My Testimony Against LB583

Last week I appeared before the committee discussing LB583 – a bill that would attempt to increase the recycling of E-waste at the expense of local businesses like Schrock Innovations.

Despite my efforts to reach out to many of my competitors in Lincoln and Omaha, I was the only individual who appeared to testify in opposition of LB583.

There were however, three other national groups who submitted letters of opposition. The proponents were represented by Senator Priester, WasteCap Nebraska, CP Recovery, The Sierra Club, and others.

I thought my testimony went well, and the issues I raised spawned several questions that may not have been asked by the committee. Below is a transcript of my testimony:

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Chairman Louden , members of the Natural Resources committee my name is Thor Schrock, S-C-H-R-O-C-K. I represent Schrock Innovations, Inc. and appear before you to testify in opposition to LB 583.

The intentions behind LB583 are noble and strive to create a cleaner environment for all Nebraskans. The intent behind LB583 is to shift the costs of recycling E-waste from the shoulders of the consumer and place it on the shoulders of the manufacturers who produce electronic equipment such as computers, televisions, portable DVD players, GPS navigation systems and the like.

Unfortunately, I do not believe that LB583 will achieve its objectives for several key reasons:

1) LB583 is will disadvantage Nebraska’s small businesses

This point is best illustrated by an example. Lets take a look at Dell. Under the definitions of who a manufacture is, it is apparent that Dell is considered a manufacturer because it distributes goods through a distribution network that includes wholesalers.

However, Dell also sells computers directly to consumers without using a distribution network. I am certain that LB583 was intended to cover all of the computers that Dell might ship into Nebraska, not just the ones from wholesalers. Therefore you can assume that any company that sells computers direct to the public – local companies like Schrock Innovations included – will be required to register as a manufacturer and pay a tax based on the tonnage of computers delivered in Nebraska.

While Dell might just decide to comply and pay the tax, their economies of scale make Nebraska’s new taxes under LB583 look like an afterthought. But for Schrock Innovations those taxes may just make us think twice before we sell our custom built computers in Nebraska. We have a hard enough time competing against the national giants and local box stores. I think I can speak on behalf of the local computer builders in Nebraska when I say that the last thing we need is another barrier to entry in the marketplace.

2) The bill’s base assumption is flawed – It is incorrect to assume that the majority of manufacturers – especially those with no physical presence in the state of Nebraska – will comply with the new regulations.

Continuing with our example of Dell, what happens if Dell does not comply with the state’s new registration requirements? I am certain that some Nebraskans will still go online to Dell’s website or call them from a catalogue and order a new PC.

I am equally certain that Dell will ship that PC to Nebraska, registered or not.

So now under LB583 the state has an OBLIGATION to pay for the recycling of that PC even thought Dell was never registered, never paid the tonnage tax, and did not kick any money into the fund that is supposed to pay for the recycling.

But for Schrock Innovations, it’s a different story. If we do not register, report, and pay, we subject ourselves to unspecified consequences under LB583. So in a way, LB583 really shifts the burden of funding recycling from consumers who buy from national mail-order companies to the shoulders of responsible local companies like Schrock Innovations.

3) LB583 will decrease the selection of electronic goods in Nebraska while increasing the prices of the goods that remain on the shelves.

Many of the least expensive electronic goods that are available in Nebraska come from overseas. Many of these overseas manufacturers establish a legal entity on one of the coasts so they can import their goods to the US and sell them to wholesalers, who in turn, sell them to us.

I love Nebraska, and the life I have here, but Nebraska is simply not a heavily populated state like California or New York. If we were, these manufacturers would comply with a bill like LB583 without blinking. But we are not. And they would not.

So the Nebraska retailer that wants to offer low cost high quality goods may have to remove some selections from their shelves since the companies who manufactured the goods refuse to comply with LB583. Nebraska is an afterthought to them, and they would not cry for very long if their product was not sold here.

Now the goods produced by manufacturers who DO comply will still be on the shelves, but their prices will be higher to cover the taxes, fees, and administrative expense involved in getting their product through Nebraska’s supply chain.
If you go to the Omaha Best Buy and find that a PC that costs $1000 there can be purchased in council Bluffs Iowa for $50 less, would you drive the 15 minutes to save $50. Maybe I am a stinge, but I would, and I believe a lot of other consumers would as well.

4) LB583 will not effectively shift any e-waste burden away from consumers

Perhaps the single greatest flaw in LB583 is that it does not achieve its intent. The costs of recycling e-waste in Nebraska will not be shifted away from Nebraska consumers.

While I am certain that consumers would appreciate being able to recycle their e-waste for free, I am equally certain that they will not appreciate paying more for the goods that they buy.

I am sure that Nebraska’s taxpayers will not appreciate having to appropriate money in future budgets because LB583 has no provision for paying the cost to recycle the estimated 1 million PCs that are in storage now in Nebraska.

And in addition, LB583 does not detail how the recycling of electronics that are purchased outside Nebraska or through mail-order or Internet channels will be funded.

If nothing else, the introduction of LB583 raises awareness of the need for local companies to help create some kind of recycling program for their customers. I believe the answer to this situation lies in the private sector, and passage of LB583 into law would only slow the adoption of private sector programs while it would also render existing recycling programs obsolete.

LB583 is not ready to be advanced to the floor for debate. If LB583 should become law, the unintended consequences on the state, its taxpayers, and small businesses would be irreparable.

Thank you Mr. Chairman for the opportunity to appear before you today. I would be happy to answer any questions the committee may have at this time.

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