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82–504 2002

FEDERAL PROCUREMENT AND INTERNATIONAL

TRADE: ASSESSING THE FEDERAL GOVERNMENT’S EFFORTS TO MEET THE NEEDS OF

LOCAL SMALL BUSINESSES

FIELD HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

NORWALK, CA, SEPTEMBER 3, 2002

Serial No. 107–68

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 

W. TODD 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 3, 2002 ....................................................................... 1

WITNESSES

Thompson, Bruce, Regional Administrator, Region 9, SBA ................................. 3

Ramos, Frank, Director, Office of Small & Disadvantaged Business Utilization, Office of the Under Secretary of Defense .................................................. 5

Cabreira-Johnson, Deborah, Program Manager, Los Angeles County Procurement Technical Assistance Center (PTAC) ........................................................ 8

Espinoza, Eric, Owner, Stitches Uniforms, Montebello, CA ................................ 11

Grippa, Adriana, President, Master Research & Manufacturing, Inc., Norwalk, CA ............................................................................................................... 13

Bearden, David, Deputy Assistant Secretary and Chief Operating Officer, 

Economic Development Administration (EDA), U.S. Department of Commerce ..................................................................................................................... 22

Holbert, David, Executive Director, Western Trade Adjustment Assistance 

Center (TAAC), Los Angeles, CA ........................................................................ 24

Thompson, Bruce, Regional Administrator, SBA .................................................. 26

Delmege, Mary, Senior Advisor, Trade Promotion Coordinating Committee 

(TPCC), San Diego, CA ........................................................................................ 28

Redway, William, Group Vice President, Small and New Business Group, 

Export-Import Bank of the United States (Ex-Im), Washington, DC .............. 30

Hinojosa, Raul, Research Director, North American Integration & Development Center, School of Public Policy & Social Research, University of 

California Los Angeles (UCLA), Los Angeles, CA ............................................. 35

Loftus, Hugh, Director, Community Adjustment and Investment Program, 

North American Development (NAD) Bank, City of Industry, CA .................. 36

Huseth, Anita, President, Mace Metal Sales, Los Angeles, CA ........................... 39

Reynolds, John, General Manager, Mace Metal Sales, Los Angeles, CA ............ 39

Alcamo, Bart, President, RBK Tool & Die Company, on behalf of The Society 

of The Plastics Industry, Inc ............................................................................... 41

Bonds, Terry, Director, District 12, United Steel Workers of America (USWA), 

Albuquerque, NM ................................................................................................. 43

Martin, Tom, Chair, Government Affairs, Small Manufacturers Association 

(SMA), Pomona, CA ............................................................................................. 44

APPENDIX

Prepared statements: 

Thompson, Bruce .............................................................................................. 61

Ramos, Frank .................................................................................................... 66

Cabreira-Johnson, Deborah ............................................................................. 70

Espinoza, Eric ................................................................................................... 75

Grippa, Adriana ................................................................................................ 80

Bearden, David ................................................................................................. 84

Holbert, David .................................................................................................. 87

Delmege, Mary .................................................................................................. 91

Redway, William ............................................................................................... 94

Hinojosa, Raul ................................................................................................... 99

Loftus, Hugh ..................................................................................................... 128

Reynolds, John .................................................................................................. 133

Alcamo, Bart ..................................................................................................... 135

Bonds, Terry ..................................................................................................... 139

Martin, Tom ...................................................................................................... 143

Page

IV

Additional Information: 

Matthews, Robert Guy. ‘‘Tariffs Give Edge to Foreign Steel on West 

Coast.’’ The Wall Street Journal, August 23, 2002 .................................... 163

Vieth, Warren. ‘‘Steel Prices Stoke Tariff Backlash.’’ Los Angles Times, 

June 24, 2002 ................................................................................................ 164

Letters to Chairman Manzullo, House Small Business Committee ............. 166

(1)

FEDERAL PROCUREMENT AND INTERNATIONAL TRADE: ASSESSING THE FEDERAL GOVERNMENT’S EFFORTS TO MEET 

THE NEEDS OF LOCAL SMALL BUSINESSES 

TUESDAY, SEPTEMBER 3, 2002

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The committee met, pursuant to call, at 9:00 a.m., at the Norwalk City Hall, Council Chambers, 12700 Norwalk Boulevard, Norwalk, California, Hon. Donald Manzullo presiding. 

Chairman MANZULLO. Good morning. The U.S. House of Representatives Committee on Small Business will come to order. Before I give my opening statement, first I am going to defer to my 

distinguished colleague that represents this Congressional District. 

Grace, I will let you go first. But before you do that, I just want 

to share with you the joy it is to be out here in sunny California. 

I spent a semester at Pasadena City College, just a few years 

ago, Grace, back in January of 1963, on an interesting course 

through college. I really fell in love with the weather here. I also 

realized at that time how very practical your community college 

system is. There we had a four-hour course in speaking Spanish, 

and, unfortunately, Grace, I didn’t keep up with it. And otherwise, 

I would have been invited to become a member of the Hispanic caucus. 

Because you may wonder, with a name like M-A-N-Z-U-L-L-O, is 

it—pronounced Man-zoo-low or Man-zway-low. You can pronounce 

it however you like, and we just have a lot of fun with that name. 

It’s Italian, like Grace’s husband. 

I am proud to represent the 16th Congressional District in Illinois, but our Congressional District is a little bit different than 

yours, Grace, but in a sense it’s similar because we have a lot of 

suburbs. 

But our Congressional District starts at the Mississippi River, 

and it runs all the way across the top of the state to within one 

county of Lake Michigan. It’s about a three-and-a-half-hour drive, 

and we have the two fastest-growing counties in Illinois, plus we 

have Rockford, Illinois, which is the machine tool center of the 

country. It has a 30 percent manufacturing base. Then as you go 

westward towards the Mississippi River, we have huge agricultural 

and value-added food processing facilities. So it’s a Congressional 

District that has just a lot of things in it that make it for a very 

interesting mix. 

2

Congresswoman Napolitano, I’ll leave it to you to make your 

opening statement. 

