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82–506 2002

LOST JOBS, MORE IMPORTS; UNINTENDED CONSEQUENCES OF HIGHER STEEL TARIFFS (PART

II)

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

WASHINGTON, DC, SEPTEMBER 25, 2002

Serial No. 107–71

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS 

DONALD MANZULLO, Illinois, Chairman 

LARRY COMBEST, Texas 

JOEL HEFLEY, Colorado 

ROSCOE G. BARTLETT, Maryland 

FRANK A. LOBIONDO, New Jersey 

SUE W. KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

JOHN R. THUNE, South Dakota 

MICHAEL PENCE, Indiana 

MIKE FERGUSON, New Jersey 

DARRELL E. ISSA, California 

SAM GRAVES, Missouri 

EDWARD L. SCHROCK, Virginia 

FELIX J. GRUCCI, JR., New York 

TODD W. AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

NYDIA M. VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

DANNY K. DAVIS, Illinois 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, Virgin Islands 

ROBERT A. BRADY, Pennsylvania 

TOM UDALL, New Mexico 

STEPHANIE TUBBS JONES, Ohio 

CHARLES A. GONZALEZ, Texas 

DAVID D. PHELPS, Illinois 

GRACE F. NAPOLITANO, California 

BRIAN BAIRD, Washington 

MARK UDALL, Colorado 

JAMES R. LANGEVIN, Rhode Island 

MIKE ROSS, Arkansas 

BRAD CARSON, Oklahoma 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

DOUG THOMAS, Staff Director 

PHIL ESKELAND, Deputy Staff Director 

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S 

Page 

Hearing held on September 25, 2002 ..................................................................... 1

WITNESSES 

Aldonas, Hon. Grant, Under Secretary for International Trade, ITA, Department of Commerce ............................................................................................... 4

Jenson, Jon, CAE, Vice Chairman & President, Consuming Industries Trade 

Action Coalition .................................................................................................... 18

Friel, Jennifer Johns, President, Mid West Fabricating Co ................................. 20

Ajax, Erick, Vice President, E.J. Ajax and Sons, Inc., Fridley, MN .................... 22

Carlson, Jay, President, G&R Manufacturing ...................................................... 23

Dowding, Christine, President, Dowding Industries ............................................ 24

Robinson, Brian, President of Manufacturing, Wilson Tool International ......... 26

Johns, Bob, Director of Marketing, Sheet Mill Group, Nucor Corporation ........ 28

APPENDIX 

Opening statements: 

Manzullo, Hon. Donald .................................................................................... 33

Toomey, Hon. Nydia ......................................................................................... 35

Phelps, Hon. David ........................................................................................... 40

Jones, Hon. Stephanie Tubbs .......................................................................... 42

Smith, Hon. Nick .............................................................................................. 43

Hobson, Hon. David .......................................................................................... 47

Visclosky, Hon. Peter J .................................................................................... 48

Costello, Hon. Jerry .......................................................................................... 52

Kucinich, Hon. Dennis ..................................................................................... 53

Prepared statements: 

Aldonas, Hon. Grant ......................................................................................... 55

Jenson, Jon ....................................................................................................... 62

Friel, Jennifer Johns ........................................................................................ 70

Ajax, Erick ........................................................................................................ 73

Carlson, Jay ...................................................................................................... 76

Dowding, Christine ........................................................................................... 79

Robinson, Brian ................................................................................................ 83

Johns, Bob ......................................................................................................... 87

Additional information: 

Letter to Hon. John Ashcroft, Attorney General, Department of Justice, 

from Chairman Donald Manzullo, House Small Business Committee ..... 97

Response to Letter to Hon. John Ashcroft, Attorney General, Department 

of Justice, to Chairman Donald Manzullo, House Small Business Committee ............................................................................................................. 98

Spot Market Price for Steel from Purchasing Magazine ............................... 99

Steel exclusion request analysis by CITAC .................................................... 100

Written testimony of Wes Smith, E&E Manufacturing Co., Inc .................. 101

Garza, Melita M. ‘‘Steel Tariffs Taking a Toll.’’ The Chicago Tribune, 

September 10, 2002 ...................................................................................... 109

King Jr., Neil. ‘‘So Far, Steel Tariffs Do Little of What President Envisioned.’’ The Wall Street Journal, September 13, 2002 ............................. 112

Matthews, Robert Guy. ‘‘Steel Union Seeks Changes in Pacts.’’ The Wall 

Street Journal, September 23, 2002 ............................................................ 114

‘‘Bush Tariffs Backfire on Local Steel Users.’’ Sunday Rockford Register 

Star, July 21, 2002 ........................................................................................ 115

Du Pont, Pete. ‘‘Paying a Price for Steel Tariffs.’’ The Washington Times, 

August 15, 2002 ............................................................................................ 123

Page

IV

Additional information—Continued

Letters to Committee documenting steel price increases or exclusion request problems .............................................................................................. 124

Statements for the record: 

Letter from Bethlehem Steel to Chairman Manzullo, October 4, 2002 ....... 189

Response to Bethlehem Steel letter ................................................................ 192

(1)

LOST JOBS, MORE IMPORTS; UNINTENDED 

CONSEQUENCES OF HIGHER STEEL TARIFFS (PART II) 

WEDNESDAY, SEPTEMBER 25, 2002 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:05 a.m. in Room 

2360, Rayburn House Office Building, Hon. Donald Manzullo, 

Chairman, presiding. 

Chairman MANZULLO. We will call this meeting of the Small 

Business Committee hearing to order. What I said two months ago 

is still true today. The higher steel tariffs imposed for a noble purpose have been devastating America’s steel user manufacturers. 

Some in the steel industry are doing better. We all want a strong 

and vibrant steel industry, but there are 59 jobs in the steel consumer sector for every one job in the steel producing sector in 

America. 

I am going to waive the reading of my opening statement here 

because I understand we are going to have about three votes coming up at 10:30, but I just want to take 20 seconds to point out to 

you the headline that appeared in the Rockford, Illinois newspaper, 

Sunday, July 21st—‘‘Bush tariffs backfire on local steel users.’’ [The information may be found in the appendix on page 115.] 

Chairman MANZULLO. What started out as something well-intended has turned into a monstrosity. I talked to a gentleman in 

my office from National Metalwares just 20 minutes ago. He has 

lost three contracts to the Chinese because he could no longer be 

competitive because of price gouging by the U.S. steel manufacturers. 

Another person in my office knows of a firm that is trolling China for $750 million worth of production. It is all going offshore. 

It is because of the tariffs on the steel. 

I will now yield to our ranking minority member, Ms. Velazquez. 

[Chairman Manzullo’s statement may be found in the appendix.] 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Today, we are continuing our examination of the impact the 

Bush Administration’s steel tariff has had on American small businesses. It remains no surprise to anyone here that the core of 

American heavy industry is weak, and that our steel producers are 

in trouble. 

Burdened with crippling legacy costs and facing foreign competitors who dump their steel here for valuable dollars, the President 

2

simply has to protect American steel to give the industry time to 

consolidate and grow stronger. 

The immediate effect of the tariffs has been to shore up this critical component of our economy while saving thousands of jobs. 

There has been some evidence that the tariff spiked steel prices for 

some small manufacturers, despite the fact that steel costs remain 

at historic levels—low. 

Now a few months later, I believe that the conclusion made then 

that this tariff has both positively and negatively impacted small 

businesses is just as true now as it was then. I will say again that 

this issue, like any other issue we deal with on this Committee, is 

complex and contains no easy answers or solutions. 

It is true that some small businesses were harmed by increased 

tariffs, but others have thrived. In a diversified production base 

some companies have done well and others need some help. This 

is not a black and white issue. These industries are, indeed, hurting. I realize that these tariffs are having a negative effect, but 

since we are concerned with all small businesses, I hope we can 

work together to find solutions to the challenges that face them. 

For example, the markets have fallen. Consumer confidence is 

down, and unemployment remains a present danger. The economy 

is affecting all businesses—small and large alike. Small businesses 

face a variety of challenges. Finding solutions to the tariffs problems will be good, but some will find them a way to contain health 

care costs. 

Steel costs has spiked by about 40 percent since the tariff was 

imposed. This is, indeed, shocking even though steel prices remain 

below historical levels, but health care costs have increased even 

more—10 percent on average each year during the past decade. 

These price hikes burden both steel-dependent companies and 

those entirely unrelated to the steel industry. 

Nearly 40 percent of Americans without health insurance work 

for small businesses. If we could cut this cost, we will more than 

make up for the increase in steel prices that small manufacturers 

face and help cover more Americans in the process. The issue we 

are addressing today is a difficult and complex one. I do not doubt 

that some small businesses have been harmed by the increase in 

steel tariffs, though some have benefited. 

I look forward to addressing the challenges that all small businesses in America face, and I look forward to working with my 

friends on both sides to find solutions to them. Thank you, Mr. 

Chairman. 

Chairman MANZULLO. I yield the time it would have taken for 

my opening statement to Mr. Toomey, and then we will go directly 

to Mr. Aldonas’ testimony. 

Mr. TOOMEY. Thank you very much, Mr. Chairman. 

Mr. Chairman, as you know, I am a passionate believer in free 

markets and free trade. I have voted to reduce trade barriers and 

expand trade at every opportunity from the trade promotion authority to free trade agreements with Jordan, bilateral trade agreement with Vietnam and permanent normal trade relations with 

China. 

In fact, last year I held a Small Business Subcommittee hearing 

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3

ports and farmers; and we heard from a number of witnesses the 

benefits of free trade and the opportunities it presents for small 

businesses, farmers and workers. I would like to thank Under Secretary Aldonas for participating in that hearing, and I welcome 

him back today. 

I am convinced when people have more freedom to exchange the 

goods and services they produce, including with people in other 

countries, all parties benefit. Unfortunately, though, Mr. Chairman, the world’s steel market is not a free market. The President’s 

temporary safeguards under Section 201 of our nation’s trade laws 

will allow the steel industry the time needed to carry out further 

investments and restructuring. 

More importantly, it will give foreign governments and foreign 

steel producers an incentive to reduce their inefficient, subsidized 

excess capacity, which is really at the bottom of this problem. I am 

very sympathetic to the problems that small businesses are facing, 

and I want to be helpful in any way possible to ensure that small 

businesses in America are able to acquire the necessary steel products to operate their businesses. 

First and foremost, we are here to work with you to address the 

very legitimate concerns you are going to raise today. 

Having said that, Mr. Chairman, I must say I think our fire is 

being unfairly aimed at the domestic steel industry. It is not the 

domestic industry or the modest price recovery that is now occurring that is at the root of this problem. The problem, as the president has correctly identified, is foreign over capacity. 

