Studio 602 Introduces "Blackwing Sessions"

I am very pleased to announce “Blackwing Sessions”, a new adventure in expanding the range of fresh content we are producing to support creativity and the use of pencils. Blackwing Sessions is a new production from Studio 602, our entertainment and educational blog at Pencils.com. The inaugural Blackwing Sessions video features my good friend Christian Tamburr as our first Blackwing Featured musical artist, and will be released on Studio602 in its full length version on Monday December 12^th. Until then here is a short teaser cut from the full length version. More about Christian and the Blackwing Sessions below.

Christian’s musical talents in the jazz world as a top vibraphonist (he plays a mean piano too) are well respected, and include an "Outstanding Jazz Solo Performer" award from Downbeat Magazine. He and a growing number of talented musicians have become big fans of our Blackwing pencils for scoring and other notation purposes. The video was filmed during the recording session for Christian’s new album “Places”. It includes interviews with Christian and his quartet members about their creative process and tools used in composing, performing and recording their music. It also features the process of working out the intro of and then recording of the final cut to “Sailing Serenity”, one of 4 original compositions by Christian included in this album. The remaining 5 songs are some great arrangements of other artists tunes including the Beatles’ “Eleanor Rigby” with a fun modern groove and Julio Iglesias’ “La Carratera” featuring a nice Latin feel. Coincidentally, Christian served as musical director and piano player for Julio on the road for three years.

We all had a lot of fun putting together for you. We hope to see you on Studio 602 on Monday when we release the full 12 minute video, plus a more complete bio on Christian as our first Blackwing Featured musician. In addition we’ll be launching sales of his new CD “Places” on Pencils.com as well. For now you can listen to the album here on Soundcloud or download via iTunes, but for those who still like the full CD we’ll have it available for sale Monday which would make a great gift for the musician in your family when paired with our limited time offer on a Blackwing 6 Pencil combo pack. We hope you’ll like our inaugural Blackwing Session video. If things go well with this we hope to collaborate with and feature more Blackwing artists, writers and musicians in the future to build upon the Blackwing Experience.

Guitars, Pencils and Lacey Act Compliance

This photo is of my father back in the 1970s during a visit to Kitaboshi Pencil Company in Tokyo, Japan, where I actually visited today. He is being presented a guitar produced using California Incense-cedar by a member of the Sugitani family who are customers using our pencil slats for their products. This gentleman is now retired, but I happened to see him today, he says he still plays guitar every day and had that guitar specially commissioned for my father as a gift. Look for my upcoming post about the history of Kitaboshi Pencil and their products that we will begin selling on Pencils.com next week. California Incense-cedar used in our pencil slats, our customers’ pencils using our slats (and in this one of a kind guitar) is fully compliant with the US Lacey Act which is the main subject of this post.

The recent news of the US Fish & Wildlife Service raid and seizure of Rosewood and Ebony wood raw materials as well as guitars from Gibson Guitars and subsequent claims by Gibson's CEO that the US government is over reaching in its actions has an interesting relevance to challenges also faced by our company and our customers in the U.S. pencil industry. Here are links to three articles about the Gibson issue over the past month:

• Trade Law Hits Note for Guitar Maker Gibson - September 19, 2011
• Gibson Guitars Wood Imports Case Raises Concerns - September 30, 2011
• Gibson Guitars CEO slams US raids as "Overreach" - October 12, 2011

At issue is the application of the 2008 Amendment to the Lacey Act, a law originally established in 1900 governing the illegal trafficking of hunted wildlife and game across state lines and since inception has continually expanded in scope and breadth to cover fish and plants. The law is administered by the Animal and Plant Health Inspection Service (APHIS) within the U.S. Department of Agriculture and jointly enforced with U.S. Department of Fish & Game which is the lead agency in the case against Gibson Guitars.

Under the 2008 amendment the law was extended to plants, wood and products made from wood and plant materials. The amendment requires importers of applicable products to certify that the wood materials used in their products were not obtained from illegally harvested materials or include any protected or threatened tree species. The amendment implemented a number of documentation and declaration requirements that must now accompany each import shipment with respect to specific species used, country of origin of the trees from which the wood product was produced and statements relative to the legal harvesting of the trees used in the. Knowingly importing wood or wooden products covered by the law is a violation of the law subject to both civil and criminal penalties. Heralded as an improvement in environmental policy the amendment was also supported by the Bush Administration as a protectionist measure for the US timber and wood products industry against lower cost imported woods.

