hazardous waste disposal, income tax filings and employee health care.
The federal regulatory state is large and expanding.
- The National Association of Manufacturers (NAM) found that manufacturers face 297,696 restrictions on their operations from federal regulations. That includes 44,628 restrictions facing production, 7477 restrictions around labeling, 21057 around distribution and shipping, and 17041 impacting human resources.
- An average of 3,300 new regulations are issued each year. Between 66 and 99 of these regulations are major, meaning each has an estimated impact of at least $100 million or more in a single year. A few have an estimated impact of more than $1 billion in a single year.
- Together, old and new federal regulations impose annual costs in the hundreds of billions of dollars. Even greater is the uncertainty over estimates of aggregate annual benefits.
The picture that emerges is a constantly changing one; layer upon layer of new regulatory mandates create a burden on manufacturers that is significant, growing and impactful, diverting resources away from important discretionary activities like market innovation
Each regulation certainly serves a public purpose. They provide environmental protections, employee safeguards, and public safety benefits. The cumulative effect, though, can pose challenges to manufacturers. Compliance begins with understanding the various regulations for each industry and region. Some issues may be subject to regulation by local, state, and federal oversight and several different entities, from environmental to energy, labor, or even homeland security.
According a recent NAM report, most manufacturers seem to follow the same five-step process to ensure compliance with new regulations: (1) identify new requirements; (2) understand these requirements and determine if and how they impact the company; (3) develop new or modify existing standard operating procedures (SOPs) to ensure compliance; (4) implement a compliance plan through dissemination of SOPs, capital improvements, training employees, creation of management systems, etc.; and (5) periodically self-audit to ensure compliance over the long-term. The entire compliance process—applicable to any regulatory requirement—is not simple, nor is it easy.
The NAM is the voice for over 12 million men and women who make things in the United States. It is the largest manufacturing association in the U.S., representing small and large manufacturers in every industrial sector and in all 50 states. The NAM has long been a leading advocate for an improved regulatory environment. Manufacturers urge enactment of federal policies that create a smarter regulatory system—one that protects the environment, public health and worker safety while minimizing unnecessary burdens imposed on companies and other regulated entities.
At every turn, the NAM working on behalf of manufacturers in America to advance policies that help manufacturers do what they do best: create economic strength and jobs. Learn more at NAM.org.
About the author:
Erik Glavich is the NAM’s Director of Legal and Regulatory Policy.
On Thursday, June 22 at 11:00 AM EDT, he will be a featured presenter in an IndustryWeek webinar discussing regulatory reform initiatives in the Trump era. During the webinar, which is sponsored by Infor, Erik will outline executive and congressional activity and what those actions mean for the both federal agencies and companies.