The truth is that steel prices, prior to the President’s steel program, were at a 20-year low. This is the result of a massive, worldwide over capacity in steel production, which was caused by foreign 

government policies, such as subsidization and protection in their 

home markets. The flood of steel imports that has resulted has cost 

thousands of jobs, dozens of bankrupt companies and the devastation of entire towns and communities. 

The President understood this problem, and that’s why he initiated a three-part plan to address the steel crisis. This plan calls 

for negotiations to eliminate foreign market distortions; negotiations to eliminate foreign over capacity and investigation of the effects of steel imports on the domestic market under Section 201 of 

our trade laws. 

After the most intensive investigation in its history, the International Trade Commission ruled in a unanimous six to nothing 

vote that imports were the primary cause of the serious injury to 

the domestic steel industry. It is essential that we keep in mind 

that the effects of low-price imports are not just low-priced steel for 

consuming industries, but by undercutting the U.S. market with 

imports, foreign producers have put our domestic steel industry at 

risk. 

The President announced Section 201 tariffs in March 2002 to 

help remedy this situation. Now I know that tariffs can cause 

harm. I believe they should only be used as an absolutely last alternative when all other remedies have failed, but such exactly was 

the case regarding foreign subsidized steel by March 2002 when 

the president decided that it was the only remaining viable option. 

4

The bottom line, I believe, is this. Only when they know that we 

are willing to retaliate with tariffs, can we realistically expect foreign governments who heavily subsidize their steel productions to 

reduce those subsidies and this massive distortion of the global 

steel market. 

Steel prices are beginning to return to normal levels, but prices 

are only now reaching the level of average steel prices over the last 

20 years. At this point, the process must be given time as prices 

recover and the industry has an opportunity to restructure. 

The President also included a release valve under his Section 201 

program. The product exclusion process was instituted to allow certain steel imports to enter the United States market duty free. The 

domestic industry has worked with the administration and its customer—— [Mr. Toomey’s statement may be found in the appendix.] 

Chairman MANZULLO. Pat, how are you doing on time? I really 

want to get to the Under Secretary before the bells go off in 15 

minutes. 

Mr. TOOMEY. Well, I appreciate that, Mr. Chairman. I will just 

wrap up then, very quickly. 

Chairman MANZULLO. Let’s do it very quickly. 

Mr. TOOMEY. And simply make the point that many products are 

not included and not covered in the tariffs. There have been many 

exceptions, and I believe it is in everyone’s interest—steel mills and 

customers—that there be a healthy domestic steel industry. I think 

this tariff decision puts us on that road. I thank the Chairman. 

Chairman MANZULLO. Thank you very much. 

Our first witness on this panel is the Honorable Grant Aldonas, 

who is the Under Secretary of the International Trade Administration. I look forward to your testimony, Mr. Secretary. 

Mr. ALDONAS. Thank you, Mr. Chairman. 

Chairman MANZULLO. Can you pull the mike closer? Thank you.

Mr. ALDONAS. Absolutely. The first thing I would like to do is request that I submit my written statement, Mr. Chairman. 

Chairman MANZULLO. The entire statement will be submitted to 

the record. We are advised, Mr. Secretary, that even though you 

have to leave, you have members of your staff that will be sitting 

here, listening to the entire testimony from the second panel. 

Mr. ALDONAS. Absolutely. 

Chairman MANZULLO. I appreciate that. Thank you. 

STATEMENT OF GRANT D. ALDONAS, UNDER SECRETARY FOR 

INTERNATIONAL TRADE, INTERNATIONAL TRADE ADMINISTRATION (ITA), DEPARTMENT OF COMMERCE 

Mr. ALDONAS. Thank you, Mr. Chairman, Congresswoman 

Vela ́zquez and members of the Committee for inviting me to testify 

today. 

I want to thank you, Mr. Chairman, for holding the hearing. 

Under your leadership, as you have worked together, the Committee has proved to be a consistent advocate for American small 

business; particularly, the many firms that represent the heart of 

U.S. manufacturing. 

One of the many points in which I know we agree is the need 

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5

and medium-sized manufacturers. Trade offers substantial benefits 

to American small businesses. It is in our best interest to enable 

them to pursue free trade as small- and medium-sized enterprises 

make up 97 percent of all American exporters. 

I am sure that you and I also agree on the fact that we need to 

rebuild trust in our trade policy, which frankly has been broken 

over the last decade—specifically, trust between Congress and the 

Executive Branch and between government and the people that our 

policies are intended to serve. 

In the President’s view we can only expect the American people 

to support an aggressive, forward-looking trade agenda if we can 

assure them that we will look out for their interest at the negotiation table. I am here to affirm that we are. 

There is understandably a need for a strong administration position on behalf of U.S. manufacturers, but I have to emphasize that 

steel lies at the heart of our manufacturing industry. The recent 

safeguard measure on steel imports illustrates one of the examples 

of the administration’s commitment to work on behalf of the American public. 

What I want to do is really put the president’s decision in context. The president’s efforts on steel are rooted in an effort to restore market conditions to the steel industry, which has been beset 

for decades with government distortions. Our steel companies face 

significant challenges. Most notably, they must compete with stateowned and state-subsidized steel producers. 

I think one single statistic is always helpful to bear in mind 

when you talk about the level of distortion in the steel trade globally. Before the last 15 years of privatizations, governments owned 

75 percent of the steel industry worldwide. That was the market 

in which our producers had to compete. 

Sadly, after 15 years of privatization, government still owned 25 

percent of the industry worldwide, which is entirely insulated from 

market competition. That’s the challenge that our guys have to 

compete with in a global market where, frankly, our duties are low. 

The barriers to trade are low in our market as they aren’t in other 

markets. That’s why we oftentimes become a dumping ground for 

steel. 

While critics of the president’s action have often charged that the 

domestic steel industry is plagued by problems of its own making, 

the industry has actually proved to be very innovative over the last 

several decades. In fact, generally, critics of the steel policy have 

a tendency of think about the U.S. steel industry as being monolithic in that is made up solely of integrated firms with 70-year old 

technology. Frankly, nothing could be farther from the truth. 

Fifty percent of our steel production now comes from minimills 

using the latest electric arc furnace technology—the most efficient 

producers in the world. Many of what were previously integrated 

firms have moved in a direction of hanging on to their finishing facilities and now import slab from abroad as a way of reducing their 

unit costs. 

The integrated firms have, in fact, moved up the value chain into 

niches where they can sustain their existing cost structure and still 

turn a profit, but really does depend on the playing field being level 

6

at the end of the day, and ensuring that the competition in the 

marketplace is fair. 

Toward that end, the president put forward a long-term solution 

to the problems that plague global steel trade. While the emphasize 

of the hearing today is on the safeguard measure under Section 

201, I want to emphasize that the first steps the President took—

for a President who is often accused of unilateralism—was for the 

first time to bring all the steel-producing countries of the world together to take a step toward eliminating excess capacity and then 

establishing new rules, new disciplines on government intervention 

in the market so we don’t continue this cycle of government intervention in the marketplace and then a U.S. response under our 

trade laws. 

In the long run the administration has sought a solution to a 

more stable steel market and will benefit both producers and users 

alike by providing greater certainty. In the short term, however, we 

continue to monitor the impact of the safeguard measure on U.S. 

businesses; particularly, steel-consuming industries. 

We did act within the framework of the Section 201, including 

the president’s initial determination, as Congressman Toomey has 

already alluded to, to provide relief where needed without overburdening consumers. The president established a process to exclude 

products that are not sufficiently available from domestic sources. 

We were very hard on the U.S. steel industry, as they will tell 

you, in that process trying to ensure that they could provide proof 

that products were, in fact, manufactured in commercial quantities 

and available before we would deny an exclusion request. 727 such 

requests have been granted, and each year which the safeguard is 

in effect, additional products can be considered for exclusion. 

In addition, we will continue to meet with the steel-consuming 

industries to work on individual problems. In fact Secretary Evans 

and I will be meeting with small businesses from Ohio, Indiana, 

Pennsylvania, Illinois and Minnesota later today. 

I have to say also that the domestic steel industry has actually 

been very helpful and responsive where we have faced individual 

situations and pointed out where, for example, the service supply 

centers were jacking up prices and there was a way by selling direct to address the problems that consumers faced in the marketplace. 

Many of the exclusions that we granted, in fact, went to small 

businesses. I am just going to cite three examples—the Industrial 

Nut Corporation, a small family-run company in Sandusky, Ohio 

was granted an exclusion for large hexagon bars that are used as 

an input in precision machine nuts; Grasche, USA, a small company with 38 employees in North Carolina received an exclusion 

for cold rolled sheet for saw bodies; Stamco Industries of Euclid, 

Ohio is a small business supplier in the automotive industry and 

received an exclusion for hot rolled steel. 

The President has asked us to continue to monitor the impact of 

the steel safeguard. I’m sure the steel industry would agree the 

President has made clear that there is no free ride in the Section 

201 process. We have consistently asked the steel industry to provide us with their plans for adjustment; how they would use the 

7

breathing space that the three years under the safeguard will provide and they have responded. 

We are engaged now, after a September 5th deadline, and a series of meeting with steel companies individually to review those 

plans, and to mark progress in terms of their adjustment. And I 

have to say, having looked at the latest news, that there is an 

awful lot of adjustment that has already taken place. 

I think what you’re seeing in the marketplace right now is that, 

not only have firms gone through bankruptcy and reemerged, 

stripped of some of their previous excess capacity; but you are finding that a lot of companies are diversifying how they produce their 

steel in a way that will make them leaner and more efficient when 

the safeguard ends. 

In the meantime, though, the administration is still committed 

to enforcing the U.S. trade laws. We want to use them as a catalyst. The president has reinforced for us, as Secretary Evans does 

almost on a daily basis that our goal is not simply to prosecute investigations under the trade laws, but to try and resolve the underlying trade disputes that often give rise to these trade cases. 

In other words, I think the action under Section 201 is a catalyst 

to move the whole process forward on a multilateral front, and we 

will continue to use that pressure going forward so we can achieve 

an outcome that is good for both steel producers and users in the 

marketplace. Thank you, Mr. Chairman. 

[Mr. Aldonas’ statement may be found in the appendix.] 

Chairman MANZULLO. Thank you, Mr. Secretary. 

Congressman Phelps had a short opening statement that he 

wanted to read. I will yield to you, David, for that purpose. 

Mr. PHELPS. Thank you, Mr. Chairman. I certainly want to 

thank you for holding this hearing, as well as the ranking member. 

It’s very important that we talk about this matter. 

In my congressional district in Central Southern Illinois, the effects of illegal steel dumping have been devastating. I have to 

admit to you I don’t relish the idea of looking the steel worker in 

the eye and seeing the fear that is demonstrated—the uncertainty 

of tomorrow. 

Many of their widows have been left with lack of health care provisions. Many of them that have been forced to retire or have retired are facing these devastating situations in their lives. 

