News

January 31, 2011
SupplyChainBrain
By: Robert Bowman

If you’re like me, your eyes tend to glaze over while reading stories about dumping disputes between trading partners.  Sure, you know what dumping is – the practice of selling raw materials or finished goods overseas at prices below one’s production costs, or what’s being charged at home.  But what are the calculations used to determine whether a country is dumping?  And what are the underlying numbers of any particular case?  The newspaper articles never say.  You just take it on faith that the exporting country is engaged in predatory pricing, or that the target country is playing political football.  Let the World Trade Organization sort it out.

A peek behind the scenes, however, yields some surprising facts about the way that dumping cases are litigated.  Turns out the U.S. Commerce Department finds instances of dumping about as often as the orthodontist says your kid needs braces – 95 percent of the time.  And the consequences can be severe, both for seller and buyer.  Antidumping penalties can remain in place for years, even decades.  In one case, the U.S. has blocked imports of potassium permanganate from China and other countries for 30 years.  The chemical compound is used by virtually every city and town in the U.S. to purify the water supply.  (Oddly enough, it’s also employed in the aging of movie and theatrical props).  The world market price for potassium permanganate: about $900 per metric ton.  U.S. domestic price: up to $2,500.  No wonder movies cost so much to make.

China is a favorite target of the Commerce Department, which is egged on by U.S. domestic producers who claim their very existence is threatened by a flood of cheap foreign goods and materials.  Fair enough, if China really is selling below cost in an effort to gin up its export markets.  But we need to take another look at the way the U.S. makes that determination.  According to one international trade lawyer, William Perry of Dorsey & Whitney LLP, there’s something fishy about the numbers.

For most exporting countries, the Commerce Department makes an effort to determine the market price of goods at home, as well as the economics of producing them.  Not so with China.  Because it’s considered a non-market economy that doesn’t play by the rules of capitalism, Commerce doesn’t look at the country’s actual prices and costs.  Instead, it constructs the numbers based on factors such as China’s cost of raw materials, labor and energy, coupled with the market price charged in a third country like India or Indonesia.

The results can be unusual, to say the least.  In the late 1990s, Perry was attempting to pry open a dumping order against silicomanganese from China.  Electricity is a key element in the production of that alloy.  At the time, Perry says, users were paying 6 cents per kilowatt hour in the U.S. and 3 cents in China.  But in determining China’s cost of electricity, Commerce used the figure of 12 cents per kilowatt hour, which it derived from India.  That decision greatly inflated estimates of China’s overall cost of producing silicomanganese, and guaranteed that the U.S. would find evidence of dumping.  “It happens all the time,” says Perry.

The real victims of the charade aren’t the Chinese, who can find alternative markets for their products.  (“There are dozens of other countries with lower costs than the U.S.,” says Perry).  It’s independent U.S. importers and distributors, who can’t compete under Commerce’s draconian rules.  Domestic producers are determined to drive foreign competitors out of the market, Perry claims, and in many cases they’re succeeding.  What’s the recourse for an importer of Chinese-made wooden bedroom furniture when Commerce slaps a duty rate of 198.08 percent on its product?

Making matters worse is Commerce’s practice of levying antidumping duties retroactively.  Other countries apply the penalties going forward from the time of determination.  In the wooden furniture bedroom case, Perry has heard estimates that U.S. importers could be liable for between $500m and $1bn in retroactive duties – never mind the legal and administrative cost of defending such cases.  That’s more than enough to put a small or medium-sized company out of business.

The situation shades into the comical.  Commerce imposed countervailing duties on coated paper from China, under the argument that because the Chinese government owns the country’s banks, their loans constituted unfair subsidies.  When the U.S. bought into private banks in 2008, using Troubled Asset Relief Program (TARP) funds, China made the identical argument about their loans to American exporters.  Touche.  “The U.S. government has been using this as a sword to attack countries,” says Perry.  “Now others are going to use it as a sword against us.”

