Gibson Guitar settlement strikes chord with wood companies

Gibson Guitar settlement strikes chord with wood companies

Although it has the CEO of the iconic guitar maker Gibson Guitar Corp. singing the blues, a U.S. law aimed at limiting deforestation has attracted calls for strict enforcement from other affected companies.

The Lacey Act, a 112-year-old import restrictions law Gibson acknowledged breaking in early August, was amended in 2008 to reduce illegal logging in Asia and other tropical countries. It requires any U.S. company importing exotic wood products to take extra care in documenting sources and confirming they aren't in violation of global sustainable forestry practices.

A settlement reached with Gibson Guitar this month is held up as the first instance of action taken to enforce the Lacey Act's provision for wood sourcing.

"The criminal enforcement agreement should be a wake-up call for companies thinking about importing illegally logged wood that the government is going to take violations of the Lacey Act very seriously," said Jameson French, CEO of Northland Forest Products and a board member of the Hardwood Federation, which joined forces with the likes of Rainforest Network and United Steelworkers to get the tough amendment passed in 2008.

Makers of hardwood floors, musical instruments and other wood products interviewed for this story said they're taking a rigorous approach to compliance.

Armstrong World Industries, for instance, requires all its wood suppliers to document their compliance with the Lacey Act for each shipment Armstrong imports, according to Milton Goodwin, vice president of wood product management for the giant floor and cabinet company based in Lancaster, Pa. "This is a standard part of our procurement practice and ensures that we responsibly manage our wood supply chain."

It's worth noting that Armstrong does this even though "97 square feet out of 100 square feet" of the wood products it sells are sourced from managed U.S. forests.

Competitive disadvantage

Other purchasers of wood and wood products said without strict enforcement of the law, their efforts to take a sustainable approach to wood sourcing put them at a competitive disadvantage.

Anderson Hardwood Floors took preemptive measures about five years ago that have helped make it easier to comply by discontinuing the use of tropical exotics from South America, Africa and Asia, said Don Finkell, CEO of the St. Louis-based company. It insists on Forest Stewardship Council (FSC) certification to guide purchases of anything sensitive.

He noted, however, that those efforts could cost him. "So far, there has not been a verified product with a price point that will support a successful marketing campaign," Finkell said. "This shows you the extent of illegal logging that still exists. The good guys still cannot compete with the bad guys on price.

"It is essential that the Lacey Act is evenly enforced," he added, "so that the playing field is leveled for honest manufacturers and their employees.

Gibson Guitar Sings the Blues

Companies with potential exposure to exotic wood imports have reason for caution, given the outcome of the high-profile investigation of Gibson Guitar.

The U.S. government accused the musical instrument maker of flagrantly disregarding the Lacey Act last year, and seized close to $262,000 in ebony used for guitar fingerboards. The case made headlines after CEO Henry Juszkiewicz accused the government of unfairly targeting the company.

He maintained that defiant stance in early August when the company agreed to settle. Gibson Guitar's deal with the government requires it to pay $300,000 in fines and make a $50,000 donation to the National Fish and Wildlife Foundation. The company must also strengthen its compliance controls and procedures.

"We felt compelled to settle as the costs of proving our case at trial would have cost millions of dollars and taken a very long time to resolve," Juszkiewicz said. "This allows us to get back to the business of making guitars."

Calls for More Scrutiny

Competitor C.F. Martin & Co., a guitar maker , based in Nazareth, Pa., has a radically different point of view.

"If anything, the Lacey Act's due care requirement has affirmed the practices that we, as a conscientious consumer, have had in place for many years," said vice president of business development Gregory Paul. About 60 percent of the company's products use tropical hardwood content such as rosewood, mahogany and ebony.

"While there is more time-consuming paperwork and inspection scrutiny to deal with," said Paul, "we're still pretty excited about the positive impacts that Lacey has had in driving focus and effort toward establishing a greater number of sustainable sources of material around the world."

The Act has already contributed to a 22 percent global decline in illegal logging, estimates the Environmental Investigation Agency, an international group that works to uncover environmental crimes. And, equally compelling from an economic point of view, it has helped boost demand for products from sustainably managed forests.

"The Lacey Act is a huge sucess story for creating jobs in America," said French of the Hardwood Federation.

Best Practices for Compliance

Of course, compliance is an ever-changing process, so C.F. Martin's methods have likewise changed with the times, Paul said.

For example, even though the guitar-maker has had a stringent review procedure for years, it has added more third-party verification and it now uses FSC certifications to guide sourcing. The company also spends more time visiting forests with its suppliers, Paul said.

"The FSC model appeals to us in particular because it focuses not just on the environmental aspects, but also the social and economic issues surrounding a resource as well," he said. "Creating an environmentally sound, economic value stream in a way that is respectful and affirming of the people who own the resource is the key to sustainability."

Anderson Hardwood Floors also relies on a responsible procurement program established by the National Wood Flooring Association that builds on FSC and requires independent audits of its sourcing practices.

The company manages one non-domestic species of wood that accounts for about 5 percent of its sales, and it has looked carefully at the paper trail of permits and certifications produced by its long-time trusted supplier, said Finkell. 

That has meant checking operating permits, maps of timber tracts, and manufacturing processes. There are three tiers of certification it requires:

  • First party, which is verification by the supplier and probably enough in countries of low risk.
  • Second party, which involves internal scrutiny by a company of its suppliers.
  • Third party, which requires independent verification for raw materials, offering the highest level of risk mitigation. 

"All of this we have done in response to the passage of the Lacey Act amendments in 2008," said Finkell. "Prior to that we operated on our company policy of not engaging in harmful environmental practices. With the passage of Lacey, we need to be able to document it to others if the need arises."