While I have no specific knowledge of and cannot speak to the specific issues involved with Gibson's case I can certainly state that illogical and inconsistent application of the rules process by government agencies responsible for enforcing the Lacey Act is a ripe example of the "law of unintended consequences" as with much government regulation. CalCedar has been deeply involved in addressing the 2008 Lacey Act amendment relative to compliance of our own pencil wood supply as well as understanding the impacts of the law on our company, our customers and the pencil industry supply chain as a whole.

We have long taken an industry leadership position in assuring the wood resources we utilize are harvested from well managed forests according to applicable rules and regulations in any countries we source our wood from. We have and continue to support industry efforts to increase the overall sustainability and have been a pioneer in implementing FSC and SFI third party certification to an increasing proportion of our wood supply. Thus in concept implementation of the Lacey Act amendments in 2008 was a step in a positive direction with a goal of eliminating illegally sourced raw material or utilization of any threatened plant species. Though the standards applied as to what’s illegal or legal or threatened or not can vary from country to country as the Lacey Act simply requires compliance to the applicable laws in the country of harvest. Thus the level of added environmental protection here is inconsistent from country to country.

The Lacey Act requirements added a whole new level of documentation and due diligence required for us to supply slats to our US based pencil manufacturing customers. This included updated investigations and documentation of our wood supply chain and added costs of consulting in the investigation with an accredited third party certification agency as to appropriate precautions including the added burden to segregate and/or eliminate any wood of potential concern and to maintain clear chain of custody of all our through the supply chain. All of this was already occurring with respect to our FSC and SFI material in both Cedar and Basswood, but we felt it important to apply these processes to the balance of our Basswood supply chain. Where we could not clearly document exact origin we sorted out the material to create yet another classification of inventory. Thus with respect to our Basswood pencil slats we now must keep separate inventory and track three different groups of products; FSC certified, Lacey Compliant and standard inventory which we do not believe is a compliance concern but will not take the risk of selling into the US market without clear chain of custody back to the forest.

However, this burden of declaration documentation was not extended to the importers of pencils themselves. Thus wood sold to our customers who produce pencils in the US is subject to the documentation requirements while finished imported pencils are not, placing an added burden on U.S. pencil producers. Given that the majority of pencils consumed in the U.S. today and before the amendment took effect were imported this inconsistent application of the statute to intermediate vs. finished products hardly serves to protect US manufacturing jobs or to ensure that the majority of pencils sold in the US are indeed Lacey Act compliant. This does not mean many or even most pencils are not compliant, just that the chances are higher that they could be. As far as musical instruments are concerned importation of pianos and stringed musical instruments, including guitars, seem to have become subject to the documentation and declaration requirements in April 2010, so in this case it appears the compliance playing field may be a bit more level between US and Foreign producers in that industry.

Next, the rules are not very specific on the level of sufficient due diligence to protect an importer from prosecution and civil and criminal penalties under the act. The "due care" principal is used which is generally contextually applied depending upon the level of organizational expertise and level of involvement in the supply chain of the importer of record. Thus as an experienced wood products manufacturer standards for "due care" applied to our company may be interpreted by the relevant agency differently than that of an importer of finished pencils who tends to rely solely upon the level of documentation they choose to request from their supplier. In many cases such suppliers are simply foreign trading companies, not manufacturers themselves, relying on the say so of their own supplier. With much pressure put on the price of imported pencils and other wood products this provides some level of incentive to less ethical suppliers to fudge in the information provided to their U.S. import customer. If a U.S. importer does not perform an on the ground investigation or use a knowledgeable third party certification agency, which is not specifically required under the statute, and simply relies on the paperwork provided by their supplier, they may be at some elevated risk of exposure to prosecution as to whether they employed “due care” in the event there is ultimately some problem found with the legality of the raw materials. This essentially becomes a risk management exercise for each importer with differing levels of risk tolerance and exposure.

Finally, as a knowledgeable U.S. company operating our own facility in China and selling globally we are more at risk of punishment under this U.S. act than are our foreign competitors. It’s going to be difficult for a U.S. importer penalized under the act to recoup any fines even if they have some form of guarantee. As such we've taken a more conservative approach to managing this issue in our company. This is also more costly than most of our foreign competitors especially those who are exporting finished pencils to the US where no specific requirements for their U.S. import customers to file the import declarations. This does not mean those pencils are not subject to requirement to be legally harvested, but they have less risk of being challenged as to compliance.