Let’s be clear about something: China’s hands are anything but clean.  The country’s manufacturers pay outrageously low wages in order to compete in overseas markets.  And China is all too ready to file spurious dumping complaints against its many trading partners.  But we’re not hearing the whole story, when we read about China’s alleged dumping of goods and Commerce’s acts of righteous retaliation.

So what’s to be done?  Commerce could define China as a market economy for purposes of determining actual production costs – treat the nation as it does, say, Iran.  And it could make future dumping duties prospective instead of retroactive.  Barring those moves – unlikely in the short term, given the political power of certain U.S. industries – American importers and distributors need alternative strategies for survival.  Perry backs government aid for domestic companies that are injured by cheaper imports.  As a template, he cites the work of the Northwest Trade Adjustment Assistance Center.  The Seattle-based body provides federal grants, technical expertise and planning assistance to endangered businesses.  Perry notes the case of a U.S. maker of ceramic pots, whose livelihood was being threatened by imports from Mexico.  Today, having worked out a new business plan with the assistance center’s help, that same company makes ceramic molds for titanium parts for The Boeing Co.  In its 25 years of existence, Perry says, the center has saved 80 percent of the companies that entered the program.  And the price tag?  A measly $16m a year.

We’re paying a lot more than that to have the opposite impact on American business.  “Dumping cases,” declares Perry, “are destroying U.S. companies.”

Reprinted with permission from SupplyChainBrain

September 16, 2010
Idaho Business Review
By Brad Carlson

Idaho’s timber market is at a near-perfect storm.

General market and overall economic conditions of the past three years have placed harvest and production levels well below normal, closing several mills across the Northwest.

“We have bled pretty hard for the last couple of years, and now we’re just treading water,” said Tamarack Mill LLC Vice President Rodney Krogh.  The company, which operates mills in central and north central Idaho, has been in business for more than 40 years.

Krogh said if it’s not demand, it’s raw material availability or imports.  And, if it’s not that, it’s managing costs.  Tamarack Mill has finally worked through inventories of lumber purchased at high prices during the housing boom.

Production of lumber, the largest component of Idaho’s forest products industry, fell to an estimated 1.1 billion board feet in 2009 from just over 1.3 billion board feet in 2008, according to a report prepared by the University of Idaho in January 2010.  The harvest for the previous year was at levels not seen since World War II.  Over 80 percent of the facilities surveyed anticipated production to increase or stay about the same in 2010.

“The sawmill industry is very slow right now based on housing starts and unemployment,” Krogh said.  “We’re probably looking at this kind of situation for at least another couple of years, with very little demand for lumber.”

A positive for Tamarack Mill, in addition to bringing inventory and production in line with demand, has been increased efficiency.

“We are always trying to upgrade our facilities, and technology is the biggest thing with sawmills,” Krogh said.

He recently applied for and received a $150,000 matching grant, from the Northwest Trade Adjustment Assistance Center, that helps to fund computer hardware and software technology to record material information and provide instant inventory specifications and costs.  Northwest TAAC is a nonprofit corporation that helps businesses plan competitive strategies and become eligible for funding under the federal Economic Development Administration.

The computer program ultimately will benefit the Kooskia-based company’s operations at the Evergreen Forest sawmill in Tamarack and the Clearwater Forest planer mill and shipping yard in Kooskia.  The firm also has a power co-generation plant at the Evergreen site – it sells to Idaho Power Co. – and has ownership in a trucking company.

Previously, log receiving, scaling and reporting processes were done manually.  Scaling refers to taking a log’s dimensions and noting any defects; now it’s done with computerized tools that download the information.  Krogh said the new process, which begins when arriving truckers use a touch screen to describe what they’re delivering and where it came from, takes the burden off of the administrative staff and provides up-to-the-minute information on costs.

Judy Klinkam, associate director with Northwest TAAC, said the organization helps businesses hurt by imports.  The idea is to help them complete a project that makes them more competitive globally.

