Monday, September 23, 2013

Are We Winning the Fair Trade Battle?

AEC Past Chairman Duncan Crowdis
At this point, the answer is an easy one – ABSOLUTELY.  There are several key metrics to consider. The first is where we are winning and where we are losing on the various decisions from the Department of Commerce (DOC) and the US International Trade Commission (ITC) that support our case that Chinese aluminum extrusions were being illegally imported. The second question is the one that really counts: whether the orders of the DOC on duties related to aluminum extrusion imports from China are effective.

Let’s first look at the decisions of the DOC and ITC. The big win was the obvious one that culminated in the ITC decision in early 2011 that our industry was being injured by imported Chinese extrusions and then in April 2011 by the DOC that the Chinese producers were causing this injury through government subsidies and by “dumping” extrusions illegally into the U.S. Their decision to help “level the playing field” resulted in duties of up to 400 percent.

Subsequent to this obvious win, the DOC has dealt with numerous appeals (both from us, as well as the importers) and what are known as “scope requests”, which are simply requests for a decision on a specific product from a U.S. importer who believes the products they import from China do not fall under the scope of the Department of Commerce orders. Over the past 26 months, we have had 27 appeals and 51 scope requests. This process has involved the Department of Commerce, the Federal Court of Appeals and the Court of International Trade (CIT). In terms of strategy, we have tried to focus only on key cases which we defined as ones that have either a large direct impact on our industry or that, while perhaps representing a small part of the market, could create a precedent leading to decisions in the future that could be very significant for our industry.

Of the total 78 appeals and scope requests, 28 have been ruled in our favor, 10 have gone against us and 40 remain on-going – A LOT OF WORK and still a lot more to do.

As I mentioned in the last blog, we are currently fighting to turn around a recent trend of the Department of Commerce to simplify their decision-making process which has led to 6 negative rulings in the past 6 months.

HOWEVER, WE HAVE WON A LOT!  Without our involvement, this ratio would have been significantly weighted against us, effectively whittling away the positive impact we have experienced since the end of 2011 with a dramatic reduction in illegal imports.  To give you a feel, here are some significant wins on products that were challenged and ruled “in scope” by the Department of Commerce:
  • Unitized curtain wall systems – this was huge!!
  • The use of aluminum extrusions in heating and cooling systems
  • Solar shading systems
  • Kitted fencing systems
  • Awnings and railing systems
  • Drapery rail kits

Another big win for us was mentioned in the last blog, where we involved ourselves in the GPX tire case in order to attempt to turn around an incredibly negative and ridiculous ruling by the Federal Court of Appeals related to the ability of the DOC to apply countervailing subsidy duties to “non-market” economies like China. In the end, legislative changes were made that ensures both the countervailing subsidy and anti-dumping duties would live on in our case. In addition, we have won several appeals from companies attempting to get “special” rates.

But as you can see, we haven’t won them all.  Several examples of products ruled “out-of-scope” (i.e. no duties applied) were;
  • Heat sinks with significant fabrication called “finished heat sinks”
  • Solar mounting kits
  • Kitted stands and displays

The second key metric is THE goal that we started with and continue to hold up as the only real measurement of success: the need to “level the playing field”. And by doing so, has the industry been able to compete on what truly counts – quality and service? The answer to how effective this has been is a resounding ABSOLUTELY YES!!!

We continue to use the following chart that shows the amazingly dramatic and quick drop-off in imports that perfectly aligns with the dates of the preliminary ruling in Q3 2011. The nearly 500 million pounds that has “come back” to the domestic industry is the equivalent of about 33-35 8” presses working at 100% capacity.  I can’t think of anything more significant to our industry than this and, for now, the level of imports remains at these very low levels:

And so our actions have met with amazing success; however the resilience and persistence of the Chinese industry is clearly not going away and the moment we let down our guard, their march will continue.  I got involved because I care deeply about our business, our employees, our suppliers and our industry. Anyone that feels similarly and wants a hand in helping shape the future of our industry and YOUR BUSINESS should contact Rand Baldwin of the AEC.

Fair Trade – It Matters!