As a company we are continually working to insure that an increasing portion of our wood supply to the pencil industry actually is part of one or more accepted third party certification programs, most specifically FSC or SFI, under the PEFC umbrella. Given both inflationary cost and supply developments with respect to Basswood in China resulting from the Chinese government now enforcing greater harvest restrictions we are currently testing and introducing a new 100% FSC certified product line named Pacific Albus. This new product is U.S. plantation grown and fully Lacey Act compliant. We see Pacific Albus becoming increasingly important versus Chinese or Russian grown Basswood in our company’s supply program and is a product that will be proprietary to our company. I expect to post more about this new product range as we move forward with greater adoption and acceptance into the industry by our customers.

Celebrating the Japanese Pencil Industry

Sometime next week, tentatively on November 2^nd, we’ll be introducing a few select items from two Japanese brands on Pencils.com; Kitaboshi Pencil Company and Tombow. The selection includes several great items for the holiday gift giving season. You can learn more about those specific items in an upcoming Studio 602 story early next week.

This expansion of brands at Pencils.com is a part of our continuing effort to introduce more of the products of our pencil slat customers’ from around the world. This allows us to increase the breadth of great high quality pencil offerings on Pencils.com, some of which are not readily available or well known in the U.S. Market. It also helps increase awareness and appreciation of some great pencils and of the wood-cased pencil in general. Given our close relations as a wood slat supplier to many producers around the world, we hope to continue growing our offering mix quite a bit over the next year.

This week also marks my annual visit to Tokyo to visit a number of our pencil slat customers and to work with our Palomino and Blackwing producer about production planning and product development for new pencil items we expect to introduce in 2012. Most notably a Palomino quality, private label pencil program, though we’ll share more about this in the coming months as that program moves closer to launch.

The Japanese Pencil industry is probably one of the most interesting domestic pencil industries in the world. Relatively young by comparison to its European and US counterparts with several brands dating back 100+ years, most Japanese production and development of wood-cased pencils began in the post World War II era. Over the past 20 years the industry has been subject to many of the globalization pressures faced by other developed western markets it also faces an extra challenge of demographic trends; a declining and aging population which means the consumption of pencils in Japan is actually declining year to year and has been for some time. Japan is the highest cost pencil production market in the world which is reflected in their prices. As a result very little exportation of Japanese wood-cased pencils is occurring, so the local market dictates overall production trends domestically. (In fact Pencils.com with our Palomino and Blackwing products and more Japanese pencils coming may be one of the largest volume export distributors to North America already.)

Despite these trends the Japanese production supply chain remains relatively intact and traditional without the degree of radical makeovers of mergers, acquisitions, or the extent of off-shoring production that the industry has witnessed in North America and Europe. Yes, there are certainly fewer producers over time, with several dropping out over the pat few years, but the basic structure has been relatively static. Also taken in context of relative market size vs. Europe and North America there are actually proportionately more Japanese companies actively involved in the production of pencils and pencil components in Japan today than in these other regions.

Why is this? Several factors contribute.

First, Japan is a high quality and brand loyal market with consumers who understand the difference between good and bad pencils and are willing to pay the difference. The 100 yen pencil is quite common and Beyond the major brands, Mitsubishi with its Hi-Uni and Tombow with it’s Mono, there has long been a unique demand for specialty pencils that also give a collectibles status such as “Character Pencils”, popular Disney, Pokemon and Anime characters licensed to either a pencil producer or a marketing company that contracts a local producer to produce their pencils. “Game Pencils” which treat the 6 sides of the pencil as a sort of die which children can roll against one another and win each other’s pencils. And a whole range of designer theme pencils. Such innovations were first made popular in the Japan before being adopted by some US companies focusing on the school pencil market as they attempted. Even if a marketing company has the rights to a character they most generally still use a Japanese sub-contractor for quality reasons and there have been a few lessons learned about the expectations of the Japanese consumer when the quality of an imported character pencil was not up to par. In the US, more and more of such license or designer theme pencils are imported by marketers from lower cost manufacturing, with just a couple companies actively producing such pencils in the US today. In Japan all the companies are involved in this segment of the market.

Second, the unique structure of the Japanese industry involves a variety of specialist subcontractors, some who only specialize in one or two parts of the manufacturing process, such as wood-working, lacquering and finishing, graphite & color core production or packaging. Larger companies such as Mitsubishi and Tombow and mid tier producers such as Sakamoto and Kitaboshi use these often more nimble or uniquely skilled sub-contractors to meet special processing needs, smaller production run sizes and do quicker turnaround on orders. The character pencil marketing companies as well as some branded pens producers such as Pentel rely entirely on sub-contractors for their wood cased pencil needs. Such a structure helps to shorten the supply chain vs. imported pencils in the changing specialty, novelty pencil market.