“Imports need to be one factor leading to a downturn in employment and sales in the last few years,” she said.

Krogh said Tamarack Mill continues to compete with Canadian wood.

“It’s still very competitive, especially in white fir, because their SPF (spruce, pine and white fir) competes with our white fir markets,” he said.

In late August, the Washington, D.C.-based lobbying group U.S. Coalition for Fair Lumber Imports said it may file a complaint against British Columbia wood producers, alleging hundreds of millions of dollars in damages had occurred to U.S. mills and producers.  The complaint, under the Softwood Lumber Agreement, would claim B.C. producers have increased the proportion of low-grade timber it allows to be harvested.  The Coalition for Fair Lumber Imports opposes unfair Canadian lumber trade practices including “gross under-pricing” of subsidized timber on government land.

Shawn Church, editor of the Random Lengths newsletter based in Eugene, Ore., said the 2006 U.S.-Canada Softwood Lumber Agreement imposes a penalty tax on Canadian lumber shipments to the U.S. based on the strength of the lumber market.  As the market rises to certain levels, the tax goes down in steps – in the case of British Columbia, from 15 percent to 10 percent to 5 percent to zero – based on the Random Lengths Framing Lumber Composite Price reported weekly.

B.C.’s tax has been 15 percent for most of the time since the agreement has been in effect, because of the down housing market, he said.  A mid-year spike in prices brought the tax down to zero in June, he said.  The tax went to 10 percent in July, and since August has been back at 15 percent.

Canadian softwood lumber shipments to the U.S., as a percentage of total U.S. supply have dropped in each of the last five years, from 33.4 percent in 2005 to 26.4 percent in 2009.  Recession in the U.S., the Softwood Lumber Agreement and efforts by Canadian companies to diversify their markets are among reasons, Church said.  China became Canada’s top offshore destination last year, though the U.S. remains Canada’s top market overall, he said.

If a Softwood Lumber Agreement case is filed, it likely would be filed by the Office of the U.S. Trade Representative, not the Coalition, because the agreement is between the two governments, Church said.

Krogh said the new technology should help Tamarack Mill deal with import competition more effectively, having survived the other challenges in the still-difficult lumber business.

Reprinted with permission

October 29, 2009
Alaska Business Monthly

Anchorage, Alaska

Federal grants are now available to help Alaska companies compete in changing global markets

Congress has again funded Trade Adjustment Assistance (TAA) programs aimed at assisting companies that are losing sales to foreign imports, or have been forced to lay off workers or cut back on hours.

Eligible companies can receive up to $75,000 in grants for a wide range of projects of their choice to increase profitability and save jobs. The program cannot, however, be used for equipment purchases.

“Companies must show a decline in sales or production and employment, and then be able to tie that to an increase in imports,” said Gary Kuhar, director of the nonprofit Northwest Trade Adjustment Assistance Center (NorthwestTAAC).

The Center administers funds from the U.S. Commerce Department’s Economic Development Administration to assist a wide range of businesses and service industries.

The TAA funds enable companies to develop and complete projects they might not otherwise have considered, and to do so in an effective and structured way. Projects may include developing websites and marketing tools in multi-languages, providing manufacturing design and site layouts, among others.

“We’ve helped fishing businesses that have lost sales to a foreign source, farmers, oil and gas producers, wood products manufacturers – we’ve even designed a small hydroelectric dam for a sheep ranching business in Idaho,” Kuhar said. “We are the only TAA program that not only helps clients develop a strategic plan; we implement the plan for them by hiring outside experts to complete the project.”

The TAA grants also are open to co-ops and associations.  Find more information about Trade Adjustment Assistance for Alaska companies at www.nwtaac.org or contact .

Reprinted with permission

September 24, 2009
The News-Review
Roseburg, Oregon
By John Sowell

The Swanson Group has been selected to receive $100,000 from a federal grant meant to protect jobs in Oregon’s struggling timber industry.