Of the 31 companies that have filed for bankruptcy, four of those 

in Illinois have been included in that. Over 5,000 steel workers 

have lost their jobs in Illinois—in Central and Southern Illinois. 

This is unacceptable. When you look at the 19th District, 27 counties, the largest geographic district east of the Mississippi, I can 

tell you these trade policies have done nothing but kill us. 

I can take you up and down the landscape of downstate Illinois 

and demonstrate how we’ve closed shop after shop. 

[Mr. Phelps’s statement may be found in the appendix.] 

Chairman MANZULLO. How are you coming with your opening 

statement? I want to get on with asking questions of the Under 

Secretary before we head to votes. 

Mr. PHELPS. We know that the Section 201 steel tariffs imposed 

by President Bush were helpful and I applaud his efforts and I 

firmly believe they have been effective; but even with this elevation 

8

of prices that we are experiencing now at the June 2002 levels, I 

want to point out this is not inflation. It is the beginning of a market recovery. 

So we cannot afford to let our investment slide and our steel industry to go to waste. The tariffs are a strong step in the direction 

of economic recovery. Hopefully, the exemptions that were imposed 

will not be as great as we threatened to be. But we hope that the 

potential for the steel industry will recover, and it can if we cooperate and enforce our present laws. Mr. Chairman, thank you. 

Chairman MANZULLO. What is your time frame, Mr. Secretary? 

Mr. ALDONAS. I am here as long as you want me here, Mr. Chairman. 

Chairman MANZULLO. We have got three votes that are going to 

take at least 30 to 40 minutes. Are you okay on time? 

Mr. ALDONAS. I will go and get a cup of coffee. 

Chairman MANZULLO. We will take five minutes now and see 

how far we can get ourselves. Will that be all right? 

Mr. ALDONAS. Sure. Absolutely. 

Chairman MANZULLO. My question is about the next round of exclusion requests. Why that can’t start immediately? Why it has to 

wait until November until the meetings begin with decisions expected in March? 

Mr. ALDONAS. Frankly, it is to provide a little certainty to the 

market. So traditionally, what has been done in safeguard actions 

is we’ve established an annual process. 

So we will provide a set of exclusions. What we will do is we will 

take a look on an annual basis and see what has happened under 

those exclusions as well as see where there are other demands in 

the marketplace. 

But in some respects, the goal of the safeguard is to ensure that 

our steel industry does have some breathing space, and what I 

really mean by that, Mr. Chairman, is access to capital. And until 

the capital markets are certain about the underlying economic conditions, it is a little difficult for them to make investments. So 

you’ve seen a lot of fluctuation up until we close the exclusion process. 

I think things are leveling out at this points. So once the market 

sees the ground rules are set for a period of time, then I think it’s 

easier for the companies to get the capital they’re going to need to 

make the adjustments. We will open the process up again in November. 

Chairman MANZULLO. What is bothering me about the exclusionary process, and I will be quite frank, is that the decisions to 

exclude are as political as the decision to impose the tariff in the 

first place. 

In fact, in the last round of exclusions, it was the U.S. steel companies that got half the exclusions and they, themselves, wanted 

cheap imported foreign steel, so they could take and slice that up 

and sell it back to the steel users—many of whom are here today— at 30 to 40 percent price increases. 

Why were the U.S. steel manufacturers—the ones who complained about importing of steel—granted half the exclusions to import the very steel whose prices they said were wrong and which 

lead to the 201 situation in the first place? 

9

Mr. ALDONAS. First, I need to take exception, Mr. Chairman, 

with the impression that this was political. I know that the press; 

particularly, in the Wall Street Journal and a number of other 

places, described the exclusion process either, A, as being bending 

over backwards for domestic political constituencies or alternatively, bending over backwards for our foreign trading partners. 

It was neither. 

Now the President set out a basic standard, which was we were 

going to grant exclusions where steel was not available in particular grades with particular chemistry in reasonably commercial 

quantities. 

The problem that the steel industry themselves face is there is 

actually no merchant market for slab any in the United States. So 

if you are going to get slab to realign your plant, either you are 

chipping away at your own inventory, which would have made 

sense over time. 

But if you are caught short, and you want to do the realign and 

we want to continue the adjustment process in the steel industry 

in our view it made sense to grant them exclusion for slab from 

abroad. That was consistent with the original exceptions that the 

President granted for slab at the outset. 

What we have seen, frankly, is a higher demand for slab than 

we expected as a part of that process. So I would have a tendency 

to view what we did for the steel industry at the tail end of the 

exclusion process something that was consistent with the President’s initial action in terms of providing that exclusion for slab because there is simply no merchant market for that in United 

States. 

Chairman MANZULLO. The argument also would then apply to 

the steel users. They ended up being second-class to the steel producers. They wanted the very same thing. They wanted the bread 

and butter of steel so they could make their products. So the administration discriminated against the producers in favor of the 

manufacturers. Don’t you think that is inconsistent? 

Mr. ALDONAS. I don’t see it that way, Mr. Chairman. Apart because what we really did press very hard on was whether or not 

a product was produced in the United States, and I have gone 

through the Midwest recently, what I think—a lot of the small 

businesses that I talked with would agree is that the steel that 

they use is garden variety steel that is manufactured in the United 

States. 

From the steel industry’s perspective, with respect to slab, there 

is no merchant market for slab in the United States. The only 

source is abroad. 

Chairman MANZULLO. That brings up another point. Mastercoil 

Spring in McHenry, Illinois filed for an exclusion and the response 

from Sumiden was an objection. Maybe the Attorney General 

should be involved in this. Because lo and behold, after the exclusion was denied, Sumedin sent this memo to Mastercoil. 

[The information may be found in the appendix on pages 146– 150.] 

Chairman MANZULLO It says ‘‘Currently Sumiden does not have 

production capacity to produce 100 percent of requirements. We 

would have to provide delivery information on an order by order 

10

basis.’’ And the price of coil was 33 percent more; this, to me, is 

what it means to have political exclusions. 

The steel companies came in. Their statements were accepted as 

gospel. No one could go beyond the face of them. You didn’t give 

the steel users the opportunity to challenge them. 

The whole system of exclusions were skewered and bent in favor 

of the objectors. And now we come back here, and my question to 

you is, when we have obvious fraud that took place on the part of 

Sumiden Wire Products Corporation out of Dixon, Tennessee, with 

a memo coming after these exclusions were denied, do you have the 

authority to go back—— Mr. ALDONAS. Sure. 

Chairman MANZULLO [continuing]. And to take a look at those 

exclusions? 

Mr. ALDONAS. What I have asked the—— Chairman MANZULLO. Do they have to wait until March? 

Mr. ALDONAS. No. I mean, this is one of those incidents where, 

which I have said to a number of the users that I’ve met with— is where there is real evidence that the objection was not one that 

was based in fact, we will want to take a hard look at that. 

We didn’t design this system to impose a dead weight loss on our 

consuming industries. So where they had a legitimate claim, we 

wanted to grant the exclusion where something wasn’t being produced in the United States of that type or grade. So where there 

are instances where there was an objection registered, and in fact, 

that objection didn’t prove to be accurate. I don’t wand the legal 

finding to it. 

Chairman MANZULLO. They lied. 

Mr. ALDONAS. In those instances, I think we want to go back and 

take a look at them. What I have done is invite the users, when 

they have those situations, to get in touch with us directly because 

I do want—— Chairman MANZULLO. A bunch of them are going to see you later 

on this afternoon. 

Mr. ALDONAS. I know that, Mr. Chairman. I do want to say, 

though, in defense of the folks who—my colleagues at the Commerce Department—they did an extraordinary job. You can appreciate that in a process like the exclusion process. You will get a lot 

of pressure from both the steel consumers and the steel producers. 

These guys played it right down the middle. They understood 

what the standard was that the President had announced, and 

they pressed very hard. Is it possible in instances we didn’t go far 

enough? Sure. Absolutely. And we want to take a look at them. 

Chairman MANZULLO. We have go vote. We are going to stand 

adjourned and appreciate your indulgence. Thank you. 

[Whereupon, at 10:37 a.m., the meeting was adjourned to reconvene at 11:15 a.m.] 

Chairman MANZULLO. If all of you could please have a seat there, 

if you can find one, the hearing will be back in session. 

I have one more question, Mr. Secretary, and then we can finish 

up here. We also have another constituent, Arnold Engineering, in 

Marengo, Illinois. They import ARNOKROME–5C material and we 

have the same problem there. They have a 30 percent tariff and 

are liable for another 8.47 percent antidumping duty on some very 

11

sophisticated material that is not made in the United States. They 

missed the May 20th deadline to file their exclusion request. 

These go on by the hundreds. I guess what I am asking you is 

probably the impossible, but we have to have a mechanism to process these new requests. Give me some guidance on how, either our 

office or somebody in your office that we can get these in. They are 

all urgent, but could you give me some guidance on this, Mr. Secretary? 

Mr. ALDONAS. Well, certainly on the ones that we talked about 

before, Mr. Chairman, about situations where we are arguably—

were mislead by a steel company’s objection or they misfired in 

terms of the objection they registered, we want to hear about those 

because those are things we should address. 

They were in time. They made their application. Something that 

if the facts were not as we understood them, that is something that 

we ought to revisit. On the others, particularly, with respect to 

dumping, where the product is—in fact, there is an exclusion process, as I understand it, under the dumping laws as well. That is 

something where it would be a question of either talking with me 

or Faryar Shirzad, who is the Assistant Secretary for Import Administration. 

But as I have consistently said, Mr. Chairman, I think that consumers should use me as a voice in the process, and that I want 

to hear from them. When the President and the Secretary have 

talked about the need for an initiative with respect to manufacturing, we want to make sure we honor the fact that steel is at the 

core of that because I think that’s the core of our manufacturing 

industry. But that certainly isn’t to the exclusion of everybody else 

who at the Commerce Department we represent. 

Chairman MANZULLO. I appreciate your openness. Ms. 

Vela ́zquez? 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. I thank you, Under 

Secretary Aldonas. After listening to Chairman Manzullo’s complaints about whole exclusion process, how would you answer, or 

what type of comment can you make regarding those steel manufacturers who claim that the exclusion process is biased and unfair? 

Mr. ALDONAS. I just want to clarify, Congresswoman, when you 

say steel manufacturers, do you mean the steel producers are saying that it’s bias and unfair, or the steel consumers? 

Ms. VELA ́ ZQUEZ. Consumers. 

Mr. ALDONAS. Consumers? The President laid out in his decision 

on March 5th, the standard which we would apply throughout the 

process. We were guided strictly by the President’s standard, and 

that was if a product was not available in commercial quantities 

in the United States, we were going to grant the exclusion. 

I think our steel producers would vouch for the fact that we 

pressed very hard whenever they came in with an objection. I think 

there is instances, which the Chairman has alluded to, where we 

may not have pressed hard enough; but we really did press very 

hard to insist that we had evidence that they—not only they were 

going to produce it, and it wasn’t just a question of saying they 

there capable of producing it; but I think actually produce it in the 

12

time frame that was relevant from the point of view of the consuming industry. 