Mrs. NAPOLITANO. Thank you, Chairman Manzullo. It is a pleasure for me to have the Chairman of the Small Business Committee 

in Norwalk to listen to our business issues, especially when it deals 

with government access to the procurement business, which is so 

vital to our areas, not only Southern California, but specifically the 

34th Congressional District. 

Chairman Manzullo, the fact that this area had double-digit unemployment due to the departure of one of the biggest defense 

manufacturers has created a lot of problems, and so one of my jobs 

is to make sure that we assist all business, small, medium and 

large—we have very few large—be able to be successful in knowing 

what is out there, not only in city procurement, county, state, but 

also specifically federal procurement. 

And the idea being that if we help our business be able to have 

the ability to know how to be successful, then it’s up to them to 

be able to do it, and we want to be sure that our agencies are in 

tune with that and that we are able to help both sides be able to 

increase sales in our area, because I need the jobs, very simply. I 

need the employment in the area. 

Mr. Manzullo, I believe that Mrs. Millender-McDonald broke her 

ankle, and might come. Loretta is supposed to be here, so she may 

be coming in off and on, but I certainly thank you for your true nature of love for business, for consenting to come to Southern California and meet here. 

And, while there is only two of us, you would be surprised what 

we have done before together. We are a Republican and a Democrat, and yet we work for business. There is no political line when 

it comes to small business. And I thank him for that. 

And I also must thank the city of Norwalk for facilitating this 

nice City Council chambers, where I have been before. I used to be 

mayor of this city. And my staff and all the staff who worked on 

this. It takes a lot of work, including Mr. Manzullo’s staff, to put 

this together. And the agencies who are cooperating, and it’s good 

to see some of my old—one of my old colleagues who is now in government, in federal government, Mr. Thompson. Welcome, it’s good 

seeing you, truly. So thank you very much. We will move on. 

We hope that today brings you a little more insight and the ability to connect and contact the agencies that are here. Please feel 

free to talk to them. SBA has ten consultants outside the courtyard, ready to help answer questions throughout the meeting. 

Don’t feel like you need to sit, and if you need to ask them questions, they are here to do just that. So with that, Mr. Chairman, 

thank you, I will turn it over to you. 

Chairman MANZULLO. Thank you. Let me acknowledge Donna Jimenez. Donna, where are you? Why don’t you stand up. Donna is 

representing Congressman David Dreier, who can’t be with us 

today. Thank you for your participation. I appreciate it very much. 

Just to give you some of the rules, I know it won’t happen here, 

it’s happened in some field hearings, but unlike what you might 

see on C–SPAN during the House of Representatives, during the 

committee hearing, we don’t allow—what’s the word for them?— any displays of emotion. You can smile, you can chuckle if you 

3

want. But no booing or hissing. I know that’s not going to take 

place. 

You ought to see what has happened at some hearings. But that 

is not going to happen here. Sometimes the issues are a lot more 

complex and divisive. 

We have a five-minute clock, and the purpose of that is to facilitate the testimony. When it gets to 30 seconds to go, I will try to 

gently tap like this, and then I would like you to sum up within 

30 seconds. Okay. 

All the written testimony of the witnesses will be accepted for 

the official record. If anybody in the audience wishes to give any 

testimony, any written testimony, if you could keep it to under two 

pages, two 81⁄2-by-11 pages, single spaced, I will keep open the 

record for a couple of weeks, and then if you could get your testimony over to Ms. Napolitano, she will make sure it gets to our office and is made part of the complete record. 

Most of you have never testified before a Congressional committee. The first thing I want to tell you is relax. Nobody is going 

to put you under oath. Nobody is going to accuse you of doing anything wrong. I sit on the Financial Services Committee, and we 

went through that with MCI WorldCom. I just want to let you 

know you are real people out there, not those clowns that come in 

from those bogus corporations and do the huge injury that they’ve 

done. 

So let’s start with our first witness Bruce Thompson. Bruce is the 

regional administrator of Region Nine for the Small Business Administration. And Bruce came in from San Francisco for us this 

morning. Bruce, we look forward to your testimony. 

Mr. THOMPSON. Thank you, Mr. Chairman, and Congresswoman 

Napolitano. Is this on? 

Chairman MANZULLO. It is, but it’s very soft. 

[Whereupon discussion was held off the record.] 

STATEMENT OF BRUCE THOMPSON, REGIONAL ADMINISTRATOR FOR SBA REGION 9, SAN FRANCISCO, CALIFORNIA 

Mr. THOMPSON. Mr. Chairman, Congresswoman Napolitano, 

thank you for convening this field hearing to discuss the important 

issues of federal procurement and international trade as they relate to small business. 

I am Bruce Thompson, the U.S. Small Business Administration’s 

Regional Administrator for Region 9, which includes California. I 

am pleased to be here today representing Administrator Hector 

Barreto and having the opportunity to discuss SBA’s role in these 

areas. Here with me in the audience is Alberto Alvarado, our District Director for Los Angeles, and his very capable staff are also 

here. 

Chairman MANZULLO. Why don’t you have them stand. 

Mr. THOMPSON. Would you please stand up? I didn’t want to do 

that with my five minutes. 

Chairman MANZULLO. That’s okay. We won’t penalize you for it. 

So people know to whom to go for help. 

[All stand.] 

4

Mr. THOMPSON. Great people. Great people. Also, Martin 

Selander, our SBA’s USEAC representative, is here, and Nick 

Manalisay, a Procurement Center representative, is also here. 

It is the mission of the SBA to help entrepreneurs realize the 

American dream of owning and expanding their businesses. I think 

President Bush said it best when he said, and I quote, ‘‘The role 

of government is to create an environment in which people are willing to take risk, an environment in which people are willing to risk 

capital, an environment that heralds the entrepreneur and small 

businessperson.’’

I am pleased to report that over the last three years, SBA’s Los 

Angeles District Office has led the nation in providing $2.8 billion 

in financing to more than 7,000 small businesses, including over $1 

billion to over 4,000 minority and women-owned businesses. 

