Down to the wire

A local manufacturer leads the charge against Chinese subsidies [From our print edition featured in Monday's City Paper]

Email | Print By Ken Whitehouse

Robert Rollins

On Oct. 20, Gov. Phil Bredesen and Tennessee’s economic and community development commissioner Matt Kisber will lead a delegation of business, technology and health care leaders on a 10-day trade mission to China.

While there, they will shake hands, kiss the proverbial babies and work to increase trade between the state and the world’s most populous nation. China is Tennessee’s third-largest trading partner — trailing only Canada and Mexico — with annual purchases of more than $1billion.

But what likely won’t be discussed are ongoing disputes between Tennessee companies and Chinese competitors, disputes that are currently being reviewed by the International Trade Commission.

Nashville Wire Products Inc., which manufacturers wire products like shelving, oven racks, barbeque grills and more from its Polk Avenue base near downtown, is part of a consortium that has taken legal action against Chinese companies it says are killing the domestic industry through a practice called “dumping.”

In this case, “dumping” doesn’t have anything to do with landfills. Rather, it refers to something called predatory pricing. What that means is that a manufacturer in one country is exporting a product to another country at a price that is either below what it charges in its home market or is below its costs of production. Over time, the relative cost of manufacturing the product in the target market is so high that it forces producers there out of business.

Nashville Wire has been involved in two such disputes, stating that imports from China were being unfairly exported to the U.S. market because Chinese government production subsidies drove down the cost to the point that American companies couldn’t compete in their own back yard.

Robert Rollins, head of the material handling division at Nashville Wire, said his firm last year joined with its Kentucky competitor, SSW Holdings, to file a suit before the International Trade Commission over imported kitchen and appliance shelving.

Their action was followed this past May by a similar complaint from a group of steel wire makers that included Sumiden Wire Products Corp., a Dickson-based subsidiary of Japanese holding company Sumitomo Electric Industries.

Then, in June of this year, Nashville Wire teamed with Kentucky-based AWP Industries Inc. as well ITC Manufacturing Inc. of Phoenix and J&L Wire Cloth LLC of St. Paul, Minn. That group of companies alleges that wire decking — think shelves used in massive warehouses — has been dumped onto the U.S. market.

Rollins said the distorted market is responsible for the fact that Nashville Wire’s materials handling division will post a loss this year. Although the parent company as a whole will stay in the black, its executives have had to — unfairly, they say — lay off workers or not fill the positions of retiring employees.

The costs of an elaborate process

Trade disputes like this often bring with them a certain romance — here’s the little guy fighting back against an overseas bully — but the efforts involving Nashville Wire have brought on board the big-time weight of the U.S. government. Rollins said that his team was approached by SSW Holdings about joining them in filing the kitchen shelving complaint. Together, they sought “countervailing duties,” basically a tariff imposed when a foreign country subsidizes its exports.

“We are the only member of the coalition that is an importer, and therefore could provide information about prices in China and the process that goes on over there,” Rollins said about Nashville Wire’s place in the consortium.

Getting the case going took a lot of time and money from Rollins and his peers. They had to provide mountains of data about production costs and the impact of Chinese imports and work with their attorneys to prepare their case. In both cases, the firms sought out international trade experts and divided the legal tab, which can quickly run up when you’re handling thousands of documents.

“Trade actions in general are very expensive to prosecute. Companies who file are struggling and it keeps the courthouse doors closed to many folks,” Rollins said. “We share the bill with our coalition but mom-and-pop stores hit by the Chinese tidal wave just go under.”

Most trade disputes that originate in the United States end up before the International Trade Commission, an independent, non-partisan and quasi-judicial federal agency of the United States whose members are appointed by the president.

The commissioners provide trade expertise to both the legislative and executive branches and determine the impact of imports on U.S. industries. From there, they direct actions against certain unfair trade practices, such as dumping, patent, trademark and copyright infringement.

When three of the six commissioners of the ITC agree that there has been dumping or other trade violations, the matter is referred to the U.S. Department of Commerce, where an administrative law judge will make a determination.

Kathy Cannon, a partner in the Washington, D.C., office of New York-based law firm Kelley Drye & Warren LLP, has represented Nashville Wire in both cases.

Speaking to the Post, Cannon said that the U.S. government uses duties to level the playing, calling them “not punitive, but … remedial.”

Trade actions are on the rise around the world after steadily trending down since early this decade. The World Trade Organization earlier this year reported that its members launched 208 investigations in 2008, up from 163 the year before but still well below 2001’s 366 cases. Similarly, the number of so-called “final measures” jumped to 138 from 107 in 2007.

On the march

American metal companies scored a win two months ago, when the Commerce Department imposed countervailing duties in the kitchen and appliance shelving case. The department’s investigators said they found about 30 programs that funneled subsidies to producers and created dumping margins between 143 percent and 316 percent.

The wire decking complaint appears headed for a similar resolution: The ITC has issued a “preliminary finding of injury” and a final decision is expected by next June. Resolving these types of cases can have a direct impact on local economies, Cannon said.

“The recent imposition of duties on kitchen shelving from China is expected to reverse the trend in job losses and declining profitability for the U.S. industry, including Nashville Wire,” she said.

For Rollins and his team, there is still a bittersweet note to its dumping journeys: Another positive ruling and the imposition of tariffs would go a long way to restoring their company’s health — but not all the way.

“We run at a razor-thin margin, so if we can get the tariff imposed, then absolutely yes, it will have been worth it,” he said. “There is an upside, but we probably are not going to be seeing enough to get back to pre-dumping levels. It is hard to see the industry come roaring back.”