So the fact that they could say, look, we can be up and running 

in two-and-a-half years, and that means we can produce the steel. 

That wasn’t good enough for us. We had to say can you produce 

it now and can you satisfy the needs of the consumer? Otherwise, 

as far as we are concerned, the product is not made in the United 

States in all practical terms. 

So the bias in the system was one to use only the standard applied by the President, but to lean very heavily on the steel guys 

to say we really have to understand whether you can produce this 

way now in a way that is relevant, commercially, from the point 

of the consumer. 

Ms. VELA ́ ZQUEZ. How can you explain how the steel tariffs are 

part of the administration’s three-year program to assist the steel 

industry? 

Mr. ALDONAS. Congresswoman, it’s a good question. Traditionally, what you are trying to do with one of these safeguards is you 

create a price wedge between what had been the pricing situation 

and what would be something more nearly historical market conditions. The 30-percent tariff was designed to do that. I have to say 

steel prices, while they are up in some categories, and up significantly in some categories, overall they haven’t actually recovered to 

the historical levels even with the 30-percent tariff. 

In fact, looking forward toward the end of the year, steel prices 

in the spot market are already softening again because of softer demand and increasing imports, despite the tariffs. 

But the point was to make sure that you drove that price wedge 

in there so that the capital markets would see that there was a little more profitability on behalf of the steel companies and that they 

could go to the capital markets and look for opportunities for them 

to try and, either retrofit their existing plant to become more competitive or engage in mergers and acquisitions or consolidations 

that would make them leaner and more efficient. 

Ms. VELA ́ ZQUEZ. Mr. Aldonas, the Consuming Industries Trade 

Action Coalition is recommending that the administration get rid 

of the tariffs. Can you share your comments on that? 

Mr. ALDONAS. Well, in my view, the tariffs the President put in 

place haven’t yet served their purpose. And I look at that two ways. 

One, we haven’t yet seen the kind of adjustment in our own industry that the breathing space is designed to encourage. It’s happening, but it’s not complete. So I think it is going to take some 

more time for that process to play out. 

The other thing is to the extent that tariffs serve as leverage 

with respect to our trading partners. We have accomplished a lot 

in the OECD negotiations, but we are nowhere near our goal. I 

think that we have to stay the course in terms of trying to ensure 

that other trading partners come around because, really, the solution to this problem in the steel industry is not the 201. Our own 

steel industry will tell you that. 

Until we get to the root cause of the problem, we haven’t really 

solved it. We will continue in this cycle that we go through every 

10 years, which nobody has an interest in doing. I was reminded 

at the break that the steel industry in Paris at the most recent 

13

round of talks stood up and were unanimous about wanting to go 

forward with market reforms. It was only when the governments 

came to the table in the meetings later that we started to have 

trouble. 

So what I heard from industry across the board was an understanding that there is going to have to be adjustment in all countries in terms with coming to grips with the problem. We have a 

little bit more difficult time when we get the governments in the 

room to talk about that stuff. 

Ms. VELA ́ ZQUEZ. You mentioned before that access to capital was 

an important issue. Can you please expand on that? 

Mr. ALDONAS. Sure. Well, first, let me say that access to capital 

isn’t the only issue. The market has been working with brutal efficiency in terms of driving adjustment through the industry with 34 

bankruptcies and an awful lot of plant closures, but with more capital available, for example, it allows an integrated company to realign plants that will make them efficient going forward. 

It allows companies to engage in acquisition strategies that 

would consolidate capacity so that what is left in the U.S. market 

is the most efficient production. It would also allow investment of 

research and development, which would allow all U.S. companies 

to move up the value chain and earn a higher rate of return. 

Ms. VELA ́ ZQUEZ. Mr. Aldonas, are you aware that the administration, through the SBA loan programs, that these programs have 

been cut—the funding has been cut? 

Mr. ALDONAS. I am aware of that. 

Ms. VELA ́ ZQUEZ. Would you approach the President and economic 

advisor, Mr. Lindsey to tell that at this time is the wrong approach? 

Mr. ALDONAS. Certainly, in terms of my own experience with my 

good friend Hector Barreto and all the work that SBA does, anything we can do to reinforce the SBA, but I will have to look into 

that. 

Ms. VELA ́ ZQUEZ. Yes. The administrator, believe me, he has done, 

and he is trying to do everything he can because, he as a businessman, understands the need for access to capital; and how this loans 

programs through SBA played an important role. So 40 percent of 

most loans in this country that are provided to small business come 

through SBA. So it is not Mr. Barreto. It is Mr. Lindsey and it is 

the President. 

Mr. ALDONAS. No, all I was commenting on is the fact that I 

think Hector is doing a wonderful job. I know that on the export 

side, Hector and I have collaborated a lot. He is somebody who you 

can have a lot of confidence in, but I am happy to take the message 

back. I will raise it with Secretary Evans this afternoon. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Chairman MANZULLO. Congresswoman Tubbs-Jones. 

Ms. TUBBS-JONES. Thank you, Mr. Chairman. Good morning. 

Just in case people don’t know, I hail from the great city of Cleveland, the home of LTV Steel. The home of many small steel manufacturing companies, and we have gone through a significant loss 

of jobs and restructuring and reworking with regard to the steel industry. I have offered several pieces of legislation trying to address 

the issue of legacy costs on behalf of the steel industry. 

14

I wonder, Mr. Aldonas, what is your position on legacy costs and 

how do we pay for the legacy of great people who have worked in 

the steel industry forever and ever and ever and deserve to have 

some type of retirement program that would cover their health care 

costs? 

[Ms. Tubbs-Jones’s statement may be found in the appendix.] 

Mr. ALDONAS. Well, my instinct is always to say what is available already. And when we look hard at the legacy cost question, 

what we found was—and let me break it down. With those folks 

who were over 65 and already retired, the Pension Benefit Guarantee Corporation would take up 97 percent of their pension. 

They would have Medicare, Medicaid and low cost insurance programs, Medigap, available to them from the government. And then, 

with the folks who were 45 to 65, who—I think it’s reasonable to 

say they should still find work elsewhere during that period of 

their lives as you and I are going to have to do. 

To the extent that you could help them in the interim with their 

health care costs, it is pretty clear that under the Department of 

Labor’s National Emergency Grants, you could make block grants 

to communities to try and address that particular issue. 

So in fact, when we looked at it from the point of view of the administration, it looked like there was a panoply of programs available from the U.S. government that could actually help address 

that without having to provide additional money from the Congress. 

The other point I think is fair to say is that—— Ms. TUBBS-JONES. Let me stop right here for a minute. Are you 

saying there are programs that could, in fact, cover those costs in 

communities like the City of Cleveland, but that’s a ‘‘could.’’ That 

is not that you’re committing—that the administration is committing dollars for that purpose, correct? 

Mr. ALDONAS. No. What we have said is we are interesting in 

trying to work with communities on that. 

Ms. TUBBS-JONES. No, go back. 

Mr. ALDONAS. What you asked me, Congresswoman, was what 

was——

Ms. TUBBS-JONES. Will you answer my question, sir? The question—answer my question. The question is that you could do that. 

You are not committed to doing that, have you, sir? 

Mr. ALDONAS. The question you asked me was whether——

Ms. TUBBS-JONES. No, answer that question. You could do it, 

could you not, sir? Excuse me, Mr. Chairman, I am going to be 

kind. 

Chairman MANZULLO. I would instruct you to let the witness answer the question. 

Ms. TUBBS-JONES. But he doesn’t want to answer the question, 

but you could, correct? 

Chairman MANZULLO. Give him the opportunity to do so, please. 

Ms. TUBBS-JONES. Mr. Chairman, thank you. 

Mr. ALDONAS. But we have not had anyone take us up on that, 

and this was a subject of a great deal of discussion at the time the 

President took the action under 201. 

Ms. TUBBS-JONES. You haven’t had anyone come to you and say, 

okay, that the legacy costs are significant and we’re applying to you 

15

to take over those legacy costs through those programs, is that correct? 

Mr. ALDONAS. What we have had is a number of companies that 

have come and said to the Pension Benefit Guarantee Corporation 

that we want you to take over the pension costs. That has taken 

place. In fact, the PBGC has actually been proactive in many instances in removing the legacy costs from certain companies since 

they act in some sense as a steward of the pension program. So 

that action has taken place.

I was actually discussing more narrowly the point about the 

Labor Department programs, and in that case I don’t purport to 

speak for the Labor Department. I know that the programs are 

available, and that it was clear to many of the folks we were talking to, including the steel workers unions, that those were possibilities. 

I don’t know whether any community has actually come forward 

and asked for national emergency capital. 

Ms. TUBBS-JONES. Before you said no one had asked, did you not, 

sir, in your answers? 

Mr. ALDONAS. To the best of my recollection, no one has asked 

for that——

Ms. TUBBS-JONES. You can represent that? 

Mr. ALDONAS. I just did. 

Ms. TUBBS-JONES. But you are not speaking for the Department 

of Labor? 

Mr. ALDONAS. No. 

Ms. TUBBS-JONES. Let me ask another question, okay? If you will 

allow me. 

Mr. ALDONAS. Yes. 

Ms. TUBBS-JONES. In addition to legacy costs, there are small 

businesses who believe that, as a result of the tariffs being imposed, that their businesses are suffering. When you look at tariffs, 

is there a way in which small business can be successful or benefit 

as well as the larger steel industry can benefit? And if so, what is 

that balance or twix-between that we can weigh in to do so? 

Mr. ALDONAS. I think the answer is it depends on their pricing 

power in the marketplace. Small businesses that are stuck between 

a service supply center, which is not a steel producer, but acts a 

middleman who is jacking up prices on the one hand; and they buy 

in very small quantities, isn’t going to have any market power with 

respect to their supplier. 

On the other hand, they are not likely to have a lot of market 

power with respect to the upstream industry—the auto industry, 

for example, to whom they sell. They are going to be caught in a 

vise. Where small business have more a market nitch where their 

product is more unique and things like that, and they have the 

pricing power, I think they can pass the price on. 

A point to make is that prices are already starting to abate in 

the steel industry. So if you look forward to the fourth quarter, you 

can already see spot prices starting to soften, which I hope, which 

in addition to exclusions will provide some relief to small businesses. 

16

Ms. TUBBS-JONES. I don’t want to presume that small business 

is jacking the prices as you have said. I am sure there are some 

small businesses who have succeeded out——

Mr. ALDONAS. That is not what I said, Congresswoman. What I 

said was service supply centers who are middlemen between the 

steel producers and the small businesses where the consuming industries are reading the market and driving the prices up higher 

than that which steel producers are selling in the marketplace. 