The SBA is committed to representing small business men and 

women as an effective and efficient 21st century national organization, an organization that focuses on simplification, innovation, and 

dedication, in order to create a climate in which entrepreneurship 

can be both encouraged and sustained, a climate that ensures that 

small businesses have a maximum opportunity to compete for 

available procurement dollars. 

To that end, the SBA is working with the Office of Management 

and Budget as the President called for in his small business agenda on task force dealing with issues vital to small business access 

to federal procurement data. They are full and open competition 

and contract unbundling. It is important to note that this President 

has made it clear that he expects more than task force reports. He 

demands results. 

For 34 years, the SBA and industry have come together to conduct a procurement conference. This year for the first time, the 

SBA included matchmaking as part of this event. As a result, 1,000 

appointments between qualified small businesses, federal agencies, 

and prime contractors were conducted. Due to its success, the SBA 

is taking this matchmaking program to 12 locations across the 

country. 

Additionally, the SBA is conducting a top-to-bottom review of the 

8(a) business development program to ensure effective management and efficient delivery, and we are also developing an online 

8(a) application to dramatically simplify the process. 

Another initiative under way is the SBA’s online procurement 

academy to train entrepreneurs, and, as you may know, the SBA 

has plans to restructure its workforce, including the Procurement 

Center representatives, to bring them closer to customers. 

In your district, Congresswoman, we are very supportive of the 

President’s goal to improve small business access to federal procurement opportunities. During the fiscal year of 2001 a total of 

170 federal government procurements were awarded to small business concerns in the district for $15.9 million, including Philatron 

International. 

Philatron has grown into a highly respected multimillion dollar 

electronic and electric wire, cable, and hose manufacturer. The 

company is a graduate of the 8(a) program and is considered the 

world’s foremost expert in coiled cable hose. 

5

America’s small businesses want more business. The President 

and administrative staff are strong champions for small business 

in the federal procurement system, and, accordingly, as I have 

briefly described, the SBA is committed to evolving and simplifying 

our delivery of products and services. We are dedicated to being 

proactive and delivering procurement opportunities to the small 

business community. 

Thank you for giving me this opportunity to share the administrator’s vision, and I will be happy to answer any questions. 

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

Chairman MANZULLO. Right in back of you is Phil Ramos, who 

is the president, secretary, CEO, chief operating engineer and janitor for Philatron. Stand up, Frank. I’m sorry, Phil. Okay. Thank 

you. [Applause.] We had the opportunity to visit his facility last 

night. 

Our second witness—and I got Phil and Frank mixed up on it— oh, Nick—is Nick Manalisay, is he here? Nick, would you stand up? 

All right. Everybody turn around and look at Nick. He is the Procurement Center representative for the USDA. What did I say? No, 

U.S. Small Business Administration. SBA. All right. I need some 

more coffee. I got the FBI and the AFL/CIO—I’m going to get—all 

these initials, Grace, with members of Congress. 

Anyway, people that are interested in doing business with the 

federal government, Nick, you’re the person to see, is that correct? 

Mr. MANALISAY. Yes. 

Chairman MANZULLO. Okay. Thank you. Our next witness is 

Frank Ramos, Director of the Office of the Small and Disadvantaged Business Utilization Department of Defense. Frank is going 

to talk about Department of Defense’s efforts to address the concerns of small business on general procurement practices. Frank, I 

didn’t quite see it in your prepared testimony, but give us a thumbnail definition of what small and disadvantaged businesses are, because there is a little confusion that goes on there. We look forward 

to your testimony. Once you give the definition, then I’ll start the 

clock. All right? Is that fair enough? 

STATEMENT OF FRANK RAMOS, DIRECTOR, OFFICE OF SMALL 

AND DISADVANTAGED BUSINESS UTILIZATION (OSDBU), OFFICE OF THE SECRETARY OF DEFENSE, DEPARTMENT OF 

DEFENSE, ARLINGTON, VIRGINIA 

Mr. RAMOS. That sounds good. I would like to recognize, Mr. 

Chairman, Congresswoman Napolitano, and a gentleman I introduced you to last evening, Dr. Robert Segura, former dean of the 

School of Education, Cal State University Fresno. He has been on 

my staff for two weeks. And we are going to be doing some things 

there. Is Bob here? 

Chairman MANZULLO. Stand up, Bob. 

Mr. RAMOS. Mr. Chairman, and specifically Congresswoman 

Napolitano, thank you for bringing me back home. I am a Fresno, 

California native, and it’s always good to get back to California to 

get a fix of Mexican food, so thank you. 

Let me define what we call small and disadvantaged business. 

According to the statute, some are firms that are what they call 

SBA certified 8(a) companies. These companies are socially and 

6

economically disadvantaged firms, again certified by the Small 

Business Administration. There is another group called disadvantaged businesses—— Chairman MANZULLO. If you’d excuse me just a second, we are 

joined by Congresswoman Loretta Sanchez. 

Ms. SANCHEZ. Good morning. 

Mr. RAMOS. Congresswoman. I was describing small and disadvantaged businesses. Essentially, what that business is, is one 

who is, in effect, certifying that they are a small disadvantaged 

business, not necessarily going through all of the details of the certification process as an 8(a) company, but is certified in part by the 

SBA that they are, in fact, a small and disadvantaged business. 

In that grouping we also have HUBZones. HUBZones are historically under-utilized business economic centers. We are trying to improve their economic well-being. They are important because they 

also include Native Americans—all reservations are HUBZones in 

the Native American territories. 

We also have, according to the statute, severely handicapped veterans, which have again, a high degree of interest on my part. 

Then we also have small women-owned businesses that are, again, 

part of our outreach effort, and really all of the federal government, 

so just not the Department of Defense but all the Federal agencies. 

Chairman MANZULLO. Frank, you’re there just for the regular 

small business, they need some help, they can come to you. 

Mr. RAMOS. I’m sorry, sir? 

Chairman MANZULLO. This is for regular small business that 

may not fit into any of those categories. 

Mr. RAMOS. Well, they don’t enjoy the interest of the economic 

focus of all the federal agencies, but they are included within our 

umbrella, Department of Defense, as well as other Federal agencies. 

