Mrs. MORELLA. Thank you very much, Mr. Grant. We appreciate getting your point of view. We will be asking you a few questions

too.

And now our final witness, Mr. Brunner?

TESTIMONY OF ROBERT E. BRUNNER, VICE PRESIDENT AND GENERAL MANAGER, SHAKEPROOF/ITW, ELGIN, IL

Mr. BRUNNER. Madam Chairwoman, I would like to thank you and the Subcommittee for holding this timely and important hearing today on the question of whether the Fastener Quality Act is needed or outdated.

My name is Robert Brunner, and I am the Vice President and General Manager of the Shakeproof Automotive Products Division of Illinois Tool Works, Inc. I have been asked to represent the Industrial Fastener Institute (IFI) before this Committee today, and to present its views on the question of whether the FQA is needed or outdated.

Currently the IFI represents 148 companies that manufacture and sell about 85 percent of domestically produced fasteners in North America. We believe that the study Congress directed the Department of Commerce to perform, which calls for the identification of changes that have occurred in the fastener industry, is urgently needed and will demonstrate that the present FQA is both unworkable and unnecessary in today's private sector fastener environment.

We stand ready to assist the Commerce Department in assessing the changes that have occurred in the industry; and hope that the Department will work closely with industry in conducting the study and in drafting its report and recommendations to Congress.

We also feel it is important that Congress schedule additional hearings on the FQA once it receives the Commerce Secretary's report and recommendations so that Congress can have the opportunity to explore options to the Act with industry and other effected interests before taking action.

To this end, the fastener industry has formed a coalition of interests representing fastener manufacturers and users and distributors, including importers, to speak collectively on these issues. We feel this coalition will provide the Administration and Congress the best available evidence that the Act as currently constructed is unworkable and unnecessary in today's private sector fastener environment.

Many of these issues to be addressed by the coalition are outlined in my written statement, and will be more fully developed over the next several weeks for submission to the agency as part of its required study under P.L. 105-234.

Allow me to list nine reasons why IFI believes the FQA is not workable in its current form, and, in our opinion, no longer needed to assure the quality of private sector fasteners sold in the United States: one, problems originally addressed by the 1990 Fastener Quality Act should no longer exist; two, the FQA exceeds Congressional intent to limit the scope of fasteners covered; three, the FQA fails to recognize modern manufacturing methods, and current statutory language does not permit the Agency the flexibility to resolve the problem; four, the paperwork burdens imposed by the Act are

overwhelming and do not recognize modern electronic commerce; five, implementation of the FQA may result in $1 billion worth of grandfathered fasteners being unsalable; six, the requirements for implementing the FQA, based upon obtaining sufficient numbers of accredited laboratories are unworkable; seven, the FQA is perceived in Europe and elsewhere as an impediment to trade; eight, end-use fastener traceability is a fallacy; and nine, the FQA imposes a disproportionate financial burden on small businesses.

Of these nine reasons, the first is most critical. We commend the Committee to call upon the federal agencies identified in the 1988 Committee report, The Threat from Substandard Fasteners: Is America Losing its Grip?" and determine what changes they have made to their purchasing and quality assurance practices since the mid-1980's. There is no reason, we believe, why they should not take on the same mantle of responsibility for quality assurance that private industry users have adopted.

Further, we commend the Committee to evaluate the accessibility, disposition, and diligence of federal agencies with prosecutorial authority for the types of fraud identified in that report.

Beyond the nine fundamental issues identified above that make the FQA unworkable, is the concern that the FQA creates a competitive advantage for foreign fastener manufacturers and their customers. The FQA as currently written embodies an unfair trade practice aimed at more than just U.S. fastener manufacturers. Currently fasteners imported into the United States, as part of sub-assemblies or assemblies, like, for example, a transmission, are not fasteners within the meaning of the Act and the regulations. These fasteners are therefore exempt from the costly testing, certification, and paperwork provisions imposed by the Act.

In summary, the IFI believes that the Fastener Quality Act is misdirected and unworkable in its current form, and we believe is no longer necessary in the private sector. Today, we are again at a crossroads with the FQA. The agency has done everything it can legally do to make the FQA to work and yet it does not work for the reasons cited above.

Over the next several months, IFI and others who comprise the industry coalition working on this issue, will document in considerable detail all that is wrong with the Act. We expect that from this effort a realization that the current Act is unworkable will become clear to everyone involved and that a much simpler approach, based upon proven, proactive, private sector initiatives is preferable.

On behalf of the IFI, I wish to thank the Committee for its invitation to raise our concerns in this forum. And I hold myself available to answer any questions that the members may have.