Ms. TUBBS-JONES. You know what, I don’t want to take my time 

to read back what you said, but I know that you said that small 

businesses are jacking up prices. 

Mr. ALDONAS. I did not. 

Ms. TUBBS-JONES. Let me finish, and just let me finish. 

Chairman MANZULLO. You are out of time here. 

Ms. TUBBS-JONES. I am out time. So let me complete with this, 

sir. I don’t want to presume that there are small businesses across 

this country who are not doing the job that they think are—they 

are not true business people who are engaging in conduct that 

would be inappropriate. So I am going to be there fighting on their 

behalf, sir. 

Mr. ALDONAS. Wonderful. 

Chairman MANZULLO. I guess as the Chairman, I have the last 

comment. Thank you, Mr. Secretary. We have in our book of steel 

correspondence, Mr. Secretary, letters from steel manufacturing 

users, accompanied with letters from the steel suppliers, and the 

steel suppliers, the middle men are attaching letters coming directly from the steel manufacturers. 

One of them is Bethlehem Steel. I would just like to mention 

names because I like to hold people accountable. I really would 

challenge the statement that the so-called middle men, or the steel 

suppliers, are responsible for gouging. The steel companies call it 

profit recovery. 

I have written to the Attorney General. He has not had the kindness to answer my letter yet asking for an investigation for collusion, and anti-trust, monolopolistic type of practices. 

[The information may be found in appendix on pages 97–98.] 

Chairman MANZULLO. It has not happened. I can show you. In 

fact, you have the latest steel correspondence book, I would you 

track in there exactly the fact that it is the steel manufacturers 

themselves break a contract with the steel suppliers, saying, sorry, 

we are breaking the contract and the steel suppliers have to pass 

that bad news on to the steel users. 

You had a comment? 

Ms. VELA ́ ZQUEZ. You just mentioned that the Attorney General 

didn’t respond. He hasn’t responded? 

Chairman MANZULLO. No, he has not responded. 

Ms. VELA ́ ZQUEZ. So maybe we need to subpoena him. 

Chairman MANZULLO. Well, let me take that under consideration. 

[NOTE FOR THE RECORD: The Justice Department responded on 

October 3, 2002. See page 98.] 

Chairman MANZULLO.Mr. Secretary, I want to thank you for your 

indulgence, and to thank you for being here. I thank you also for 

17

the willingness to work with us on those exclusions that obviously 

fell through the cracks. 

Mr. ALDONAS. Thank you for the opportunity. 

Chairman MANZULLO. Thank you, again. You are excused. 

[Recess.] 

Chairman MANZULLO. We have the second panel here. Congressman Nick Smith, would you like to introduce your constituent. 

Your statement will be made a part of the record. 

Mr. SMITH. Thank you, Mr. Chairman, thank you. I do welcome 

Christine Dowding from Dowding Industries here. 

Just let me briefly say that the high tariffs in Michigan and 

many other parts are having the result of losing jobs and driving 

business out. Just for the statistics, for every one person working 

in the steel-producing industry, there is 57 people working in the 

steel-using industry. 

The economist in Michigan suggest that we are going to lose 6 

to 10 jobs for every 1 job we save in steel-producing. With that, it’s 

my honor to introduce Chris Dowding, president of Dowding Industries and Dowding Industries is a 36-year-old family-owned stamping business that employs about 140 workers in my district. I am 

very proud to have Chris here today. 

I might add that many of the steel-using industries have come 

to me. They would like to be added to the 700-odd exemptions that 

the administration has already made on giving exemptions for 

some of the steel for particular industries that causes great distortion. 

I have a Fortune 500 company that is threatening to move out. 

This is one company that is under duress because of the problems 

of the tariffs. I applaud the Committee for holding this hearing and 

certainly welcome Chris Dowding, who is the president of Dowding 

Industries. So thank you. 

[Mr. Smith’s statement may be found in the appendix.] 

Chairman MANZULLO. We appreciate your participation. Congressman Hobson, you also have a constituent that is here today. 

Mr. HOBSON. Thank you, Mr. Chairman. First of all, let me say 

to you, Mr. Chairman and members of this Committee, I really appreciate all the hearings you have had relating to small business. 

As you know, we have had a couple of other areas where we have 

worked together to try to improve things for small business, and 

I really appreciate the proactive stance you have taken, not just for 

this hearing, but with a couple of other issues that we have taken 

on and your championship of that. 

I, today, want to introduce my constituent Jennifer John Friel, 

President of Midwest Fabricating in Amanda, Ohio. I have toured 

this facility and seen first-hand how hard it has been for this company to operate in these uncertain times. Midwest is representative 

of other small businesses that drive my state’s economy. 

Most are family-owned and operated, and I think there are a couple in this room besides Midwest, and they are vital to our local 

communities just like a lot of other small businesses. I am a small 

businessman by background myself. 

Nick Smith was talking about the business as it affects Michigan, and the steel-consuming businesses, such as Midwest have 20 

employees in the State of Ohio for every 1 that is a steel-production 

18

job. So we have a lot of people that are involved in the manufacturing side of this. 

But the interesting thing about this is that Midwest is incurring 

a lot of problems because of these tariffs, and hasn’t purchased any 

imported steel. This is occurring not only there, but other people 

in this room from our district are having the same problem. 

I think the tariffs were well-intended, but I think they are creating new problems without solving the old one. If they were designed to save our nation’s steel producers, who is going to rescue 

Midwest and other companies as they suffer from these tariffs? 

The other thing I would like to say, and I can’t say this for Midwest, but I have seen those letters that you referred to before 

where people just broke the contract and they just said if you want 

you, you are going to pay it. We don’t care what agreements we 

made before. That’s the deal. I think that’s a terrible way to do 

business in our society. I don’t think it should be stood for. With 

that, at this point, introduce Jennifer to all of you. 

She runs a wonderful company in Fairfield County, Ohio. She 

has a couple of locations there. Thank you for allowing these people 

to come in and tell their stories. 

[Mr. Hobson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you for participating. You are both 

welcome to sit on the panel as long as you can, and we will go from 

there. 

Our first witness is Jon Jenson, President of the Consuming Industries Trade Action Coalition. We look forward to your testimony. 

Mr. HOBSON. He is from Ohio, also; but he is not from my district 

or Stephanie’s. 

Chairman MANZULLO. Okay. That’s great. 

STATEMENT OF JON JENSON, CAE, VICE CHAIRMAN & PRESIDENT, CONSUMING INDUSTRIES TRADE ACTION COALITION 

(CITAC), INDEPENDENCE, OH 

Mr. JENSON. Mr. Chairman, the Section 201 tariffs are reeking 

havoc in the steel market for downstream manufacturers, despite 

what you are hearing today. Skyrocketing prices, uncertain supply 

due to allocations and lengthening lead times, broken contracts and 

growing quality problems are forcing steel users to the brink of disaster. 

We urge the administration to end this tax on steel-using industries as soon as possible. 

We thank you for your leadership and your continued attention 

to the steel issue. Many of the witnesses at the Committee’s July 

23rd hearing testified to the damage done by the steel tariffs. As 

you will hear from the witnesses today, the situation has not gotten 

any better. In fact, it’s gotten much worse. 

The exodus of business to offshore manufacturers who can obtain 

steel at globally competitive prices is accelerating. Particularly 

alarming are shocking indications that more, new designs for parts 

and components for future products are being shopped overseas. 

Once this business leaves this country, it is not likely to return. 

Furthermore, the ripple effect of the tariffs impacts the companies that supply steel-using manufacturers such as service centers, 

19

machine tool builders, welders, finishers, platers, assemblers and 

others. The list of well-documented reasons for ending the steel tariffs is more compelling than ever. 

First, the tariffs are doing far more harm than good to our economy at a time when we can ill afford it. Second, they do not address the cause of the steel industry’s problem, which is the noncompetitiveness of certain integrated producers due to relatively 

high costs and operating inefficiencies. 

Third, they threaten relationships with our trading partners. 

Fourth, they interrupt critical steel imports that are absolutely essential since we must depend on imports to supply 20 to 25 percent 

of our domestic demand. Fifth, they restrict fairly as well as unfairly traded steel for which antidumping and countervailing duty 

laws exist and are widely used. 

Sixth, ironically, the tariffs inhibit and delay realization of the 

very goal for which they were imposed—the rationalization, restructuring and consolidation of non-competitive U.S. steel capacity. How much damage must be done and how many U.S. jobs have 

to be lost before the administration recognizes that the steel tariffs 

was a mistake and must be lifted? 

Exclusions are not the answer. The exclusion process, the only 

mechanism for providing relief for steel users is a blunt instrument 

ill-suited for the micromanagement of the international steel market. It’s a flawed process, inadequate, ineffective, inherently unfair 

and manipulated to the disadvantage of the steel user. 

The steel companies would have you believe a lot of things, 

among them that the exclusion process gutted the Section 201 safeguard remedies. That’s not the case. Steel tariffs still covers 75 percent of the tonnage potentially subject to the tariff—about 9 million 

tons per year. 

Furthermore, about half of the excluded tonnage is semi-finished 

steel for the sole use of U.S. steel companies themselves. Clearly, 

the domestic steel industry has no basis to complain, and the exclusion process was seriously flawed. 

Steel producers manipulated the process by representing that 

they were ready, willing and able to supply specific products when 

that was not, in fact, the case. The process was neither transparent 

nor fair. Those applying for exclusions had little opportunity to 

rebut objections raised by the steel producers. 

In many cases tonnage limitations on granted exclusions were 

simply inadequate. Further, the process is fundamentally dysfunctional because the benefit from any exclusion goes to those companies that import the product first. There is no guarantee that the 

companies that actually file for the exclusions will receive any benefit from the exclusions at all. 

The bottom line is that even after all these and other problems 

are resolved, the product exclusion process cannot solve all of the 

dislocations caused by the steel tariffs because many companies use 

domestic steel and are not eligible for product exclusions. 

The only solution is early review and repeal of these tariffs. Between 1995 and 2001, steel-using manufacturers, mostly small 

businesses, added 1,255,000 new jobs to the economy according to 

the Bureau of Labor Statistics. Today, they employ 13 million 

20

Americans compared to less than 200,000 in steel-producing industries. 

Chairman MANZULLO. How are you doing on time? 

Mr. JENSON. One paragraph. 

Chairman MANZULLO. One paragraph? Make it short. 

Mr. JENSON. It is, indeed, ironic that such an important generator of economic growth is being punished by our steel trade policy. 

Here is that paragraph. 

Efforts to reduce the world’s excess capacity of non-competitive 

steel production are laudable, but are proceeding at a snail’s pace— maybe we will see results some day. Steel-using manufacturers 

who are struggling now for their survival should not be held hostage to this process. They can’t want until some day. The tariffs 

must be lifted now regardless of the progress of the OECD negotiations. Thank you. 