Chairman MANZULLO. So you service everybody? 

Mr. RAMOS. Yes, we do. 

Chairman MANZULLO. Now we will start the clock. 

Mr. RAMOS. Thank you. Again, my name is Frank Ramos. I am 

the director of Small and Disadvantaged Business Utilization. Essentially I am responsible for all the small business contracting inside of the Department of Defense. 

I want to speak to you today about the Department of Defense 

and its procurement activities within the small business arena. We 

at the Department of Defense consider small business to be a high 

priority. The very fact that 88 percent of all Department of Defense 

prime contractors are small businesses demonstrates how important the small business world is to the Department. 

Additionally, our dependence on small business is increasing. In 

fiscal year 2001 the number of small businesses receiving contract 

awards grew by 1,825, an increase of 8.2 percent over fiscal year 

2000. 

Of these 1,825 additional firms, 584 were owned by women and 

355 were located in historically underutilized business zones or 

HUBZones, as I alluded to earlier. 

We exceeded the statutory goal of five percent contracting with 

small disadvantaged businesses, spending 5.7 percent of our prime 

contracting dollars on purchase from small businesses. Small busiVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
7

nesses received over $50 billion of Department of Defense procurement funds last year alone. The Department of Defense regards the 

contributions of small business as critical and invaluable. 

There has never been a more vital need for small business support within the Department of Defense. Neither this department 

nor our nation could have recovered from the shocking events of 

September 11th so quickly and effectively without the small business community. 

Small business provided the critical surge capacity the Department of Defense needed to begin the rebuilding of the Pentagon 

and to take on the task of fighting terrorism. These business owners immediately responded to a broad agency announcement issued 

by the Office of the Secretary of Defense for new ideas to counter 

this terrorist threat. Small businesses have great ideas, innovative 

technology, and can respond to our needs with flexibility, speed, 

and agility. 

The Department of Defense has established a Small Business Reinvention Program. This policy assigns responsibility and accountability for the program at the most senior levels within the Department of Defense, and includes solid metrics for gauging success. 

Each military department and defense agency is responsible for 

an annual small business improvement plan. These plans detail 

special initiatives unique to each Department of Defense component that will enhance small business participation. Each Department of Defense component has targets, and performance will be 

measured by my office. 

Under this initiative, the secretaries of the military departments 

and directors of the defense agencies will report semiannually to 

the Under Secretary of Defense, Mr. Pete Aldridge, who in turn 

will inform the Deputy Secretary of Defense on their performance 

against the improvement plans and targets. 

It is important that we stay in touch with the concerns of the 

small businesses that supports our requirements. The Under Secretary has, consequently, established small business forums. The 

Department of Defense Office of Small and Disadvantaged Business Office staff, which has already met with a Wichita, Kansas 

group of small businesses that produce aircraft components. 

My office has strategized with women-owned businesses, 

brainstormed with Native Americans, and represented the Secretary of Defense on the Board of Directors of the National Veterans Business Development Corporation. These forums identify 

prime and subcontracting barriers, enabling us to discuss and develop recommended solutions with department leadership and the 

chief executive officers of the major defense firms. Additionally, we 

appreciate the support from the Small Business Administration, 

and we look forward to working with them in the future. 

The Army, Navy, Air Force and defense agencies’ small business 

offices are also doing their part to help the Department of Defense 

meet its goals. They, along with over 500 small business specialists 

across the nation, are my means to transform the small business 

acquisition culture in the Department of Defense. And I emphasize 

culture. 

The Department of Defense specialists will foster a cultural shift 

in the attitude of the acquisition workforce towards small business 

8

through new teaching modules. The office of Secretary of Defense, 

my office, in partnership with the Defense Acquisition University, 

is creating the first small business training module for executives 

and program managers. These new modules will explain why the 

Department’s acquisition workforce should value the contributions 

of small businesses. Future training initiatives will focus on improving the use of Historically Black Colleges and Universities/Minority Institutions, Hispanic-serving institutions, and we intend to 

reinvigorate training about HUBZones, including Native American 

reservations, and so on. 

Department of Defense continually strives to enhance its overall 

small business performance, particularly to achieve the goals recently established for woman-owned small businesses, HUBZones, 

and service disabled veteran-owned small business. There are positive trends. In fiscal year 2001, $51.8 billion of Department of Defense procurement spending went to small business firms, with 

$28.3 billion of this going to small business prime contractors. 

I’m sorry, sir. 

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

Chairman MANZULLO. Appreciate it. Our next witness is Deborah 

Cabreira-Johnson of the Office of Procurement of the County of Los 

Angeles. She is going to speak about the county’s effort to assist 

small businesses to access and secure federal contracts. I look forward to your testimony. In your testimony, if you could also bring 

in what other agencies may be doing the same thing you are, or 

trying to do the same thing you are, it would make it a little easier 

for folks that want to break into procurement to try to put all the 

pieces together. We look forward to your testimony. 

Ms. CABREIRA-JOHNSON. Yes, can I answer that—— Chairman MANZULLO. Sure. First Frank has to turn off his 

microphone. 

Mrs. NAPOLITANO. And while he does that, I want to tell everybody, before everybody runs out, validation for your parking, please 

see the table over there. Validation. 

Chairman MANZULLO. Okay, Debbie, you can tell that before we 

turn the clock on. 

STATEMENT OF DEBORAH CABRIERA-JOHNSON, MANAGER OF 

THE LOS ANGELES COUNTY PROCUREMENT TECHNICAL ASSISTANCE CENTER, LOS ANGELES, CALIFORNIA 

Ms. CABREIRA-JOHNSON. Thank you. The Office of Small Business is the parent of the PTAC or Procurement Technical Assistance Center. The PTAC is one of the activities of the County of Los 

Angeles Office of Small Business, which is the resource center for 

helping business attain government contracts. 

Our director, Edna Bruce, is here this morning with me. Edna, 

would you stand? 

Chairman MANZULLO. Stand up, Edna. Good to see you this 

morning. 

[Applause.] 