[The prepared statement and attachments of Mr. Brunner follow:]

Statement of

Mr. Robert E. Brunner, Illinois Tool Works, Inc.

on behalf of the

Industrial Fasteners Institute

to the

Subcommittee on Technology, U.S. House of Representatives

October 8, 1998

Madam Chairwoman, distinguished members of the Committee, my name is Robert E. Brunner'. I am Vice President and General Manager of the Shakeproof Automotive Products Division of Illinois Tool Works Inc. (ITW), a diversified multinational manufacturer of industrial components and systems. I have been asked by the Industrial Fastener Institute (IFI) to represent them before this committee and to present IFI's views on the Fastener Quality Act (FQA or the Act). Madam Chairwoman, allow me to also use this opportunity to apprise the Committee, as required by House Rules, that ITW Shakeproof does not receive any federal funding that supports the subject matter on which I am appearing today.

The Industrial Fasteners Institute (IFI) is a trade association representing the fastener manufacturing industry in North America, including Canada, Mexico, and the United States, and its suppliers of raw materials, machinery, tooling, installation equipment and engineering services from around the world. Currently, the IFI represents 148 companies that manufacture and sell approximately 85% of domestically produced fasteners in North America and which contribute voluntarily and substantially to the technical work of the IFI. Two major IFI Divisions focus on the automobile and aerospace industries. A third major division is focused on the needs of a broad spectrum of industrial fastener users including farm equipment, off-road machinery, electronics,

appliances, lawn care, lighting, marine, mining, construction, railroad and truck manufacturers to name a few. The IFI supported strongly Congressional action in the form of PL 105-234, delaying implementation of the Fastener Quality Act (PL 101-592, as amended) so as to examine fully whether the Act is still needed. Indeed, significant changes in fastener manufacturing and purchasing practices have taken place since the FQA was first passed in 1990.

Since the mid-1980's, fastener manufacturers have had to transition from traditional quality assurance systems based upon end-of-line detection of fastener defects to an approach to quality that is based upon advanced quality planning, continuous process improvement, and defect prevention. The goal is zero defects in parts, and manufacturers of automotive parts, including fasteners, are required to operate such Quality Assurance Systems (QAS). For domestic automotive parts suppliers, this new approach to quality is embodied in an end-user developed quality system standard known as QS 9000. QS 9000 has been and continues to be used by the "Big Three" to qualify an ever shrinking list of suppliers, and is being adapted by other industry segments, including aerospace, and heavy equipment & machinery.

At present, only fastener companies supplying the automotive industry are required to comply with QS 9000. However, we believe that in the future, most fastener manufacturers will have to comply with customer created/imposed QASs, like QS 9000, as more and more original equipment manufacturers (OEMs) transition to this approach in qualifying their suppliers. Within the automotive industry, with which I am most familiar, the transition to such quality assurance systems has required years of effort and considerable outlays of dollars by fastener manufacturers. Hence, we expect other producers will either adopt implementation of QASs very cautiously or not at all, depending on the needs and requirements of their customers.

We believe that the study that Congress directed the Department of Commerce (Agency) to perform, which calls for the identification of changes that have occurred in the fastener industry, is urgently needed and will demonstrate that the present FQA is both unworkable and unnecessary in today's private sector fastener environment. We stand ready to assist the Commerce Department? in assessing the changes that have occurred in fastener and end user industries, and hope that the

Department will work closely with industry in conducting the study and in drafting its Report and recommendations to Congress. We also feel it important that Congress schedule additional hearings on the FQA once it receives the Commerce Secretary's report and recommendations. We believe that additional hearings will give Congress the opportunity to explore options to the Act with industry and other affected interests, both domestic and foreign, including distribution, federal agencies that procure fasteners, and federal agencies that have prosecutorial jurisdiction or Congress believes to have such jurisdiction, before taking action.

The Agency and its National Institute of Standards and Technology (NIST) have, we believe, worked diligently over the past eight years to resolve problems with the FQA. NIST's efforts are evidenced by its creation and support of the Fastener Advisory Committee3, efforts to amend the Act in 1996, efforts to listen to industry via workshops, written comment periods, and a public work session on February 4, 1997* These efforts culminated in the promulgation of amendatory rules published on April 14, 1998 which attempted to recognize QAS as a means of compliance with the Act. During this period, NIST and the Department listened to industry about problems with the Act and attempted, within the limits imposed by law, to make it workable and cost effective. Through no fault of the Agency, implementation dates for the Act have come and gone on three separate occasions due to the fact that there were not enough laboratories accredited to perform the required inspections under the Act.

For its part, the fastener industry has spent many millions of dollars over the past eight years to prepare for the FQA. Dozens of FQA Workshops have been held across the United States as well as in Europe and Asia and have been attended by more than 4,000 industry officials. However, in spite of all of the Agency's efforts to implement the Act, and all of the efforts and expense incurred by the fastener industry to prepare for the Act, the IFI believes that the FQA is still not workable for the reasons cited herein.