January 16, 2003   The PBN Company


Continuing Tariffs Could Mean Even Greater Losses to Economy

Washington, DC: Members of the Consuming Industries Trade Action Coalition Steel Task Force (CITAC STF) from across the country will tell the International Trade Commission (ITC) today that they have suffered massive financial and business losses and been rendered less globally competitive due to the Section 201 steel tariffs imposed by the Bush Administration in 2002. Company executives from steel-consuming businesses stressed that thousands more job losses and business closures could be U.S. manufacturers' dim reality unless the tariffs are quickly terminated.

The hearings on "Steel-Consuming Industries: Competitive Conditions with Respect to Steel Safeguard Measures," resulted from a House of Representatives Ways & Means Committee formal request to the ITC to study the impact of the tariffs on U.S. steel consuming industries and the U.S. economy. Requested under Section 332(g) of the U.S. trade law, the "332 report" will be part of the ITC's mid-point review of the Section 201 steel tariffs, to be presented this September - a point at which the tariffs could be terminated. CITAC's Steel Task Force pushed hard for this analysis.

A number of Members of Congress indicated they will appear in person on behalf of steel consumers, including Rep. Donald Manzullo (R-IL), Rep. Joe Knollenberg (R-MI), Rep. Peter Hoekstra (R-MI), Rep. Mike Rogers (R-MI), Rep. Thaddeus McCotter (R-MI ), Rep. Dave Camp (R- MI), Rep. Mark Steven Kirk (R-IL), and Rep. Ron Lewis (R-KY). Numerous others will submit written statements on behalf of steel consumers as well.

"There are 12 million workers in the steel consuming sector across the country and today, the ITC heard from a broad cross section of their employers about the serious competitive pressures steel consumers face as a result of the steel tariffs. The steel tariffs - without a doubt - are causing massive damage to steel consumers, to U.S. manufacturers, and to the economy. Job losses and financial losses will only worsen each day that the steel tariffs are in place. The clear-cut answer is to remove the tariffs as soon as possible," said William Gaskin, CITAC STF Chairman. He added, "We appreciate the support of our congressional friends of consuming industries."

Jon Jenson, Vice Chairman of CITAC and Lewis Leibowitz, CITAC STF Counsel, are delivering testimony at the onset of the hearing, setting the stage for steel consumer witnesses that follow. Approximately 50 steel consumers in industries as varied as automotive equipment and parts, machinery, transportation services and importers, and metalforming industries are presenting testimony before the ITC on the severe impact of the steel tariffs: steep price increases, quality problems and delays, employee layoffs, and business lost to global competitors immediately following the steel tariffs.

Other CITAC STF and Precision Metalforming Association (PMA) members testifying at the hearing included Gaskin, Douglas Krzywicki, Chief Financial Officer of A.J. Rose Manufacturing; Bill Jens, President of ATACO Steel Production Corp.; and Edward Farrer, Manager of Purchases at Olson International. They described in personal terms the impact on their companies of the dramatic price increases, supply shortages and quality issues caused by the Section 201 steel tariffs and they detailed the loss of business to foreign competitors.

Krzywicki, whose Avon, Ohio-based company (A.J. Rose Manufacturing) produces metal stampings, air bag components and spun-formed products for the automotive market, testified that they have been forced to reduce employment by 10%, scale back employee benefits and capital investing, and lost bids on new work totaling over $30,000,000 to foreign companies. One of their customers moved work valued at $4,000,000 to Korea to save costs.

Krzywicki also added that with the company's erosion of profits, due significantly to the tariffs, they are now faced with limited financial options with the bank. He said that during borrowing negotiations, "I was met with proposals for significantly higher borrowing rates, restrictive covenants and limited borrowing ability. The reason&our bank stated that they view our business, 'U.S. manufacturing tied to the auto industry, as a high lending risk'& It is a sad commentary when banks view American manufacturing as a 'high risk' investment!"

Bill Jens testified that after the tariffs were imposed in March 2002, prices at their family-owned, Wisconsin-based metal component manufacturing company increased by as much as 50%, the quality of their steel from domestic suppliers deteriorated, and deliveries were delayed. In one example of hardship caused by the tariffs, Jens said that after investing over $1.2 million in new equipment on a steel-desk job for their largest customer, the customer moved the job to Mexico where steel costs were cheaper, instead of paying for the increased annual costs of raw material because of the tariffs.

He continued, "we are facing similar challenges with other customers. We can't give a competitive quote if we have to pay 30% more for our raw material than a foreign producer." Jens added that, "we anticipate our revenues will decline by as much as 45% as a result of the tariffs."

Edward Farrer, Manager of Purchases at Lombard, Illinois- based Olson International which manufactures precision metal stampings and assemblies for the automotive, electronic and appliance industry, focusing on components for air bags, vehicle safety restraints and electronic applications, similarly told the Commission of increased steel costs as much as 30-40%, 12-week delays in receiving the steel they need, an inability to receive price quotations, and the continued threat of loss of its existing and future business due to higher steel costs of the tariffs.

Farrer concluded his testimony saying, "The most frustrating thing about Section 201 is that the steel producers had their customers foot the bill to allow them to regroup. At the same time, the manufacturing based in the USA continues to struggle with foreign competition that has fewer regulations, favorable labor rates and now a material cost advantage. Our country's economy needs a strong manufacturing base. The manufacturing sector needs access to world-class, competitive, high quality material. How does closing our market accomplish this?"

Testimonies presented at the ITC hearing are available online at citac.info/steeltaskforce or by directly contacting Dara Klatt at , cell or .

CITAC is a coalition of companies and organizations committed to promoting a trade arena where U.S. consuming industries have access to global markets for imports that enhance the international competitiveness of American firms. The CITAC Steel Task Force is comprised of steel consumers working to achieve the termination of the 201 steel tariffs by mid-point review and reform U.S. trade laws and policies to benefit U.S. steel consumers.




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