[Mr. Jenson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you for your testimony. We are 

going to have Mr. Mark Kennedy introduce his constituent, and 

then we are going to go to Mr. Hobson’s constituent for the next 

testimony. That is Jennifer Friel. 

Mr. Kennedy. 

Mr. KENNEDY. I thank you much, Mr. Chairman, and thank you 

and the Committee for bringing up this very important topic. 

I think when you look at the steel tariffs that were put in place 

six months ago, they were meant to help a few; but as we are hearing today, they have hurt many. We oftentimes hear the big companies story on this, but understanding how this effects small job-producing companies in our districts is absolutely, critically important. 

I have seen this over and over, but probably no case where it is 

more real than in the case that we bring before you today in Wilson Tool, a manufacturer in Hugo, Minnesota outside White Bear 

Lake. We have with us, Mr. Brian Robinson, the president of manufacturing of this company. I have been there. I have seen the exclusion that they should have received, and we’re putting 40 jobs 

at risk. 

We are putting export jobs at risk when we are competing 

against foreign manufacturers and we impose a cost on our steel 

fabricators that is higher than their export competitors are facing. 

We are really putting out own economic vitality at risk. 

So I am very pleased to have Mr. Robinson with us here today, 

and just to show how this is impacting Minnesota, we are also very 

pleased to have Erick Ajax from Minnesota here as well. It is a 

very important issue, and I applaud you for bringing this issue up. 

Chairman MANZULLO. Thank you for your participation. 

Our next witness is Jennifer Johns Friel. We look forward to 

your testimony. 

STATEMENT OF JENNIFER JOHNS FRIEL, PRESIDENT, 

MIDWEST FABRICATING CO., AMANDA, OH 

Ms. FRIEL. Thank you for inviting me to participate in this hearing. My name is Jennifer Johns Friel, as the Congressman said. 

I’m president of Midwest Fabricating Company. Midwest is a leader in the cold-forming of steel wire into special fasteners and rods 

for automotive, lawn and garden applications as well as a magVerDate 0ct 09 2002 07:31 Nov 02, 2002 Jkt 082506 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 E:\HR\OC\A506.XXX A506
21

nitude of components for various industrial and consumer products, 

including appliance, highway and housing construction. 

Midwest Fabricating is a family-owned corporation. We were 

started in 1945, headquartered in Amanda, Ohio. We also have operating divisions in Lancaster, Ohio and in Santa Fe Springs, California. We have approximately 260 families that rely on Midwest 

for their employment. 

My company has been adversely effected by the Section 201 tariffs on steel, even though we only buy from North American producers. We process an average of 20 million pounds of material 

each year, which happens to be industrial quality rod. 

The steel tariffs have prompted our suppliers to dramatically increase the pricing of this material, and more importantly, extend 

the lead times from a historic 4 to 6 weeks to upward of 12 to 14 

weeks. 

The 201 remedies have caused tremendous dislocation in the 

market that have seriously affected my ability to get the steel I 

need at a reasonable price. It is very difficult to operate under 

these conditions. Our customers will not consider price increases; 

do not give us firm schedules 12 to 14 weeks in advance; and therefore, we are not certain that today we are even buying the materials that we need to supply them in the future. 

Here is an example of the problem that we are facing. Our steel 

supplier pushed back a quoted lead time an additional three weeks. 

Since we owed parts to an assembly line that could not wait three 

weeks for parts, we had to purchase material on the spot market 

from a supplier that we consider to be substandard. 

Half of the material we purchased turned out to be defective, resulting in contaminated material throughout out supply chain. The 

sorting, evaluation and containment costs that were associated 

with this one order caused us to lose a substantial amount of 

money. 

Obviously, we don’t want to, and more importantly, cannot afford 

to, continue to repeat situations like this. It is very difficult to run 

a business when you don’t have any assurance that you will be able 

to obtain the raw material you need. While we are doing everything that we possibly can to obtain the steel we need, we are very 

concerned that a lack of steel will mean that we will not be able 

to supply particular orders. 

The pricing and delivery environment that has developed in 

wake of this Section 201 decision is also of concern to our customers. After the steel tariffs were put into effect, one of our longstanding customers placed a huge order with a Canadian supplier 

instead of with us because the customer was concerned that we 

would not be able to get the steel we needed. Now this order was 

worth $5 million a year over an eight-year span. We are a $25 million company. It is a significant order to us and the people who 

work with us. 

It will be very difficult to replace this business. This particular 

part will have a life span of eight years, as I said. It will not come 

up for redesign for another eight years. So even if these tariffs are 

not taken away today, I am still going to be suffering way after the 

three years, if they last that long, because of what has happened 

with the 201 decision right now. 

22

The steel tariffs have clearly harmed many downstream consuming industries. The impact, I think, is spreading far beyond 

what could have been anticipated into businesses such as mine. We 

are clearly an unintended consequence. Please help me and the 

people who work with me by taking action to help lift these tariffs 

as soon as possible. I thank you. 

[Ms. Friel’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you for your testimony. Our next 

witness is Erick Ajax from E.J. Ajax and Sons, Inc. They are metal 

stampers out of Fridley, Minnesota. We look forward to your testimony.

STATEMENT OF ERICK AJAX, VICE PRESIDENT, E.J. AJAX AND 

SONS, INC., FRIDLEY, MN 

Mr. AJAX. Thank you very much, Mr. Chairman, for inviting me 

to testify today. I am vice president of E.J. Ajax and Sons, and we 

primarily produce hinges and other steel parts that are used in the 

appliance industry known as the light good industries, and also 

electrical enclosures that we sell worldwide. 

E.J. Ajax has made a concerted effort in the last 10 years to be 

internationally competitive. In the last decade we have made sizable investments in the professional development and training of 

each and every one of our employees. For the last five years, every 

employee in our company—from the janitor to the president—has 

average 200 hours a year of professional development and job-related education so that we can compete in the world market. 

We put every nickel of our profit for the last decade—the last two 

decades back into our machinery and equipment and paying our 

taxes. We have been able to reduce our total cost of labor from over 

15 percent to down under 9 percent. 

Chairman MANZULLO. Why don’t you take a sip of water there. 

We won’t charge you for the time. 

Mr. AJAX. Thank you, Mr. Chairman. So these efforts are really 

successful in helping us compete all over the world. We have, up 

until recently, been able to export more than a third of the steel 

hinges and parts. But I have to say that the 201 tariffs have made 

it very difficult for us to sell domestically, yet abroad. 

We primarily buy hot rolled and cold rolled steel and galvanized 

from service centers. This is the plain manila material that we 

have helped our customers engineer into their product, and we estimate that 70 to 80 percent of this steel is purchased from domestic 

sources and always has been. 

However, since the imposition of the 201 steel tariffs, our raw 

material lead times have gone from days to months. Most of our 

long-term contracts were also broken within weeks of President 

Bush’s proclamation of imposing the steel tariffs. 

We have been forced into the spot market in many cases, and 

this uncertainty as to supply makes it very, very difficult for us to 

continue to do business. In addition, the steel tariffs have increased 

our costs from between 30 and 60 percent. Keep in mind that the 

steel that we use in the hinges that sell to the world market represent 50 percent—50—of our total costs. 

Since the vast majority of our customers are unwilling to accept 

the prices increases, they have turned to the world market. We 

23

have been successful in passing a small, and I emphasize a small, 

portion of our price increases onto our customers. They have clearly 

told us that we are shopping those parts so that we can remain 

competitive in the world marketplace. 

Several of our customers have already began to purchase parts 

from the other countries, and some of them are seriously considering moving more and more of their manufacturing out of the 

United States. We have lost several Fortune 500 companies out of 

the Minneapolis area in the last 12 months and more are on the 

way. 

One of our largest customers just told me yesterday that a family 

of parts that we sell to them was recently quoted with three Chinese sources at a 50 to 70 percent savings over what we are currently charging for the part. That is a sizable contract that is really 

is about 10 percent of our total sales. 

Since the steel imports were imposed on March 5th, we have had 

to lay off a total of 20 percent of our work force. You talk about 

having to look someone in the eye—we have a small family business and this is very, very difficult. I can attribute that 20 percent 

directly to the 201 steel tariffs, and there is the prospect of more 

to come. 

On behalf of the employees of E.J. Ajax, and the other 13 million 

employees that consume steel, we urge you to lift these tariffs as 

soon as possible. Thank you very much, Mr. Chairman. 

[Mr. Ajax’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you for your compelling testimony. 

Our next witness is Jay Carlson from G&R Manufacturing, Inc. in 

Naugatuck, Connecticut. 

Mr. CARLSON. Naugatuck, Connecticut. That is correct. 

Chairman MANZULLO. Is Congressman Nancy Johnson your 

member? 

Mr. CARLSON. She is but she is not able to be here. 

Chairman MANZULLO. I understand. We look forward to your testimony. 

STATEMENT OF JAY CARLSON, PRESIDENT, G&R 

MANUFACTURING, NAUGATUCK, CT 

Mr. CARLSON. I thank you for inviting me to testify this morning. 

My name is Jay Carlson, and I am president of G&R Manufacturing. But I have got to be honest with you——

Chairman MANZULLO. Jay, could you put the mike closer to your 

mouth when testifying? Thank you. 

Mr. CARLSON. I have got to be honest. I feel like I am preaching 

to the choir here because, as I see it, anybody who should be listening to our testimony this morning has already left the room. So 

that’s actually a little bit disheartening. 

G&R Manufacturing is located in Naugatuck, Connecticut. The 

company began operations in 1972; primarily, as a metal stamping 

house. We have grown into a full-service turn key manufacturing 

facility. G&R Manufacturing provides everything from basic 

stampings, progressive stampings, transfer press eyelets as well as 

intricate multi-component assemblies. We currently employ 40 

workers. 

24

G&R requires 550 tons of steel each year. We buy our steel domestically through service centers. The steel tariffs imposed by the 

present in March have reduced the availability of steel in the market to the point that our supply of steel is not reliable. 

Our service centers have been put on allocation. As a result, we 

have experienced sever shortages of certain steel grades as well as 

unacceptable increases in lead times for others. Lead times have 

increased from 4 to 6 weeks to 16 weeks or more. The increased 

lead times have places some of our automotive customers in potential lying down situations. 

In order to avoid this situation, we have had to pay extra of expedited shipping and obtain our steel from alternative sources. 

This has increased our costs significantly and it could potentially 

jeopardize the quality of our products. The alternative sources that 

we have to utilize are not necessarily the best quality, but they are 

our only alternative. 

In addition, we have to face steel price increases of 40 to 60 percent. This translates into additional costs for my company of 

$100,000 to $200,000 a year. G&R is a small business and cannot 

absorb these costs, nor do we have the power to pass these higher 

costs onto our customers. We are already competing in a global 

market that is a rather uneven playing field in terms of labor, 

health and environmental costs. 