The money, from a Trade Adjustment Assistance grant issued through the federal Economic Development Administration, will be used to create a new market strategy and to improve efficiency through the use of advanced computer software. It will also pay for training costs.

The new software will give Swanson the ability to evaluate each individual log to determine the best use. That will help the company maximize efficiency and boost revenues.

“We’ll get better total recovery,” said Steve Swanson, company president and chief executive officer.

The grant, which the Swanson Group will match, will also allow the company to carry out a market analysis and develop new products less susceptible to imports.

“It’s a very substantial grant. This money is meant to make companies more competitive,” U.S. Rep. Peter DeFazio said. “All of this comes with anticipation of the housing market coming back, hopefully, next spring.”

Since 1994, trade agreements have cost Oregon more than 10,000 jobs, mostly in Southern Oregon, the Springfield Democrat said.

The Swanson Group, based in Glendale, operates five sawmills and plywood plants. Two are located in Glendale, with the others in Roseburg, Springfield and Noti, west of Eugene.

The company employs 500 workers but is only running at 40 percent capacity because of the downturn in the housing and construction industries. The company has laid off 40 percent of its workforce in response to the soft market.

“It’s going to be helpful,” Swanson said, “but it’s not going to be the savior of the industry.”

An extension of the $8,000 federal tax credit for first-time home buyers would also provide a boost to his company and other timber companies, Swanson said. He would also like to see the program expanded to provide a credit to all buyers, not just individuals and couples buying their first home.

With the homes sold during the current program, which expires Nov. 30, reducing the inventory of available homes, an extension could promote new home construction, he said. That would lead to an increased demand for lumber and other wood products used in home construction, he said.

“Every little bit helps,” Swanson said.

Swanson said he was pleasantly surprised to receive the grant. The company, he said, had tried unsuccessfully to obtain retraining grants from the same agency for laid-off workers at Swanson’s Roseburg and Springfield plants.

Reprinted with permission

August 9, 2009
Alaska Journal of Commerce
By Laine Welch

Is competition from foreign imports biting into your business? Trade Adjustment Assistance programs are designed to help American workers and businesses become more competitive.  Three TAA programs have been funded again, under the U.S. Departments of Labor, Agriculture and Commerce.

“Salmon pollock, crab – we can find imports coming in for just about any seafood, so therefore, they would qualify,” said  Gary Kuhar, director of the nonprofit Northwest TAA Center, which administers funds for the Commerce program in five states, including Alaska. “Our program focuses on helping the firm, and secondarily, saving jobs. We’re the only program that not only helps develop a strategic plan, we implement the plan for them,” he added.  NorthwestTAAC also handles all the paperwork and federal bureaucracy.

First, a client must show that his or her business has been hurt by foreign imports.

“We have to show a 5% decline in sales or production, and a decline in employment, and then be able to tie it into an increase in imports over the past three years. We also talk with former customers that are now buying a product or service from a foreign source,” Kuhar explained.

The NorthwestTAAC program is best suited for medium to large businesses, but it is also open to co-ops, associations and individuals. Small companies can get grants up to $30,000; for large firms, the limit is $150,000. Both require some cost sharing.

“If your heart is set on buying equipment, we’re not the program for you. But if you’re interested in becoming more vertically integrated and taking over some of your own marketing efforts – we do a great job in creating brand identification, brochures and labels in multi languages, and web site development.

“It could be a fish marketing firm that has lost sales of Alaska salmon, say, in Iowa to a foreign source like Chile, Canada or Norway,” Kuhar said. “We’ve helped a Southeast seiner develop an eco-tour business – they wanted to get out of the salmon industry but had a nice 58 foot seiner and they didn’t know what to do with. Another salmon fisherman is now selling his canned pack in Eastern Europe. We’ve designed a small hydroelectric dam for a sheep rancher in Idaho. He’s now generating over a quarter million dollars a year in electricity, and using it to keep his sheep operation going. We’re really only limited by our imaginations.”