Ms. CABREIRA-JOHNSON. And as far as other agencies or organizations that may be doing the same thing, there are quite a few 

which we do not try to replicate those same processes, but we try 

to complement each other. Some of the agencies would be the Small 

9

Business Development Centers located throughout Southern California. Of course, our partners—major partners in offering our 

training is the SBA, Small Business Administration, who often 

speaks and presents at our workshops, trains. The General Services Administration, which is a major purchasing agency for the 

Federal Government, and we conduct training classes together. 

Chairman MANZULLO. Somebody could come to you and if they 

are not in the right facility, you could direct them, is that correct? 

Ms. CABREIRA-JOHNSON. Certainly. That’s my job. 

Chairman MANZULLO. Look forward to your testimony. Now we’ll 

start the clock. Thank you. 

Ms. CABREIRA-JOHNSON. Mr. Chairman, Congresswoman 

Napolitano and distinguished members, I appreciate the courtesy 

you are extending to Los Angeles County in giving me the privilege 

to present this testimony. 

I am Debbie Cabreira-Johnson, Manager of the Los Angeles 

County Procurement Technical Assistance Center, funded by the 

Department of Defense, Defense Logistics Agency. 

The Procurement Technical Assistance Center, or PTAC, is one 

of the program activities of the County Office of Small Business. 

There are 88 other PTACs nationwide, five of which are in California. Our mission is to assist businesses, especially small, minority, woman-owned and veteran and/or service-disabled-veteranowned businesses in their efforts to do business with the Department of Defense and other government agencies. 

The County of Los Angeles has a population of approximately 12 

million, a greater population than 42 states in the nation, with 

more than 1 million in the county unincorporated areas alone that 

ranges from a few blocks to 100 square miles in the Antelope Valley. There are 88 cities within the county’s borders, the largest of 

which is the city of Los Angeles. 

As members of the Small Business Committee, you know how 

critical small business is to this nation’s economy. In Los Angeles 

County there are approximately 250,000 small businesses, 96 percent of which have fewer than 100 employees. 

The Los Angeles County PTAC receives numerous inquiries from 

firms and business in the county as well as the surrounding areas. 

On a daily basis we see and hear which government buying practices work well and also which might present obstacles to small 

business participation. 

It is our job to guide these firms step by step if necessary 

through the stages of this complex procurement process. This may 

include but is not limited to marketing, identifying appropriate solicitations, preparing bids, helping them prepare their bids, understanding regulations, the federal acquisition regulations, and administering the contracts. 

In addition, we are in a position to help connect large prime contractors with capable small business contractors, a growing function which is significant in this area of contract consolidation. 

In order to service these many businesses and cover the county’s 

vast area, we hold regular monthly courses at the PTAC headquarters. We coordinate quarterly workshops with our partners, 

the U.S. Small Business Administration, and the General Services 

10

Administration throughout the county to train and disseminate 

this information. 

For the first 18 months of our operation, the L.A. businesses that 

we have been able to register on the County’s electronic database 

numbers approximately 9,000. Of those 9,000 businesses, 212 of 

those are registered vendors right here located in the 34th Congressional District. 

The number of active clients that the PTAC services, roughly 

423. The number of small business awards that I can report number 18, resulting in over $7.4 million in awards. We have held numerous classes over the last year and a half, 42 and counting. The 

average attendance at our county workshops held quarterly number 300. In many instances we run out of paper, we run out of documents to hand out at the door because they show up unregistered, 

without RSVP. The average attendance at monthly classes, 50. 

I believe our presence has made a positive impact in the community. Many contract awards are not reported back to us, thus making it difficult to measure our impact in dollar figures. However, in 

just the one and a half years of PTAC’s existence, five years for the 

County Office of Small Business, we can report success in our outreach and marketing efforts with small business. 

We help our clients one by one find the opportunities, complete 

the paperwork, which eventually will lead to obtaining a government contract. Small business contract awards mean the creation 

and retention of jobs. But the PTAC mission is an ongoing one. 

Federal and local matching funds are critical to enable the PTACs 

to continue our mission of helping these capable small firms pursue 

contracts as either prime contractors or subcontractors in whatever 

capacity possible. I always tell my small business clients that even 

the smallest piece of pie is better than no pie at all. 

We applaud the Senate Defense Appropriations bill which included an additional $5 million for the PTAC program. 

Mr. Chairman, thank you again for the privilege of presenting 

this testimony. Please let me know if you have any questions. 

Chairman MANZULLO. The ding means you’ve got 30 seconds to 

go. 

Ms. CABREIRA-JOHNSON. Okay. I applaud the Defense Appropriations Committee. We hope that the House version will agree to the 

Senate’s increased spending level. We also commend this committee for listening to the needs of small business, and Representative Velazquez for introducing Bills H.R. 1324 and H.R. 2867, 

aimed at helping small business in the federal procurement arena. 

Again, Mr. Chairman, honorable members, thank you again for this 

privilege. Please let me know if you have any questions. 

[Ms. Cabriera-Johnson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Appreciate it very much. Our 

next witness is Eric Espinoza. He is the owner of Stitches Uniforms, and he is going to talk about specific problems faced by his 

company securing federal contracts, and the recommendations for 

the system. Eric, we look forward to your testimony. 

Mr. ESPINOZA. Thanks very much. A little nervous, but first I 

want to thank Chairman——

11

Chairman MANZULLO. The first thing you do is take a glass of 

water. Go ahead. Take a sip of water, and then we will start the 

clock. 

STATEMENT OF ERIC ESPINOZA, OWNER, STITCHES UNIFORMS/G.S. DUNBAR & CO. INC., MONTEBELLO, CALIFORNIA 

Mr. ESPINOZA. First, I want to thank you for coming on a long 

weekend and yesterday. I am sure staying away from your family 

on a holiday weekend was a little trying. 

Chairman MANZULLO. It was great to get together for some true 

Mexican food, really, that Grace had prepared for us. 

Mr. ESPINOZA. Again, Congresswoman Napolitano, thank you for 

putting this all together, and giving us a chance to speak. 