All of these sub-contractors are small family owned companies operating essentially in a building that co-locates production with their own homes. They are more like traditional artisan workshops than what the average person would picture as a factory. The owners of these businesses are highly skilled and knowledgeable about their business. The extreme care and detail they speak with in discussing the technical aspects of doing this or that operation in the manufacturing process can be a truly amazing experience. Generally their home and factory debt has long been paid off and though their equipment is old and slow they are the best at what they do.

Still this industry structure faces several threats which are a factor of both the demographic and competitive globalization trends over time. As the overall market shrinks and largest producers feel pressure from lower cost pencils they tend to keep more production in house to retain their economies of scale, thus slowly squeezing some of the subcontractors out. Mainly, focused on non-pencil products such as pens, markers, correction tape, etc. these companies still feel their pencil business is important and need remain the most efficient volume producers. Some have set up off-shore production of certain pencil components or assembly operations for some products in Vietnam or China, similar to western producers who have gone multi-national in their operations. Over time the mid-tier companies have adapted by focusing on introducing new products to diversify their business away from pencils into complementary novelty items, by broadening their sales distribution channels or dropping certain manufacturing functions to use subcontractors, etc. Finally, as the business owners’ age in the sub-contractor segment, often the 2^nd or 3^rd generation family members are not interested in continuing with the same passion as their parents, so these businesses also tend to shake out due to lack of management succession or natural selection of a sort.

As a wood supplier to the Japanese Pencil Industry for three generations, our company is always conscious of these challenges. We value the close relationships we’ve built with many of these companies and families and salute their commitment to producing the highest quality wood-cased pencils. Adding and promoting more pencils produced in Japan to our Pencils.com offerings is just one small way of supporting these friends in the industry. They produce some of the most unique and interesting novelty pencils in the world and in time we hope to make this collectable segment a larger part of our offering in addition to some of the branded items we’ll be introducing in the coming weeks and months. We hope you’ll help you’ll join us in our Japanese Pencil Celebration event in November at Pencils.com.

Reviving the Blackwing: One Year In

Saturday October 1^st will mark the first anniversary of the “rebirth” of the Blackwing pencil brand with our Palomino Blackwing pencil. This was followed in June by our introduction of the Palomino Blackwing 602 model, which more closely replicated the look, feel and performance of the original Eberhard Faber Blackwing 602 pencil. We’ve been fortunate to see early success with these efforts and a growing following of happy and dedicated customers on Pencils.com, and increasing interest from dealers and retail trade to stock Blackwings as well. Certainly, we cannot yet claim a big commercial and financial success and any accumulating sales margins are being reinvested in further development of the business. However, the progress is encouraging and we are continuing to push forward in our day by day efforts towards these goals.

Naturally at such symbolic occasions as an anniversary or birthday one tends to contemplate various events that lead to the current conditions or state of mind we find ourselves in; be those events and circumstances positive, negative, fortuitous, unlucky, results of poor decisions or just hard earned. So I thought I’d share a number of my key thoughts on this topic as we look back at what brought us to this point.

Much of the history and our motivation for re-launching the Blackwing Brand I covered in this early post and others in my “Reviving the Blackwing” series last year. There is much I could add to this going back through some of the history of the development of our first Pencils.com e-commerce shop and our original Palomino pencil range which were essential early steps. Having the old platform of the Incense Cedar Institute Pencil Pages on the pencils.com URL of course gave us a good start at getting our products seen by quite a few visitors reviewing our early Story of Pencils educational content. However, in essence, it was really listening to the frequent suggestions of our customers requesting our Palomino pencil with the replaceable eraser with the ferrule assembly design of the original Eberhard Faber Blackwing 602 that we determined to move forward.

As we prepared to launch our new pencil we initially intended to call it the “Palomino Pegasus”. I even had written some early marketing material expounding on the legend of Pegasus landing upon Mt. Helicon and loosening the rock from which sprung forth the Hippocrene spring. This spring is where the Muses gathered and was believed to be the source of their poetic inspiration. Thus by association our new Palomino Pegasus pencils would be a catalyst of artistic expression. However, we then learned that Newell (Sanford) had allowed the Blackwing trademark to lapse and so through good fortune and quick action we filed for and claimed the rights and instead launched our pencil as the Palomino Blackwing. It’s often been erroneously reported over the past year that we purchased the Blackwing trademark. However this has been the result of a mistaken assumption by a few who misunderstood the meaning of the phrase “acquired the trademark” where the word acquire is not specific as to the means of coming into possession of something.