The steel tariffs have tipped the scales even further by making 

my steel costs substantially greater than those of my foreign competitors. On top of all that, our foreign competitors are able to import their product to this country duty-free. As a result, G&R Manufacturing, like many other small- and mid-size companies has a 

difficult time competing and finds it difficult to stay in business. 

I can tell you that G&R Manufacturing’s experience is not 

unique. As a founding member of the Manufacturer Leadership 

Group of Connecticut, which consist of 180 small businesses in the 

Waterbury, Connecticut area, I know that the tariffs have had a 

ripple effect. As U.S. steel-consuming industries lose business, so 

do the companies that supply those industries—such as service centers, finishers, platers and assemblers. The situation is only getting 

worse. 

The steel 201 tariffs need to be lifted as soon as possible. We operate on tight margins and a very competitive market. The hardship of these tariffs, and our inability to pass on any price increases, will costs not only jobs, but will also affect G&R Manufacturing’s ability to survive. Thank you again for letting me testify 

this morning. 

[Mr. Carlson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank for your testimony. Our next witness is Christine Dowding. Could you bring the mike closer to you 

and bring it down just a little bit there. That’s fine. Thank you. We 

look forward to your testimony. 

STATEMENT OF CHRISTINE DOWDING, PRESIDENT, DOWDING 

INDUSTRIES, EATON RAPIDS, MI 

Ms. DOWDING. Thank you, Mr. Chairman. Good morning, it is, 

indeed, an honor to appear before this Committee. My name is 

Chris Dowding. 

25

As Mr. Smith stated, I am the president of Dowding Industries 

with locations in Eaton Rapids and Springport, Michigan. I am the 

second generation of our family business that my father started in 

1965. We are a steel user employing about 150 employees. We purchase nearly $7 million worth of steel that is turned into 

products for the diesel and automotive markets. Our customers are 

such companies as Cummins, Caterpillar, TRW and Borg Warner. 

The Section 201 steel tariff is having a devastating effect on my 

business. While we as steel users want producers to be stateside, 

I, as a small business, now feel like I am David facing the immense 

statute of Goliath. 

As a small business, we do not want steel producers as our foe. 

We want to join with our fellow Americans and find solutions to 

help the ailing steel industries. Solutions that do not put American 

steel users at risk of extinction. Solutions that do not pit 59 user 

jobs against 1 producing job. We need to join forces with a solution 

that does not put us at odds with each other. We are in business 

together here. 

There are enough economic constraints facing American companies against global third world competition as has already been addressed here today, such as the rising insurance health care costs. 

Let’s not sustain another. We understand that President Bush has 

closed his door to this issue, and in the light of the terrorism facing 

America, I understand the priority. 

However, President Bush, we pray you will open your door and 

hear the voice of the small businessman in America. I am fighting 

for the survival of not only my company, but the survival of my industry, for small businesses all over America. The heart of America 

is small businesses. I am fighting for the long-term jobs of my employees, not the next election vote. My concern is how do we get 

the message to President Bush. 

My father frequently reminds me that God has blessed our company when I am feeling like we don’t feel so blessed, based on the 

current conditions. We worked hard to make good business decisions as some of our counterparts have stated here today. A second 

generation trying to pass on my father’s dream. I graduated from 

Northwestern University in 1990 with a Masters degree in Management. We have made a commitment to come out of every recession better than when we went in. We have invested in our people 

through two training grants with our local community college. We 

have purchased the latest technology in the world in both laser and 

machine cutting. 

We have purchased rundown factories and invested nearly half 

a million dollars in their renovations. We have survived the economic downturn of the heavy-duty truck market, and we had to lay 

off 130 people. I had to look at those people in the face and it is 

horrible. We came out of it and we have survived, and we still employ 150 people. 

My father’s dream has been to develop our community and provide jobs for Americans, not move our company abroad. However, 

due to the steel tariffs, we have begun conversations with a Mexico-based company. 

Please understand this was not in my five-year goals or objectives that we established just last year. However, if this is what 

26

it takes to keep my family business ongoing, we will pursue it 

versus the alternative, which is the elimination of it. We are seeing 

an average of 16 to 20 percent increases in material prices, and I 

have that here and I am willing to submit it—as much as 66 percent on some of the items to the tune of $50,000 per month cost 

impact. 

On an annualized basis, this equals more than three times what 

my company has made, entirely, in the last two years. As if piece 

price wasn’t enough alone, we are now faced with longer lead 

times, premium charges, charges due to unavailable material. As 

a small business user, we buy steel through service centers. Before 

the tariffs were imposed, our lead time on material was two to four 

weeks. It is now as much as six months and delivery and quality 

are unreliable. 

We recently had a promise, and we were told, I’m sorry, we can’t 

deliver that after all. I am running out of time, so I’ve got to skip 

to the end. 

Our customers demand 3 to 5 percent cost reductions. They will 

not allow us to increase our prices. They are making us be competitive with Taiwan, Vietnam and Mexico; and if we can’t match the 

price, we lose the work. 

It is an un-level playing field for the small business users, and 

why does anybody think a small business user can play in it any 

better than the big steel industry. 

Mr. Chairman, we are asking for an opportunity to stay in business and remain competitive in the global market. Without a reliable, competitive supply, Dowding cannot be a successful small 

business. I am confident there is another solution to help the ailing 

steel industry without victimizing small business USA and their 

employees. 

President Bush, let’s talk. Thank you, Mr. Chairman, for this opportunity. 

[Ms. Dowding’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you for your enthusiasm and sincerity. Our next witness is Brian Robinson from—is it really Ham 

Lake? 

Mr. ROBINSON. I am from Ham Lake, yes. The company is in 

Hugo. 

Chairman MANZULLO. Okay, I just never heard of Ham Lake before. There are a thousand lakes in Minnesota and they stopped 

counting. I know the story. Brian, we look forward to your testimony. 

STATEMENT OF BRIAN ROBINSON, PRESIDENT OF MANUFACTURING, WILSON TOOL INTERNATIONAL, WHITE BEAR LAKE, 

MN

Mr. ROBINSON. Thank you, Mr. Chairman. My name is Brian 

Robinson, and I am the president of Wilson Tool International. 

Wilson Tool of White Bear Lake, Minnesota is a 36-year-old, privately owned corporation that is the world’s largest independent 

manufacturer of punch press and press brake tooling. Wilson currently has 470 employees. In October of 2000 we employed 770 employees. 

27

The total reduction of over 280 employees has taken place since 

that time due to the current economic down turn and its devastating impact on the manufacturing sector. As I sit here today, 

I currently have 40 more jobs at risk due specifically to the tariffs. 

I am here to tell you that the steel exclusion process did not 

work. It has unintended consequences for further job losses in the 

manufacturing sector. Wilson Tool has applied as early as October 

2001 for an exclusion on cold rolled steel products engineered into 

special shapes, also known as profiles. 

Wilson applied for this exclusion because we were unable to purchase these profiles from a domestic source. Indeed, we were assigned an official ‘‘N’’ number to the exclusion request, and reasonably assumed that our exclusion request was accepted and would 

be considered. 

Accordingly, profile shapes remain subject to the 30 percent tariffs. It does not make any sense to impose a tariff on a product that 

is not made in the United States. It does not help any domestic 

company and it simply increases our costs and makes it more difficult for us to compete in the marketplace. 

Wilson Tool has always had a commitment to buy steel products 

from domestic sources whenever possible. While Wilson currently 

purchases 85 percent of its steel from domestic sources, Wilson has 

had to import these profiles because we have been unable to purchase this material from a domestic source. 

When Wilson Tool first developed a need for these profiles, we 

actively solicited bids from all U.S. steel manufacturers capable of 

producing the profiles. Wilson required 29 separate profiles with 

varying sizes and quantity limitations ranging from 1 U.S. ton to 

a maximum of 21 U.S. tons per profile per year. Only one domestic 

company submitted a bid, and it did not meet the requirements 

and quantities or scope. 

Accordingly, Wilson has had to resort to foreign producers and 

accept the bid of Boehler-Uddenholm of Austria. Wilson Tools has 

worked with Boehler over the course of the last two years and 

spent tens of thousands of dollars to develop the profiles to our 

specs. This development process was lengthy in part because of all 

the products needed to be certified and to go through extensive 

quality control. 

Again, Wilson has always made a commitment to purchase steel 

from the domestic source; but when we cannot purchase the steel 

we need from the domestic source, we do not understand why we 

should have to pay Section 201 tariffs. It makes no sense. If the 

exclusion process of the tariffs remain, it definitely needs to be 

more transparent to the smaller business. 

In closing, I have come to Washington to testify because there is 

something inherently flawed with the process of obtaining an exclusion to the Section 201 tariff. 

When small business must engage lobbyists to represent them or 

to be compelled to travel to Washington in order to advocate their 

right to be heard, or when a tariff is imposed on domestic manufacturers for importation of raw steel product only to have their foreign competition import the same steel product produced from the 

same foreign mill as a finished product without a tariff, then we 

have a problem. 

28

It is obvious that the exclusion process does not work. Therefore, 

the tariffs do not work; and they have caused unintended consequences to the manufacturing sectors. Thank you. 

[Mr. Robinson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Our last witness is Bob Jones, 

who is director of Marketing, Sheet Mill Group. Oh, Bob Johns. I 

am sorry. Somebody correct his name tag there. 

Mr. JOHNS. It’s handwritten. 

Chairman MANZULLO. Johns—J-O-H-N-S? 

Mr. JOHNS. That’s correct. 

Chairman MANZULLO. I am sorry. Bob Johns, who is the Director 

of Marketing of Sheet Products of Nucor Corporation. We look forward to your testimony. We are going to correct your name plate 

right now. 

Mr. JOHNS. I feel like the fire ant at the picnic here. 

Chairman MANZULLO. You are doing fine. You might want to pull 

the mike closer to you. Thank you. 

STATEMENT OF BOB JOHNS, DIRECTOR OF MARKETING, 

SHEET MILL GROUP, NUCOR CORPORATION, CHARLOTTE, NC 

Mr. JOHNS. I am Bob Johns of Nucor Corporation. We are a steel 

mill, obviously. Perhaps one of the reasons we are here is that we 

put a slightly different view of the 201 decision than a lot of people, 

and we have been known for plain talk. 

We put it in the context of the need for free and fair trade. And 

to us, fair trade means trade according to international rules 

agreed upon by the United States and over 100 of its trading partners, not lawless chaos. 

Our trading partners have violated the antidumping and countervailing duty laws with respect to steel so pervasively that enforcement of our trade laws is virtually impossible. As a result of 

blatant violation of international trade rules, the domestic steel industry was undergoing unprecedented hardships. 

The updated number of the number of bankruptcies—our count 

is 35 as of a week and a half ago. Roughly 15 million tons of capacity was shut down, either temporarily or permanently. I might add, 

it was fairly suddenly. Even companies like Nucor, which is the 

most efficient steel producer in the world, were finding it difficult 

in our own home market. 