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This post was written by AEC Past Chairman Duncan Crowdis

Tuesday, September 10, 2013

Taking our Case to Washington

AEC Past Chairman Duncan Crowdis

Fair trade cases like ours (AEC’s) generally do not involve a political process. The rules are relatively clear and the process is driven by various statutes. However, we were not na├»ve enough to believe that politics would not play some sort of role. After all, the support the Chinese industry receives is VERY politically charged. And here in the US, the fight is all about people, employment and jobs, clearly areas that our elected officials hold dear to the heart (or should!). While the two sides of the isle see the path to job creation somewhat differently, publically all of them claim this to be their primary focus.

Therefore, as part of the trade case process, we have worked hard to reinforce and expand our political reach. We knew at the outset that there may be times when we would want or perhaps even need, to call on “our friends” to lend a little elbow-nudging weight from time to time. As it turns out, we have leveraged our political connections several times over the past three years.

One of our industry’s strengths is our diverse geographic foot print. This plays in well to leveraging the political card with industry representation in over 100 congressional districts.

The first time was during the original case, when we were preparing the case to prove and demonstrate to the U.S. International Trade Commission (ITC) that the domestic industry was being injured as a result of the illegally imported Chinese extrusions. We tried to rally political support through letters sent to many members of congress, both in the House and Senate and on both sides of the isle. In addition, prior to the ITC hearing in 2011, a number of us went to Washington to personally meet and discuss the case with several dozen members of Congress and their staff. In the end, we got several to testify at the ITC hearing to help lend some weight to our cause all leading to the successful ruling two months later.

The next political intervention was at the beginning of 2012 when a ruling by the U.S. Court of Appeals at the end of December 2011 on a GPX tire case was to eliminate the countervailing duties side of our orders. The Court claimed that the Department of Commerce does not have the authority to levy countervailing subsidy duties on “non-market” economies such as China – baloney.  Of all countries where these types of duties are legitimate and needed, it is China. While this ruling was going to affect all 24 active subsidy cases, we decided the extrusion industry simply couldn’t afford to rely on anyone else to come to the rescue. Our only avenue was to rally Congress to pass legislation that authorized Commerce to levy these types of duties on non-market economies such as China (assuming that subsidies were proven). Sounds simple? Think back to what was going on in Congress in January 2012. What were the odds that anyone could rally Congress to take bi-partisan action behind any common goal at that time??? On top of that, we required legislation that would make the reversal retroactive to ensure it covered existing cases such as ours. And to make it even more interesting, we had just over a month to make this happen before the Court orders went into effect!

Our passion pushed these speed bumps aside. We flooded numerous members of Congress with letters and a number of us visited Washington and personally met key congressional members and their staff. At the end of the process, legislation was created, several members “championed” the legislation first through the Senate and then the House, and it passed through an expedited process at the last moment. Whew!!  After this successful conclusion, I recall us reflecting back as an industry team and realizing that the U.S. extrusion industry just played a key role in getting Congress to actually agree on something and pass a potentially sensitive piece of legislation in less than a month – go figure!!  Maybe we should now tackle easier issues like debt reduction, job creation, the U.S. debt ceiling, world hunger….who knows?!

Recently, we once again requested help from our members of Congress. Over the past 6 months, the Department of Commerce has ruled on several scope challenges, highlighting a potentially dangerous trend toward watering down our orders. Scope challenges are when a company requests Commerce to rule on whether the products they are buying from China fall within the scope of the orders (and therefore subject to the duties or not).  Commerce’s rulings were becoming inconsistent compared to their earlier rulings and were starting to go against the spirit of the original scope and orders. Ease of administering the orders was starting to outweigh the spirit of the original scope.  We have worked too hard to get to this point to just let it slowly slip away from us!

In addition to meeting several times with officials at the Department of Commerce in Washington over our concerns, a month ago we decided to ask our members of Congress (particularly those on the House Ways and Means and the Senate Finance Committees) to apply pressure to Commerce to simply encourage them to apply the spirit of the original scope to these scope review challenges. Again letters were sent and 6 of us travelled once again to Washington at the end of July and had about 20 meetings with offices and staff of key congressional members of the House and Senate, both Democrats and Republicans. The reception we got was welcoming and sympathetic and we are now working through a process to have several of these members of Congress champion letters to send to Commerce requesting that they simply apply the scope as it was written. We are not asking for “special” treatment. We just request that Commerce frankly enforce the law that they wrote!