Perhaps the most important aspect of our success to date however is the strong support of our customers and sharing of the Blackwing story. Certainly we’ve worked hard to cultivate and promote the story of the original Blackwing and have benefited greatly by some wonderful PR exposure from Boston Globe, Boing Boing, a host of pencil bloggers, Fortune Magazine, NewYorker.com and many other websites and blogs that just like to share cool stuff. So we are greatly appreciative of all the support, feedback and in some cases even criticism that we’ve received from our customers and others over the past year. One of my key aspirations for all our efforts has been to spur a re-engagement of as many people as possible with the wood-cased pencil and an appreciation for what a true quality pencil is. In a sense to make pencils more cool and fun. In our continuing efforts to listen and respond to your feedback we didn’t stop with the initial version. We redesigned a new Palomino Blackwing 602 model to satisfy those customers looking for a pencil with both design and functional writing performance of the original Eberhard Faber version. The response to our 602 model has been even greater and we are seeing and hearing more from those of you who are rediscovering the joy of writing with a real high quality smooth graphite pencil whether it’s a Blackwing or another of your favorite models.

Through the telling of the Blackwing story and our new Studio 602 content we continue to focus on bringing light to a range of creative expression and to provide inspiration for you to use the Blackwing to initiate the process of executing your creative ideas whatever they may be. Ultimately, despite the name change from Pegasus to Blackwing we still hope our pencils and other new products can be that catalyst for executing on your creative expression and thus view the developing Palomino Blackwing range as “More than a Pencil”.

Finally, as we approach the 1^st Birthday of the Palomino Blackwing we are celebrating by launching on Pencils.com today our new range of Blackwing folio, notebooks and sketchbooks. This is a natural next step in the evolution of the Blackwing brand into a broader creative experience. The expanding Blackwing range is accompanied also with new notebook and sketchbook offerings in our Palomino and ForestChoice ranges as well. We are truly excited about these new items and hope that you will be as well. We look forward to your future feedback and participation as we strive to build the Blackwing into a truly creative and fun. Thanks so much for your past and continuing support.

Notebook Evolution

As we approach the one year anniversary of the introduction of our Palomino Blackwing pencil we are nearing the next step in the evolution of the Palomino and Blackwing product ranges as we get set to introduce our first series of journals, sketchbooks and notebooks. In addition, we’ll also be complementing our ForestChoice FSC certified pencil range with a selection of FSC Certified notebooks. So, here is a first look at the overall range, though we are planning feature posts on individual product group selections leading up to our official launch near the end of September.

When we first conceived the idea to introduce a range of notebooks in some of our top brands, we had several goals in mind. First, the design and quality had to be fully consistent with the high standards for each of our relevant pencil brands: Palomino, Blackwing and ForestChoice. This meant using superior materials, as well as partnering up with an experienced and reliable supplier with all the capabilities to produce outstanding products on a competitive basis. We wanted a collaborative partner to guide us in understanding and learning about the notebook market, but that was creative and adaptive to our concepts and needs as well. After several months of research, we found just what we were looking for in Istanbul, Turkey. As it turns out Istanbul has a long tradition of artisanal printing and bookbinding. Our new partner, Talat Printing & Leather Products Company, has over 50 years of industry experience and is now into its third generation as a privately held family business. Thought primarily a producer of premium customized planners and notebooks for large commercial clients, they introduced their own Fabio Ricci brand range for retail distribution in the past few years. As part of our partnership we will also be taking on the North America distribution of the Fabio Ricci brand, initially introducing their Elios line of their notebooks this fall, along with our own California Republic family range to retailers and distributors.

Our next goal was that our notebooks needed to have a functional partnership with our pencils and a design that supported your creativity, whatever the specific activity: writing, drawing, sketching, composing and more. For this, I spent 4 days in Istanbul in early April working with Talat to develop our initial product range with adaptations of Talat’s items. All the materials utilize premium acid free papers and covering materials from European suppliers in Spain or Italy with appropriate weights for each notebooks intended purpose. ForestChoice products include FSC paper as well as cover stock. This was supplemented with work from our branding design team to come up with a belly band and packaging design theme that was informative and helpful. In all, we’ve got a great line up we are very proud of as an initial launch and we received very positive feedback when we showed the samples to potential customers at the National Stationery Show back in May. Getting everything done in time for the NSS was a challenge, but we were very encouraged by the feedback received. Production of our initial stock has been completed and the shipment is currently on the water expected to arrive in California within the next two weeks.

