2010 FIN – McGrath at NFDA: Distributor’s OEM Contracts Should Provide Protection in Case of Tariffs
April 27, 2010 FIN – Trade attorney Matthew McGrath speaking on U.S. fastener antidumping petition in Las Vegas in 2009.
It is important for distributors to have clauses in contracts to offset antidumping duties, attorney Matt McGrath advised distributors at the National Fastener Distributors Association spring conference.
“Stay informed,” McGrath emphasized.
McGrath, of Washington, D.C.-based Barnes, Richardson & Colburn, is U.S. counsel to importers in the Nucor fastener antidumping / countervailing duty investigations and appeals.
Importers need to coordinate with manufacturers and trading companies, review pricing policies, have contract clauses on AD/CVD liability and evaluate third country and domestic suppliers.
Foreign manufacturers review pricing and costs, prepare an audit trail, review contract clauses and consider becoming an importer of record.
Nucor filed an AD and CVD petition in September 2009, which the ITC rejected by a 6-0 vote in November. Nucor presently has an appeal pending.
In the petition most low, medium and high carbon commercial standard nuts, bolts and cap screws, including standard J429 grade 2, A307A and A194. There was an exclusion for parts made to an automotive or aerospace manufacturer part number and proprietary or patented fasteners.
McGrath said the unanimous vote was “a bit surprising.”
He found the petitioners’ claim did not demonstrate the price effects. Imports remained a stable share of the market and didn’t change even during the recession.
There will be a briefing on the appeal this summer followed by a decision during the autumn of 2010. McGrath ventured that the 6-0 vote was indicative that Nucor did not make its case and reduces its chance in appeals.
• Nilo Urbani, Nylok Corp. international division general manager, noted that U.S. Bureau of Census and Industrial Fasteners Institute statistics show the U.S. fastener industry employs 42,000 people.
U.S. manufacturers are operating at 59% capacity.
In 2009 a total of 33.1% of fasteners were imported – down from 40.3% in 2008. Other recent years: 39% 2007; 38.8% 2006; and 36.7% for 2005. Taiwan is the number one supplier, followed by China, Japan, Canada and Germany.
Taiwan’s 2009 exports were 31.9% by value and 37.1% by weight.
• Steen Hansen of Bossard North America noted that antidumping duties could force the transfer of production to other countries and thus a “high risk of quality issues” and a costly, time-consuming process.
There will be more China and EU/US trade barriers when tariffs are added.
Importers are more likely to develop new sources than for domestic production to increase.
Bossard was among the companies battling antidumping tariffs. “We did it for our customers at a huge workload and cost,” Hansen said.
• Steven Fang, of fastener manufacturer Rexlen Trading of Taiwan, pointed out that the value of Taiwan fasteners is headed “up and up” while tonnage is decreasing.
“China is changing,” with more and more of its fastener production being consumed domestically, Fang explained.
Fang noted that the Metal Industries Research & Development Centre and China Steel Corporation are encouraging Taiwan fastener manufacturers to produce higher value fasteners.
• Bernd Stapf of the European Fastener Distributors Association recalled that in 1980 imports were a small part of the European fastener supply. By 1990 Japan, Korea and Taiwan were major suppliers and by 1995 China was a major exporter to Europe.
In 2007 China produced 70% of the fasteners Europe imported for a 26% market share.
Current European tariffs range from 26.5% for one small producer to 87%, Stapf noted.
He questioned whether the tariffs work, noting that one stainless steel manufacturer in Europe has been protected by antidumping duties “and still not competitive.”
The European distributors seek “fair trade,” Stapf stated.
Stapf cited a “conflict of interest between globalization and national desires.”
• Geoff Hopwood of the Birmingham, UK-based master distributor Owlett-Jaton, said the European Fastener Distributors Association favors fair trade rather than dumping and subsidies and “free trade vs. protectionist measures.”
Hopwood questioned the need for antidumping duties. “If action was needed it was 20 years ago.”
The EU antidumping “process is too political and subject to manipulation,” Hopwood observed.
Hopwood also questioned whether antidumping policies really work. AD is inefficient because Europe has too many external borders and the danger of “avoidance” via transshipping or other means.
“The aim is not to compensate differences but to protect domestic production – without having the means to really control,” Hopwood said of tariffs.
“What we really want is a stable market,” Hopwood said.
He noted that Birmingham was once the heart of the UK fastener industry and maybe even the world. Today there is little production of fasteners.
“Anti-dumping hasn’t helped,” Hopwood suggested. “Ultimately customers worldwide will decide. The market forces will prevail over short term distortions.”
Hopwood also said “protection will not make the producers more fit for the global challenge.”
Europe GDP was down 4.1% for 2009 and investment was down 12.1% during the third quarter. OEMs – which total 65% of fastener demand – decreased orders 30% in 2009. MRO accounts dropped 15%.
Looking ahead, Hopwood said the EFDA is anticipating a “modest recovery, challenging economics” and longer delivery times due to lower production.
Raw material prices are triggering “massive price increases.”
Citing the global economy, global supply, consolidation, specialization, web information, value-added services and margin pressure, Hopwood said “we have never had so many issues at one time.” ©2010/2018 GlobalFastenerNews.com
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