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MARKET INSIGHTS Floored: Lumber Lessons A Lumber Liquidators saga: Here’s what we learned, and here’s what has changed By Ken Ryan “[Diligent veriﬁcation]’s not guesswork, but rather a clear path for the industry to use. This is the most important lesson that should prompt all of us to review our systems immediately.” Bill Dearing, president of the North American Laminate Flooring Association More than 18 months after “60 Min- utes” shocked the flooring industry with a report alleging Lumber Liquidators was selling Chinese-made laminate flooring containing dangerously high levels of formaldehyde, industry and association members and executives have had time to digest the collateral damage and take the necessary steps to ensure their own compliance. The consensus is that Lumber Liqui- dators, the giant retailer that lost a tre- mendous amount of business and was pounded by Wall Street for its actions, cast a pall over the entire industry (both hardwood and laminate flooring) by its misdeeds. However, the good news is that steps were taken — by Lumber Liquidators, flooring retailers, distributors and manufacturers — to ensure products and processes were complaint with California Air Resources Board, known as CARB or CARB 2, which in 2009 established the world’s toughest standard for limiting formalde- hyde emissions from composite wood products such as laminate flooring. [While the standards are legally enforceable only in California, the U.S. government is finalizing regulations that will largely duplicate CARB on a nation- al level; therefore, suppliers are doing their compliance audit ahead of time. In addition, manufacturers want to adhere to the Lacey Act, which in 2008 was amended to include plants and plant products such as timber and paper. This landmark legislation represents the world’s first ban on trade in illegally sourced wood products.] Here’s a look back at some of the 28 mistakes made, false assumptions, and impacts — both negative and positive — stemming from the Lumber Liquida- tors’ “60 Minutes” episode from March 1, 2015. Mistakes made For Bill Dearing, president of the North American Laminate Flooring Association, what struck him the most was the lack of due diligence on the part of Lumber Liquidators. “Note this is not a statement that anything necessarily was done illegally, but certainly product claims that should not have happened did indeed hap- pen,” Dearing said. “Such potential incidents are lessened greatly with the proper implementation of an authorized standards-setting organization.” Dearing said NALFA’s members, largely U.S.-based manufacturers, are monitored for every product element. For example, a listed NALFA product must be CARB 2 compliant, which means the product should be thor- oughly vetted through secondary and independent sources. According to Dearing, the key teach- ing moment here is the practice of diligent verification, which was lacking in this instance. “It’s not guesswork but rather a clear path for the industry to use,” he said. “This is the most important lesson that should prompt all of us to review our systems immediately.” Dan Natkin, senior director of resi- dential products for Mannington Mills, NOVEMBER/DECEMBER 2016 HARDWARE + BUILDING SUPPLY DEALER said the Lumber Liquidators episode was a “hard lesson learned” but he wouldn’t characterize it as a debacle. “What happened could happen to any company who imports without an import quality control department and without expertise in very complex laws such as the Lacey Act and CARB regulations,” Natkin said. “What we learned as an industry, ultimately, is that you need to check, double check and triple check to make sure you truly know where your wood and laminate is coming from and to verify, not trust, that it is meeting all applicable state and federal laws. This may include your own internal verification systems (lab, QC department, etc.) as well as third-party verification systems that you contract with — not your supplier.” Beyond ‘60 Minutes’ Within 24 hours of the “60 Minutes” report, flooring retailers were besieged by calls from their customers regarding the “health” of their floors. The dealers, in turn, sought assurance from their distributors and suppliers that they were all in compliance and could back it up with the correct paperwork. “We learned in our business to be more cautious and inquisitive with whom we do business with to make sure our relationship with our vendor partners is not only healthy and ben- eficial but also trustworthy in doing the right things and compliance with the laws under our jurisdiction,” said Carlton Billingsley, owner of Floors and HBSDealer.com