In the coming weeks leading up to the launch we’ll cover each of the products in more detail. We’re very excited about this next step in our evolution as a broader range supplier of premium writing pencils and notebooks that support a creative and enjoyable experience of putting your ideas to paper and pencil. It’s not just a pencil and a notebook. It’s an experience.

Hearst & Morgan: An Architectural Collaboration with a Pencil Connection

My wife and I recently completed a driving vacation down the California coast which included an overnight stop in San Simeon where we visited Hearst Castle. Each of us had been there separately as children, but clearly our appreciation of this architectural gem and the vision of William Randolph Hearst is much greater with a bit of seasoning over the years. Having designed, built and remodeled a couple very modest houses ourselves, we found it amazing to see what Hearst and his Architect Julia Morgan accomplished over 28 years that they collaborated on this property. There is a very well done movie in the visitor center which covers Hearst’s life and the influences that lead to his personal attachment to and vision for this estate as well as his close working relationship over several decades with Julia Morgan. Full of quite a few old home movies, it’s just a great chance to learn about their creative working process in addition to the history of the property. This often involved tearing down and rebuilding many aspects of the project as well as designing to complement and feature the amazing, historical pieces of art, furniture and architectural treatments imported from throughout Europe.

During our overnight we lodged at The Morgan at San Simeon, decorated throughout with an amazing collection of her original architectural design renderings for many aspects of the Castle. Almost all of these were done in graphite and colored pencil. This collection represents a remarkable exhibition of art and has strengthened my own interest in historical architecture and the use of pencil as a creative medium in this trade. I’ve shared a few of my photos of the Morgan drawings here. Amazing details down to the designs of the stair risers all around the property, and untold design features throughout. The bottom of each print includes a description of the item and the inscription “Mr. W. R. Hearst San Simeon, Julia Morgan, Architect” along with the date of the drawing, all in pencil. The one photo of the property I included below demonstrates how the tile risers become an integrative component of the overall architectural design.

Julia Morgan’s story is a fascinating tale of one of America’s first leading female architects. Graduating in 1894 as Civil Engineering student from University of California, Berkley she was the first woman to be accepted and graduate with a degree in architecture from the Ecole des Beaux-Arts in Paris. Returning to San Francisco and employed by John Galen Howard, who was responsible for the UC Berkeley Campus Master Plan at the time, she worked on designs of several buildings. This included two endowed by Phoebe Apperson Hearst, William Randolph’s mother. This initiated a long relationship between Morgan and the Hearst’s that spanned over 30 years and included multiple projects on both Hearst Estates as well as several newspaper buildings. Beyond her most famous work on Hearst Castle, Morgan was one of several architects contributing to the Bavarian village themed Wyntoon estate on the Hearst’s 67,000 acre forest property along the McCloud River just south of Mt. Shasta. Outside the broad Patronage of the Hearst family, Morgan did extensive work designing buildings for YWCA (including the Asilomar Conference Center) and several other women’s educational institutions such as Mills College. In all something like 700 buildings in California are attributed to her body of work and much has been done by historians documenting her contribution to the field of architecture.

One final interesting connection between pencils and this story is that the Hearst’s McCloud River area timberland holdings include stands of California Incense-cedar which have historically been harvested and sold by the Hearst Corporation for use in pencil manufacturing. From 1979 to 2003 our company owned and operated a saw mill at McCloud, CA, which was originally established as the McCloud River Lumber Company in 1896. Even before that we were producing pencil stock lumber in our Mt. Shasta City mill from the early 1960s until the early 1990s. The nearby Hearst lands historically provided some portion of the cedar used by both saw mills to produce pencil stock that was then sent on to our slat operations in Stockton to make pencil slats sold to our pencil manufacturing customers. Even though our manufacturing supply chain is designed much differently today, producing slats in China, we still receive some pencil stock we are purchase from other suppliers who buy cedar logs from the Hearst lands. Thus the Hearst property has been participating in some small portion of the pencil industry’s sustainable cedar supply for 50 years or so.

Palomino Blackwing Setting Design Trends

Recently we’ve received a few great examples of how some forward thinking customers have been using our Palomino Blackwing pencils as an integral part of their promotional efforts in their own businesses. As you’ll see our Blackwings can make a great design and quality statement as a corporate gift in combination with a unique story or gift.