Clearly, something is dysfunctional with the world steel market. 

As the result of the presence of imports sold in the United States 

in violation of international rules, steel prices were, as Treasury 

Secretary O’Neil put it just a few days ago, fictitiously low. I think 

that it is worth repeating—fictitiously low. 

The 201 relief has had a beneficial effect on three classes of 

small businesses not invited to today’s hearing—small steel producers, companies supplying goods and services to the steel industry and steel users who depend on a reliable source of domestic 

steel and don’t have a problem. There are literally hundreds of 

these countries in all parts of the United States. 

There is a representative of one of these companies here today, 

Doug Ruggles of Martin Supply Company. His operation nearest us 

is in Decatur, Alabama. Mr. Ruggles, who supports the 201 deciVerDate 0ct 09 2002 07:31 Nov 02, 2002 Jkt 082506 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 E:\HR\OC\A506.XXX A506
29

sion, had hoped to testify before you today, but unfortunately, he 

was not invited as he does not oppose the 201 relief. 

The Committee has not heard from any of the other hundreds of 

small companies like Martin that supply the steel industry. I would 

hope the Committee would hold a hearing that would be inclusive 

of those small businesses supporting the 201 decision at some 

point. 

Some steel consumers have blamed the 201 for rising costs, increased import competition, and even the movement of production 

overseas. If you look at their claims, you will see that many of 

these problems emerged well before the president acted. The over 

valued dollar and the sluggishness of the U.S. economy have had 

a much greater effect than any 201 relief. 

At the same time, the economy data do not indicate that 201 relief has caused either rising prices or increased unemployment in 

the general economy. Steel prices have risen throughout the 

world—and this is kind of an update for people that make charts. 

In China, for example—and this is as of last week—transaction 

prices now for hot rolled coil are higher than they are in the United 

States. If foreign manufacturers have any advantages in steel 

costs, those advantages are more than offset by the higher productivity of American workers and the costs of moving merchandise to 

the United States. 

As for the exclusion process, I can attest that it was not only exhaustive, but exhausting probably for all parties involved. The U.S. 

government granted over one-half of the exclusions requested. As 

a result, by our count, about 5.5 million tons remain covered by the 

201 remedy. Let me qualify that by saying its finished product. 

The supply issue is old news. Supply is balanced in most products, and becoming balanced rapidly in others and prices have stabilized at low levels by historic measures. The shortage and price 

message is no longer connected to reality in the products that 

Nucor makes. 

The president’s decision to provide relief under 201 has had an 

immediate and positive effect on hundreds of small businesses 

across the United States. I implore you to ask Doug Ruggles. By 

ensuring that the U.S. steel industry can continue to supply its 

customers’ needs, it will benefit the thousands of small businesses 

using steel as well as those supplying the steel industry and its 

workers for years into the future. We do thank you for the opportunity to express our views. 

[Mr. Johns’ statement may be found in the appendix.] 

Chairman MANZULLO. Well, thank you. We corrected your name 

plate. It is extremely important. I appreciate your testimony. 

We have another vote coming up here very shortly. Mr. Johns, 

do you know how much, if any, Nucor has increased the price of 

your steel in the past six months or so? Do you have those figures? 

Mr. JOHNS. We don’t have a general figure. It really depends on 

the individual product line. Where there is no relief afforded by the 

201 there have been zero price increases, in fact, decreases. 

Chairman MANZULLO. You have had zero price increase——

Mr. JOHNS. On some products. Do you know anything about 

Nucor’s breadth of products? 

30

Chairman MANZULLO. I know that you are a mini-mill, and I 

know that you are located in Charlotte, North Carolina. 

Has anybody here bought Nucor steel? 

Ms. FRIEL. Yes. Actually, we were getting quotes from Nucor 

January 1st, $16.20 a hundredweight. We got a quotation last week 

$19.65 a hundredweight, which is a 21 percent increase from 

Nucor. 

Chairman MANZULLO. For what type of steel? 

Ms. FRIEL. It was cold rolled bar. 

Chairman MANZULLO. Would you want to comment on that, Mr. 

Johns? 

Mr. JOHNS. I can’t comment on cold drawn bar because that is 

a downstream product for us. I would have to look into that. I represent the flat roll division, and we are predominately involved in 

the hot rolled, cold rolled and coated products. 

Chairman MANZULLO. So the product to which she testified is an 

increased step after it leaves your hands. Is that what you are saying? 

Mr. JOHNS. It’s a downstream product for our division. 

Chairman MANZULLO. For Nucor? 

Mr. JOHNS. For Nucor now. I certainly would like to look into 

that, but what I would also suggest is when we see the term ‘‘price 

increase,’’ and we see it all the time, I think it needs to be put into 

context because I look at all these wonderful charts around the 

room and I see they start at a 20-year low created by illegal dumping, and the price was compelled by illegal dumping. 

When you make that the start and say increase versus what the 

price was in 1982, 1989, 1996, 1997, I would suggest that we have 

had a restoration as oppose to increases. 

Chairman MANZULLO. But you know 201 doesn’t deal with dumping. It deals with surges. 

Mr. JOHNS. I understand that. 

Chairman MANZULLO. There has been no finding that the foreign 

products that were shipped here were at predatory prices or that 

the companies shipping them had been subsidized by the government. That element is not here. You had used it in your testimony. 

Mr. JOHNS. No, I would take you back to the genesis of the 201. 

I also stated the pervasive nature of the violation of U.S. trade law 

had resulted in—by the time the President looked at this issue, 

there were about 200 active antidumping orders in place—proven 

violations of U.S. trade law—another 50 pending. If you put yourself in our shoes, you are looking at product and country switching 

that had no end to it. 

Chairman MANZULLO. My question here is these witnesses 

here——

Mr. JOHNS. If you will allow me to finish the comment. 

Chairman MANZULLO. I am sorry, go ahead. 

Mr. JOHNS. When you are dealing with that pervasive nature of 

violation of U.S. trade law, the only mechanism you have is the 

safeguard mechanism provided by the 201. 

Chairman MANZULLO. You could have enforcement of the dumping laws. 

Mr. JOHNS. It’s a two-year process from the beginning to relief. 

31

Chairman MANZULLO. That is correct, but it is also the fairest 

because you can end up with retroactive tariffs. 

Mr. JOHNS. Very seldom. 

Chairman MANZULLO. If it is done right, you can, and you can 

stop the practice. 

Mr. JOHNS. It does not normally fall back. 

Chairman MANZULLO. But we have got people here who have testified to the fact that they have had price increases. Mr. Carlson 

testified that he had price increases of 40 to 50 percent. Who is responsible for that? 

Mr. JOHNS. I will go back to the point I made before. 

Chairman MANZULLO. But a TV costs less now than they did 10 

years ago. How far are you going to go back and say they were at 

an all-time low. I don’t think that is a valid argument. You keep 

going back to where it was in the good old days. 

Mr. JOHNS. No, this is not the good old days. We are talking 

about a 20-year average. 

Chairman MANZULLO. I don’t know of any industry that says, 

well, these prices are not where they were years ago. Granted, it’s 

the farming industry, and everybody knows what happened there. 

That is totally subsidized and there is a huge problem going on 

there, but I just don’t see your point. What you have here is these 

people are desperate. 

If they go out of business, you won’t have a market to sell to. 

That is the point they are trying to make, is eventually, one by one, 

they are going to get picked off. They are going to get closed down 

by the Chinese people. In fact, at the opening of this hearing, National Metalwares lost three contracts to the Chinese. 

If they take any more hits, they are going to be out of business. 

And as this has a domino effect, because you won’t have anybody 

to sell steel to. That’s what they are concerned about. There is a 

balance in here that’s missing. 

Mr. JOHNS. There is a balance clearly missing, and that is, you’re 

hitting on the fundamental issues that we ought to be addressing, 

which are currency manipulation—the value of the U.S. dollar and 

trade practices by our so-called trading partners. 

Chairman MANZULLO. We continue to work on that, but unfortunately, the administration is in favor of a strong dollar. We are just 

having a very difficult time. Where are those letters from the steel 

manufacturers? Jesco Industries here is a steel user out of 

Litchfield, Michigan. Some of their suppliers increased their prices 

dramatically. Some up to 50 percent. 

Here is a letter from Crawford Steel Company. This says ‘‘Due 

to the Section 103 decided by the government to warrant a 30 percent tariff on flat rolled imports, we have been forced to raise 

prices across the board on your sizes. Prices from the domestic 

mills have increased from $200.10 a ton to anywhere from $300 to 

$350 a ton as an unprocessed ban.’’ [The information may be found in appendix page 153.] 

Chairman MANZULLO. Buhrke Industries out of Arlington 

Heights, Illinois employs 120 people, and they got a letter from 

their intermediary, which is Viking Materials, and they attached to 

it a letter from Bethlehem Steel that says the following purchase 

orders will be increased $4.50 effective June 1st. 

32

[The information may be found in appendix pages 156–161.] 

Chairman MANZULLO. They take existing purchasing orders—existing contracts and unilaterally raised prices. Has Nucor raised 

the prices on existing contracts? 

Mr. JOHNS. Nucor has honored its commitments on the agreements that we have with customers. 

Chairman MANZULLO. Good for you. That is why we don’t have 

any letters in here complaining about Nucor. 

Mr. JOHNS. I know you were looking for one. 

Chairman MANZULLO. You bet. We were. I appreciate the fact 

that we don’t have any evidence here on Nucor doing any gouging. 

We do have other companies that are involved in it. 

Mr. Johns, I want to thank you for the fact that there are no letters in here with Nucor. I thought I ought to let you know this. The 

purpose of this hearing, and the reason that you are outnumbered 

up there, is the fact that these people have not had a voice. Your 

industry has been welcomed into the White House. 

Your industry has had a lot of friends on Capitol Hill going 

around talking about this. The steel users have been scratching 

around trying to bring together a bunch of little people. They are 

little people, and it’s very difficult to bring together hundreds, if 

not thousands, of small manufacturers compared to a relatively 

small number of steel manufacturers. 

So the only forum that they have been afforded is the Small 

Business Committee, which we call the Committee of last resort. 

When nobody else will listen to the little guys. That’s why we have 

so many people that represent that perspective as opposed to yours. 

But I just want to tell you I appreciate your testimony. I appreciate your honesty and appreciate your integrity. 

Mr. JOHNS. I would encourage you to talk to Doug Ruggles about 

the other side of the small business. 

Chairman MANZULLO. I can understand it. We have also talked 

to them. 

I have got to go vote to take part in this continuing process of 

democracy. I really look forward to working with all of you again. 

Mr. Johns, my door is open to you, also. This Committee is adjourned. 

[Whereupon, at 12:45 p.m., the Committee was adjourned.]

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