First, I would like to say that the SBA and the House Small 

Business Committee were formed in function for the purpose of fostering competition and promoting small businesses throughout the 

United States. What our research has shown, however, is that a 

disproportionate number of contracts to provide clothing for the 

military are awarded to the southern and northeastern part of the 

country to the same contractors over and over. 

In the two and a half years that I have been researching contract 

awards through the DSCP clothing and textiles, I have not seen 

one contract awarded to a firm in California. I am not saying there 

haven’t been any, but I haven’t seen any. 

GS Dunbar, our partner in our joint venture to provide clothing 

to the military, was in the 8(a) program for almost ten years before 

they were awarded their first contract, and the total award for 

their contract was a relatively small $300,000. 

The testimony that—prior to mine right now, the—I forgot your 

name. Stated that there were 18 awards for—and what was the 

total on that? 18 awards for $7 million. 18 awards for $7 million. 

You divide that among the companies, that is a fairly small dollar 

amount per company that is coming out of the military for these 

contracts. 

The contracts that we see when we are doing our research have 

been large contracts, to large companies, throughout the south and 

the northeast. 

The contract that is—I am speaking of now that we are having 

a problem with was for a little over $5 million to provide a million 

T-shirts to the army. The cost on those last year was $5.99 for the 

short sleeved and $7.77 for the long-sleeved T-shirt, and we underbid that bid at $5.49 on the short sleeve and $7.49 on the long 

sleeve, a significant savings to the government, yet our experience 

has been that we have been stonewalled on a number of situations 

with the DSCP. 

They have—I lost my train of thought there. They have negotiated, changed the bid from a sealed bid to a negotiated buy on 

us, and twice they have had negotiations, and they just do not 

seem to be very forthcoming with information for us. They have 

made it very difficult for us to get any information out of them, and 

we have just had a significant number of problems. If we’re the low 

bid on this contract, we feel we should be getting a little more information from them on why they have renegotiated and why they 

have taken steps they have. 

12

Now, there is something to be said for proximity to the capital 

with regards to the companies that are in the northeast and the 

south. They are a lot closer to the capital. They can attend frequent 

seminars and meet with procurement officers, but the fact that in 

this instance we were able to produce the same garment for less 

money, we felt should stand on its own to a certain extent. We felt 

that we have been—that, given the hostile nature of the procurement officers to our inquiries, that a trip to the capital would not 

serve much of a purpose. We believe that the proposal should stand 

on its own in order to receive full consideration for award, and if 

it is necessary to meet the procurement officers, in order to satisfy 

their questions, we would be happy to attend any requested meeting, but that request has never been forthcoming. 

Another important issue that I would like the government to address perhaps is competitive pricing. Some of these companies in 

the northeast or in the south have much lower cost structure than 

we do out in California. We were still able to bid this contract for 

less, but we are not seeing anything with regards to an award. I 

think there is something wrong with that, but, these are the problems that we need to address. 

Sorry, I kind of stumbled through that. I was a little nervous, 

but I do again want to thank you for listening to me and taking 

the time out of your busy schedules. Thank you. 

Chairman MANZULLO. If you encounter a procurement officer 

that is nasty to you, have you taken the appropriate steps——

Mr. ESPINOZA. They have never been forthcoming. One example 

was when we inquired—we have hired a consulting firm basically 

in Washington, DC, that had done these types of procurement, and 

we were told that when the buy is turned from a sealed bid to a 

negotiation, that we have a right to request a debrief on why it was 

changed to a renegotiation. When we requested that, we were told 

that basically we did not have that right, and they were not going 

to——

Chairman MANZULLO. If you run into that contact Grace. She is 

a member of Congress and representative on the Small Business 

Committee, and relay that to us and we will take care of it. 

Mr. ESPINOZA. Okay. 

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

Chairman MANZULLO. Our next witness is Adriana Grippa. 

Ms. GRIPPA. Good morning. 

Chairman MANZULLO. Did I pronounce that correctly, Grippa? 

Ms. GRIPPA. Yes, thank you. 

Chairman MANZULLO. All right. There is a vowel on the end of 

my name, too, so I struggle to make sure I pronounce them correctly. 

Ms. GRIPPA. No problem. 

Chairman MANZULLO. She is the president of Master Research & 

Manufacturing, Incorporated, to testify on specific problems faced 

by her company to secure federal contracts and recommendations, 

and we look forward to your testimony. 

13

STATEMENT OF ADRIANA GRIPPA, PRESIDENT, MASTER 

RESEARCH & MANUFACTURING, INC., NORWALK, CALIFORNIA 

Ms. GRIPPA. Thank you very much. I appreciate it. Good morning, ladies and gentlemen. I would like to start my comments with 

my personal thanks to Donald Manzullo, chairman of this hearing, 

and Congresswoman Grace Napolitano. 

Like Mr. Manzullo said, my name is Adriana Grippa, and I am 

the president of Master Research & Manufacturing. We are a company who specialize in the fabrication of critical aerospace components and assemblies. 

My husband Miguel and I started our small company about 25 

years ago. And I am proud to say that we have been doing business 

with the Department of Defense for 20 of those years. Overall, we 

also enjoy a good business relationship with the Procurement Offices and an excellent relationship with the administration and 

quality representatives from Defense Center Management Administration Office with the IC trade in Van Nuys and Norwalk. 

The last few years, however, have been very difficult because of 

our dealings with the Defense Supply Center—Richmond. For those 

of you who are not familiar with this agency, it is now the procurement center for most of the military hardware needed by the Navy 

and the other Armed Forces. 

Throughout the years, we received over 800 contracts from Department of Defense centers located all over the country. This procurement process always went through the normal steps and successfully completed. By normal steps I mean request for quote is 

solicited by a government agency. 

The suppliers submit quotes. The contract is awarded to the lowest bid. Items are manufactured in compliance with contract requirements. Items are then inspected, approved and delivered, and 

payments made. 

We can’t recall an occasion where the terms and conditions of the 

contracts were changed by the procuring office after award. According with the Federal Acquisition Regulations and standard business practices, to do so requires a bilateral agreement from the 

government and the contractors. 