The first item is a “Trend Alert” sent out recently by one of our pencil slat customers Schwan-Stabilo Cosmetics, who is the largest supplier of cosmetic pencils to major brands worldwide. Schwan’s Trend Alerts are sent out monthly to over 800 of buyers and decision makers in the fashion and cosmetics industry. The card includes two pencils and has very nice copy section entitled OBJECTS OF DESIRE which briefly introduces the story of the new Palomino Blackwing and CalCedar’s renewal of this graphite pencil with it’s exceptionally dark line. It goes on to introduces a brand new formulation eyeliner pencil they've created stating:

We are pairing it [Palomino Blackwing] with the new generation in our wood-clenched eyeliner-pencil formulas. The absolute must have for the eye make-up aficionados. Schwan’s BLACKWING has a never-before-felt satiny, extremely soft and gliding application, laying down an exceptionally intense line that doesn’t smear and lasts all day (and all night).

This idea developed during a meeting I had with Schwan management this past winter in Germany when I was describing to them the launch of our Blackwing pencil. A very nice job particularly of integrating the drawing of the eyes along with the language highlighting the extremely dark and soft drawing performance of our graphite with the story of their new formulation with complementary performance characteristics as an eyeliner. These eyeliner pencils with the Schwan Cosmetics logo and Blackwing imprint are simply design and product samples and are not available for sale under the Schwan brand as their customers purchase products customized with their own brands. The pencil does leave a very dark luxurious mark and I hope it will be a big winner for them this season.

The Second example is from Elixir Design, a San Francisco based Brand Strategy firm who’s approach is deeply linked to great design. Last fall they purchased our Blackwing pencils after the launch to be used as part of this creative premium gift to their clients. The elegantly designed gift box holds a single pencil and is embossed with the quote “Luck Favors the Prepared” 2011 and a simple card internally with quote attribution to Louis Pasteur and a simple note of Best Wishes from all of us at Elixir”. Another interesting touch is the inclusion of a small wax paper envelope which contains shavings from the pencil being sharpened.

Chinese Pencil Anti-Dumping Duties Revisted

Bloomberg.com published an article on June 27th covering the pencil industry titled "New Jersey Pencil Maker Cedes No. 2's to China". While the title refers specifically to General Pencil Company and quotes it's owner and CEO Jim Weissenborn, the article has a broader focus on U.S. Anti-Dumping as it applies to the pencil industry as a whole. Anti-dumping duties and the Chinese pencil industry is a topic I've commented on in past posts over the years: Pencil Anti Dumping Duties: Primer and Pencil Anti Dumping Duties: Changes in the Air.

The article was prompted by the June 13th decision by the U.S. Trade Commission to extend for another 5 years the countervailing anti-dumping duties against Chinese pencils. In addition to Weissenborn it includes includes quotes from other industry representatives in support of the duties as well as several economists who claim that such duties do little to protect U.S. producers as production just gets shifted to other low cost countries. The article provides several statistics regarding the U.S. Pencil industry gleaned from the associated filings demonstrating that despite the duties (which have been in place about 15-20 years now) imports of Chinese pencils to the US have increased five fold since 1996 with statements that US producers accounted for just 14% of US pencil sales in 2008.

I agree generally with the statistical trends and the views of the economists that the long term impacts of anti-dumping duties don't necessarily protect U.S. Producers from the challenges of global competition. ONe can always nit-pic specific figures and percentages. The fact is in the end you still have to compete on your own innovation, manufacturing and/or purchasing efficiency and ultimately find your proper niche in the market. A point Jim Weissenborn speaks to well in the article with respect to General's market focus.

However, one aspect that is not addressed in the authors argument is that a large portion of the Chinese pencils coming into the US are in fact not paying significant anti-dumping duties relative to the China wide rate of 114%. This is because there is a process of reviewing and applying for producer specific anti-dumping duty rate adjustments with the Commerce Department. As a result the largest Chinese exporters to the U.S. are only subject to anti-dumping duty rates in the range of 1-5%, not 114%. This rate adjustment review process is an expensive and complicated legal and accounting process that makes sense for only the largest suppliers. This itself introduces further inefficiencies and opportunities for gaming the system to avoid duties, including shipping pencils from other suppliers via the favored duties of these larger entities a challenging issue to police. Eliminating such special rate reduction applications might make the system simpler in total. However, it still does not address the fact that such a change would likely spur an increased wave of trans-shipment of Chinese pencils to the US via other countries, an illegal practice, though challenging to police and administer.