Reprinted with permission

July 2009
Economic Development Board for Tacoma
Pierce County
Teamwork Newsletter

Competing on world markets can present unusual challenges for American manufacturers.  Just ask Lisa Chissus, president of Cascade Plastics, which produces plastic parts in its Fife plant.

“There are situations where quotes for the molded parts from off-shore competition have matched the material costs for us,” she says.  “We can only conclude they are being subsidized by their governments.  We adhere to environmental and safety standards required in the United States, whereas our global competitors do not face the same requirements.”

As a result, Chissus—whose company’s products are sold domestically as well as internationally—sought help from the Northwest Trade Adjustment Assistance Center, a federal program set up to assist American businesses to improve their competitive position in international and domestic markets.  The Center bears half the costs on certain projects.

Cascade Plastics obtained help with two projects, one involving staff training and the other an upgrade of the company’s website that included greater exposure in search engines.  “For example, you might be studying how to mold a plastic part.  If you go to the domain www.injectionmoldingusa.com  it will explain the benefits of molding in the United States, and includes a link back to our company website,” Chissus says.

The Center helped the company a lot in its efforts to compete internationally, Chissus adds.  “It was worthwhile; so much so that we are looking at using them again for continuing training on lean manufacturing in our company.”

For more information, check out the Northwest Trade Adjustment Assistance Center at www.nwtaac.org or call 206-622-2730.

Reprinted with permission

February 18, 2007
Alaska Journal of Commerce
By: Margaret Bauman

Firms involved in commercial fisheries that have seen a detrimental economic impact in sales, production and employment due to imported seafood may be eligible for federal aid.

The federal Trade Adjustment Assistance program, with a national budget of $13 million, helps commercial fishermen – who can tie their economic woes to increasing imports – to develop a competitive marketing, production and quality-control strategy to compete successfully against imports, says Gary Kuhar of the Trade Task Group in Seattle.

“Over the past five years, we have worked with about 30 firms and have an 80 percent success rate,” he said.  “It’s a very good program.  It returns about $230 to the U.S. Treasury for every dollar spent, in taxes from the firms and their employees.

“We’ve worked with all sorts of fishermen: salmon fishermen, crab fishermen, the processors of all types of fish,” he said.  “Anything that has been hurt by imports.”

Trade Task Group, a private nonprofit firm, serves Washington, Oregon, Montana, Idaho and Alaska, Kuhar said.  The staff helps those in the fishing industry impacted by imports to get approved by the U.S. Department of Commerce for technical assistance.

“We can’t give them any money; it is all done through cost-sharing agreements between the consultant and the firm,” Kuhar said.  Still, the success stories of the TAA program are growing.

Kuhar said one longtime purse seiner has developed a worldwide market for his canned salmon because the TAA consultant helped him develop the branding identity and a Web site in multiple languages to market the product.

Kuhar said the firm seeking help pays 25 percent to 50 percent of the cost of the consultant, depending on the size of the firm.  If the firm’s worth is less than $1 million, the federal government will pay 75 percent of the consultant costs, while larger firms pay a higher percentage.

The TAA program has also provided consultants to lumber companies and smaller manufacturers in Alaska, mostly in novelty or tourist items, who have been similarly hit by problems with competitive imports.

For information on the program, call 1-800-667-8087 or log on to www.taacenters.org.

Reprinted with permission

June 17, 2011
Alaska Journal of Commerce
By Laine Welch

From seafood businesses to lumber companies to ulu makers, trade assistance grants and programs help American businesses and entrepreneurs compete with cheaper, foreign imports.  But it’s been tough to find takers in Alaska.

“It’s a good program, but our biggest problem is finding people to take advantage of it,” said Gary Kuhar, director of the Northwest Trade Adjustment Assistance Center, which administers funds for five Northwest states through the Economic Development arm of the U.S. Commerce Department.”  This is a very independent part of the country and unlike other places where they line up for this program, we have to go out and actually find people who are interested.”

Matching grants of up to $75,000 are available to mid- or large-sized companies, and other provisions apply to smaller businesses, co-ops or associations.