However, in the past two years in dealing with the Richmond 

Center, 10 contracts have been modified unilaterally by the Procuring Office after the award, without regard to the consequences 

to our company, our rights, and in violation of the Federal Regulations. It’s almost as if the Richmond Center is intentionally trying 

to injure its small business base. 

I say the small business base because we are not the only contractor experiencing this problem. We attended an open house in 

Richmond some months ago and heard many of the same complaints from other business owners. These modifications after 

award have caused severe financial hardship, and continue to do 

so. 

Our business goal is to produce good quality products for the 

aerospace industry on schedule and at a reasonable price. To do so, 

we have to concentrate our efforts in two main areas, which are 

quality control and lean manufacturing. 

Now our time is spent correcting procurement blunders and 

after-the-fact modifications to the items being manufactured. We 

14

have even been forced to hire a contract specialist and have retained legal counsel just to deal with the growing problems. 

The most common and most expensive contract modification we 

are experiencing is the change of items to flight critical item status. 

Categorizing an item as flight critical restricts procurement to purchase only from approved sources, in most cases just the prime contractor. Some are items that we have manufactured and that have 

been in use for many years. Besides, critical nature or not, we have 

proved our capabilities to build them. And we have seen many 

items categorized as flight critical that has nothing critical on it. 

When the status of the item is changed after award and we have 

already started the manufacturing process, it forces us to stop 

working and freezes the funds already invested. For example, after 

a recent contract award, we purchased a special material from Dupont, which is the only authorized fabricator. After we received this 

material and paid $50,000 for it, we received a stop work order 

from Richmond and a request to submit what is called a source approval request, because the item had been reclassified to flight critical. This special material has been sitting in our warehouse and 

our money tied up for more than six months now, waiting for our 

source approval request to be approved. The Procurement Office’s 

response to our complaints has only been, ‘‘We are very sorry.’’ This chart that I had brought with me is an example of how the 

taxpayers’ money is also wasted (see page 83). As you can see— thank you. As you can see, we received and successfully completed 

two contracts, and after we received the third one, somebody decided to change the product to flight critical. 

We submitted a source approval package, which took 18 months 

to be approved by the Navy. 18 months. That is a long time. In the 

meantime, another order was awarded to the prime contractor, the 

only approved source. And finally, our parts were purchased to 

meet an emergency need before we received our source approval. 

In this example, as you can see, 177,000 taxpayers’ dollars—— Chairman MANZULLO. Adriana, could you suspend a second and 

turn that chart towards the audience? Because we have a copy of 

that before us. Thank you. Go ahead. 

Ms. GRIPPA. Okay. In this example, 177,000 taxpayers’ dollars 

were wasted because of a senseless restriction. In addition, it 

smacks of discrimination against a small business and collusion between the big primes and the government. 

And this is just the tip of the iceberg. I wish to have more time 

to tell you all about our troubled history, but I don’t have time. I 

know that you may have more important issues to deal with, but 

if we let Procurement Offices continued with this behavior, they 

will drive our company, and who knows how many others, out of 

business. Besides, the amount of money wasted may be tremendous, and I think it justifies for an investigation. 

I hope that you can use your power to solve the obvious problems 

within the government procurement system and especially those at 

the Defense Supply Center-Richmond. As a small business owner 

and a taxpayer, I thank you for this opportunity to bring this case 

to your attention. Thank you. 

Chairman MANZULLO. And thank you. 

Ms. GRIPPA. And can I add something very, very quickly? 

15

Chairman MANZULLO. Sure. 

Ms. GRIPPA. I just want to let you know that I am not only a 

small business, but we are minority, woman-owned, and also I am 

an 8(a) certified business. 

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

Chairman MANZULLO. Mrs. Sanchez, do you want to go first? 

Ms. SANCHEZ. Thank you, Mr. Chairman. First of all, I want to 

thank you, Mr. Chairman, for allowing this Congressional hearing 

here in the greater Los Angeles area. In particular because we here 

in Southern California do a lot of defense contracting, and as you 

know, at the federal level, the defense budget is the largest part 

of our discretionary spending. 

I also wanted to thank my colleague, Grace Napolitano, for twisting the arm or cajoling or whatever it is that you did to get the 

Chairman to be here, but, you know, I am from Orange County, 

and I—well, it is easier than my chairman, but—I am from Orange 

County, but I feel very strongly about this whole issue of small 

business, having been both in the corporate world before and owning my own business before I became a Congresswoman. 

In fact, you know, it’s interesting, because I don’t sit on this committee, and I consider this committee a very big policy committee, 

and a policy committee whose efforts impact the rest of the committees and the spending committees of the Congress. I happen to sit 

on the Defense Committee, on the Armed Services Committee, and 

almost $300 billion a year gets spent on defense at the federal 

level, versus maybe about $700 million or so from a small business 

perspective that maybe this committee has jurisdiction over, so you 

can tell that the largest spending comes out of a committee that 

I sit on. And because of that, what happens here, and how we 

make policy and how we move it through the Congress, and more 

importantly, maybe not just policy, but process, how the process is 

driven, makes a big difference for small business, and I see it all 

the time, being the only Democrat sitting on the Defense Committee for this section of our area. 

I have seen a lot of things over the last six years in my time on 

that committee in the Congress. And first and foremost is this 

whole issue of, before 9/11 really, was our biggest problem was that 

real defense dollars were not increasing, in fact, was contracting in 

the budget. And what happened, because of that, is that prime contractors, the big guys, in order to meet their growth, needs, because 

they—a lot of them are publicly traded, they would begin to cannibalize all of the work inside to their own companies, eliminating 

the contracts that were going to subcontractors, small and medium 

business size, even the medium business size, $50 million, $100 

million companies were affected by this. 

There is also another problem I think at the defense level, and 

I see it all the time, and I know if we could fix this, we would be 

so much better off, and it all comes down to this issue of process

and really how we finance defense projects, how we put them in 

the budget. And also I think a mentality from the defense, Pentagon area, where everything—you know, once the Congress decides we are going to spend on a project, there is this sort of what 

I call an orderly procurement process. You know, you are the 

prime, we go year after year, this is the way we spend. 