So the Aluminum Extruders Council remains focused on ensuring that our hard-fought orders, orders that we strongly believe are required to save the industry from illegal Chinese trade practices, continue to be applied fairly to allow us to compete on a level playing field. We are putting in a great deal of time and money to make this happen and are using all the tools available to us – legal, legislative and even political. Fair Trade –It Matters!

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This post was written by AEC Past Chairman Duncan Crowdis

Wednesday, September 4, 2013

Fair Trade - What’s at stake?

AEC Past Chairman Duncan Crowdis
In the last two blogs, we have talked about what it takes to be successful in a fair trade case such as the one the extrusion industry brought before the U.S. government. The process is long and arduous. It takes a focused commitment from the entire industry. And it takes money. On top of that, the drive must be maintained for the long run. This is not a sprint; it is a marathon.

So, is it worth it? What’s at stake?

As we mentioned in last week’s blog, the Chinese will NOT give up. They have extremely strong strategic, economic and political reasons to vigorously continue to fight this battle. The Chinese extrusion industry has built a capacity that far exceeds their current and future domestic need and, in fact, could supply a good part of the global requirement. Their desperate need to create employment significantly outweighs any supply/demand rational for this build-up in capacity.

Once you buy the argument that the Chinese extrusion industry will do everything in their power (legal or otherwise) to penetrate markets outside China to the extent possible, with the U.S. being the largest and most attractive target, it’s simply a question of – is it worth the fight to defend our business? So let’s take a look at what is at stake.

Our industry is incredibly diverse. It is one of our greatest strengths. We have operations in more than 40 states with over 300 presses that have a combined capacity of more than 4.5 billion pounds annually.

Here are some statistics that, while not backed up by a complex industry-wide survey (only governments can afford to do this), the data has been pulled together by a number of us that have been in the industry a long time and undoubtedly represent several hundred years of experience.

How many people do we impact?
  • In total our industry directly employs more than 20,000 Americans
  • When taking into consideration the supplier base, this number likely doubles to more than 40,000 employees
  • These 40,000 employees support over 100,000 children, spouses and aging parents.
The bottom line: there are more than 150,000 real people in the United States that count on our industry to feed them, clothe them, send them to school and support them in many, many other ways. They are counting on us; counting on you! Is that not enough reason to fight for what is right?

If not, let’s look at a high-level view of the financial side of our industry:
  • The domestic industry in the U.S. is currently operating at about 3.5 billion pounds per year with an estimated total  annual revenue of close to $8 billion
  • In 2009/2010, prior to the Department of Commerce applying the preliminary duties, imports from China reached a running rate of close to 20% of the total U.S. market, which would translate into an annualized reduction in domestic production of about 700,000 lb. today.
    • This level of production represents approximately 45 full presses and revenues of about $1.5 billion
  • And, unless a supplier to this industry has a business model that can easily shift their marketing efforts and production to China, the impact would be just as dramatic. Consider these products that are purchased by our industry:
    • Billet – Billet producers would see a reduction in domestic billet demand of about 900,000 lb. or $1 billion in revenue
    • Paint – assuming 15% of the domestic extrusion production is painted, paint suppliers would experience a reduction in revenue of over $25 million
    • Anodizing Chemicals – based on similar assumptions, this industry could anticipate a reduction in revenue of about $25 million
    • Dies –  Die makers would see a reduction of about 40,000 dies per year or about $40 million of revenue
    • And then there are all of the other supplies (packaging, maintenance, etc.)
And all of this assumes that the Chinese were not interested in any more than a 20% market share. This has not been the experience in other markets they have targeted (a subject of a future blog) and it would be a dangerous assumption for us in the U.S. to make.

While I would argue that these numbers are extremely conservative and that, in fact, our industry as we know it is completely at risk without concerted and industry-wide intervention, if anyone believes that these numbers seem exaggerated, divide them in half. The logic to fight is, quite frankly, no less compelling.

So, whether a player in our industry is driven by a sense of responsibility to 40,000 employees and their families or simply driven by a desire to have a financially strong and sustainable business, THE STAKES ARE EXTREMELY HIGH  and worth the fight.      

If you feel as passionate as we do and want to do something more than be an “interested by-stander”, contact the AEC to find out how you can help to control YOUR future.

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This post was written by AEC Past Chairman Duncan Crowdis