“They only have to pay 25 percent but the ceiling of assistance is capped at $30,000.  So the federal share would be $22,500,” Kuhar said.

A company has to show a decline in sales and employment, and tie that to increasing imports, but Kuhar said that “is not a big hurdle to accomplish.”

Trade adjustment funds cannot be spent on capital improvements, equipment or hard assets.  Rather, the money goes towards technical expertise.

“We help the company develop a recovery strategy and then we go out and hire the expert needed to implement that strategy,” Kuhar said.  “We do a lot of marketing strategies, brand identification, website design, export assistance and production engineering work to make firms more efficient.”

Kuhar said the program has helped a wide range of Alaska businesses entrepreneurs and they want to do more.

“Many fish processing companies, lumber companies, novelty items, sausages, berries and fruit bars — just about anything that is produced in Alaska, we can help,” he said.

An added bonus: The Northwest team handles all the paperwork and federal bureaucracy.  The application process opens July 1.  Find out more at www.nwtaac.org or via email at .

Reprinted with permission

June 4, 2011
The Spokesman-Review

Spokane, Washington
By Tom Sowa

A federal trade-assistance program that helps companies impacted by offshore competition could shut down by the end of the year if Congress votes not to renew it.

That program is the Trade Adjustment Assistance Act, and dozens of regional firms have used it in recent years to help workers find new jobs or train employees to be more competitive.

As more Republicans took seats in the House and Senate after the 2010 elections, some are suggesting it’s time to shut down or eliminate the program, saying it is too costly.  Renewing the TAA program at 2009 levels would cost about $7.2 billion over 10 years, said Sen. Orrin Hatch, R-Utah, one of the chief critics of the program.

Washington’s senators, Patty Murray and Maria Cantwell, both Democrats, support renewal, saying that the program has helped thousands of workers go through retraining in finding new jobs or improving current job skills.

More than 40 Washington and three Idaho firms have used TAA program benefits over the past three years.  One of those is Liberty Lake-based Accra-Fab, a sheet metal contract manufacturer.

Its sales have been hampered by competition from companies in Mexico and China.  In 2010, Accra-Fab qualified for $75,000 in assistance from TAA, which was combined with matching money from the company, said Barry Stewart, Accra-Fab’s HR director.

The company has three years to spend the funds on innovation or training.  None can be spent on capital projects, Stewart noted.

So far, nearly all of the firm’s nearly 200 workers have received training in lean manufacturing through TAA funds, Stewart said.  Lean manufacturing focuses companies on using fewer resources and eliminating wasteful processes.

Accra-Fab has also spent money on manager training, he said.

Another regional firm receiving TAA assistance is Kellogg-based Silver Needle Inc., which makes safety and protective clothing for utility, mining and metal workers.  Media manager Rene Gilbert said Silver Needle used the money for improving production by moving the company to lean manufacturing.

Stewart said the value of TAA training has been significant.  Without it, sales would have dropped, he said.  “With the TAA help, it has at least stabilized and allowed us to keep our sales level steady,” he said.

Reprinted with permission

The Washington State Department of Commerce offers export vouchers to eligible small businesses to help pay for the costs of finding new customers in foreign markets. Up to $5,000 per voucher is available to help defray costs such as designing and printing flyers for foreign markets, translating web content or marketing materials, attending a trade show, or flying internationally to visit potential new customers.

Find out if an export voucher is right for your business plan. Apply now! We will stop accepting new applications in August for the current grant year.

Contact: Julie Monahan, 206-256-6147, http://links.govdelivery.com:80/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTUwNjA5LjQ1Nzk0NDIxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE1MDYwOS40NTc5NDQyMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE2ODU3NzA4JmVtYWlsaWQ9bnd0YWFjQG53dGFhYy5vcmcmdXNlcmlkPW53dGFhY0Bud3RhYWMub3JnJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&101&&&http://www.exportwashington.com

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