Regardless of such inefficiencies in the system many Pencil industry insiders believe the duties are warranted given the "hidden subsidies" received by Chinese producers. One example is the VAT rebates received from the Chinese government on finished pencils exported from China. These are not applicable to slats and other components exported, thus favoring finished production in China itself. Another form of subsidy has been domestic wood costs that has been artificially low due to over harvesting over many years. In fact we are now seeing that China is experiencing dramatic increases in wood costs for all sorts of industries as the Government is curtailing harvest levels on it's forests through out the country. This is currently driving a cycle of inflationary price increases in raw material, slats and ultimate Chinese pencil prices. A subject I'll be addressing in a future post sometime in the next month, but the point here is that Chinese wood supply has been at relative lower costs than other substitute woods for our industry many years and would have been higher if forests were managed more effectively on a sustained. Fortunately the Chinese now seem to be working to correct this, though this has not dimmed their appetite for wood.

In the end the anti-dumping duties have assisted the US industry from being totally decimated by Chinese imports, even though many US Producers have had to become involved in Chinese production or imported pencil supply themselves to competitively serve some share of their US sales. Small private family owned producers such as General's and Musgrave mentioned in the Bloomberg article remain in existence today in part through the benefit of such protective duties, but just as importantly through their own dedication and commitment to producing and marketing quality products. offering superior customer service and valuing the traditions and knowledge developed through several generations involvement in the industry and the contributions to the communities in which they live. Strictly economic arguments on the subject of the good and evil of protective duties to society rarely address these social benefits.

Another First Flight, but not a Blackwing.

While we were in the midst of launching the first flight of our new Blackwing 602 these past few weeks, my wife and I have been watching over the first flight of another set of birds in our own backyard.

About 4 weeks back a pair of Robins chose to build their nest on a somewhat precarious perch of our floating pool chlorinator that was sitting in a basket just out side our kitchen window. This was about eye level right on our back deck under protection of our covered porch. On May 27th we discovered the nest with two eggs as shown here.




I took the next photo on June 6th as mom incubated her eggs. We had some really cold and rainy days from end of May through the first weekend in June so I think Mom was happy to have the cover of our back porch, though my wife began worrying about the dinner party we were hosting on June 13th for the CalCedar Board of Directors as we planned to dine on the deck that evening. Even after hatching mom sat on the nest early on during the evenings to keep the chicks warm.

All along we thought we had just two eggs, but in the end we found there were four chicks that hatched. This photo was taken on June 6th which was the first day we noticed the chicks had hatched.




Two days later on June 8th. A bit bigger and more active.





On June 10th, I was able to get several nice shots of feeding activity. It was only at this point we actually realized that both parents were tending the nest and feeding both birds. With return trips to the nest every few minutes from each parent to feed a diet of works and bugs. It also became clear the chicks were not likely to fledge prior to our dinner party on the 13th. We devised a plan to shield the nest from the party by hanging an old curtain in front of the nest. The parents needed to adjust thier landing approach to come in from the side and that took a few tries, but worked. The party came off without a hitch and the parents even kept feeding the chicks with our dinner guests seated just 5-10 feet away on the other side of the drape. After the dinner we removed the drape to improve access and so it would not hinder the chicks when they fledged.

Yesterday morning before work on June 16th I noticed the nest was now empty and chicks all gone. There was quite a mess below the nest on our deck at this point and a trail leading off our deck to the back yard. A few minutes later I noticed one of the parents on our lawn still with a fresh batch of worms and with it was one of the chicks. I was able to snap a few nice shots of parent and chick perched on this rock beside our pool. While taking these last two shots I noticed something in the pool and when I approached I found that one of the chicks had fallen in and drowned.

When I went to grab the pool skim net to remove the dead chick my Labrador retriever, Sky, approached the chick standing on the boulder which became frightened and fell into the pool itself. Fortunately, I was able to scoop up the chick as it struggled in the water and save it. It ran off under a Blue Spruce tree next too the pool. Sky had been pretty good during this whole period and had been buzzed a few times by the parents, but never really showed any interest in the birds or the nest until she saw this chick. I only hope she was not the cause of the earlier drowning when she had been out earlier in the morning. Later I saw the chick running through the lawn with one of the parents. I was leaving town yesterday morning and my son arrived to house/dog sit. I never saw either of the other two chicks and my son reports today he has not seen the parents or chicks again either. I am hopeful all three of the other chicks have made it.