16

So if there is any innovation or if there is an outside company 

that is coming in and telling us, we have something innovative, you 

don’t have to spend the $100 million doing this particular thing, 

you can buy it off the shelves, and you can save a lot of money, 

and the technologies available from a commercial basis right now 

and it’s redundant and it’s robust and we can use it, the guy at the 

Pentagon says, ‘‘You know, you are going to mess up my orderly 

procurement process. I mean, these are my marching orders.’’ So 

we need to fix that, and I hope that we can work together with the 

help of the Small Business Committee members to ensure that particularly in defense where the majority of the money is spent, we 

can do something about it. 

Bundling is a problem, it’s been a major problem for small- and 

medium-sized businesses. Rebid, you know, when a small business 

goes out and it has a five-year contract, first option opt two years 

from now, and all of a sudden through a new process in the federal 

government, their two-year contract, they are notified, well, now is 

just a one-year contract. If they put the investment in for capital 

machinery and other things, invested in the training of their employees and all of a sudden they don’t even have a guarantee of a 

two-year contract, that is a big problem for small- or medium-sized 

businesses. So we need to address that also. 

And I want to make a couple of questions to Mr. Ramos. I know 

I am going on a little, but I didn’t get an opening statement. And 

I think these are so important for us to realize. Vendor payments, 

making the payments on time. I have got so many vendors who 

have gotten a contract, and they are half a million dollars behind 

from the Pentagon payment. This is another process we need to 

work on to get right. 

And lastly, I want to say to the gentleman here, the younger gentleman who is a little bit nervous, first of all, thank you for coming, 

Eric, because your time is worth money when you are a small business owner or when you run that company, and so we appreciate 

you being here today instead of being out trying to make rain, as 

we call it in the business, and getting the contract. 

I have found, in the 6 years I have seen this process, that it’s 

relationships to a large extent that allow you to identify far enough 

ahead of time what is going to be procured, what is going to be 

available. It allows you to get ready for the whole process, so relationships become very important, and I think the first place you 

start is with your Congressperson, because they can help you with 

their staff to work with you. 

You know, I have not really found, and I hate to say this because 

I have a lot of lobbyist friends, but, you know, hiring somebody 

back in Washington, DC. Because they tell you they can get the in 

and they can get the hit for you, isn’t the easiest way to break into 

all of this. And this is to DC. They come later when you are very 

far along the process, and you are really, really competing for 

something. 

First and foremost I would say to you begin with your 

Congressperson, and with all this spending that is going into defense, I am sure—I think at the Pentagon there is this guy, and 

I am sure his name is Mr. Jones, and, excuse me, he is an Anglo, 

older male, and he is the one that is letting all these contracts, and 

17

I haven’t been able to find him, I haven’t been able to find the door 

where I can send my subcontractors to go and to get this contract. 

So we need to make a better process by which we can involve small 

business. 

And I would like to have Mr. Frank Ramos—who, by the way, 

I think you have been doing a great job, Frank, but you and I both 

know, there are major, major problems. What are we doing about 

making the process more transparent so that our small innovative 

businesses have a shot to win these contracts? 

Mr. RAMOS. Let me just go back, Congresswoman. First of all, 

your contract comment about being able to purchase right off the 

shelf. After September 11th I arrived in my office and listened to 

the special operations command, and the past circumstances that 

the military found itself, and I don’t want to say before this Administration came out, the shelves were somewhat bare. I listened to 

the command—special operations commander procurement officer, 

senior person, who was literally taking a credit card and going 

around California and buying products for the special command officers that are in the field in Afghanistan. They literally did that, 

and they found a way to go after the new technology. 

The second thing that happened, and I inserted myself into this 

process which hadn’t been done, and I alluded to the comment I 

made earlier about culture and attitude, there was an announcement for counter-terrorism, and they asked everybody in the world, 

‘‘Tell me what can you bring to the table to fight this war against 

terrorism.’’ We had 12,500 proposals, including small businesses. 

We reviewed 200 of those, some of which were small businesses. 

What I did is I inserted myself by saying, if you come across a 

small business, which is mom and pop, for example, that doesn’t 

have the managerial, technical, financial capability, we don’t do a 

finance, and my experience of the SBA, I bring this capability to 

it, we will assist that small business to provide their product or 

service to the special operations counter-terrorism expert. 

Not only that, I offered that if they found a firm that needed that 

type of support, we will put them into the Mentor-Protegee Program. We have $25 million that we can use within that program 

to support the small business owner, so we are taking some 

proactive effort into that. 

This area of procurements that you alluded to, I recognize and 

am assured by Mr. Aldridge, that we did not have in the procurement training of the senior executive offices within the Department 

of Defense the training module that explains with some clear clarity the process to help small businesses. There is some, but it’s not 

in a regular training module. 

I have contacted, and have secured agreement of Frank Anderson. He is the president, CEO, former one-star Air Force general 

at the Defense Acquisition University, and we are going to have a 

procurement module to train the most senior officers within the 

Department of Defense. 

I brought on Dr. Segura, as I introduced him earlier, the former 

Dean of the School of Education, Cal State Fresno, to help me with 

that specific endeavor, and to bring those training modules so that 

our small businesses can understand how to do business with the 

Department of Defense. It is complex. There are some issues there. 

18

With respect to this panel, and I think the Chairman recalled the 

last hearing that we had, I took all of the panel members that were 

there by the hand and I said, I will find out what is going on because I am learning the process of what is right and what is wrong. 

That which is right we are going to showcase. That which is wrong 

we are dealing with, and eyeball to eyeball these contracting officers in there, and I am deadly serious about this. 

So I have committed to—yesterday that Mr. Berrazas, who was 

here yesterday, the gentleman to my right, and to Mrs. Grippa, 

that I will take this issue, and members of my staff, and we are 

going to explore what went on in the process, we are going to tell 

them the good, bad, ugly of the process. If it is inside, we are going 

to address it, and if it is outside, at least you will be informed as 

to what went wrong. 

Chairman MANZULLO. Frank, we appreciate that very much. I 

know you have been following up on the witnesses we have had in 

Washington, and your work on that has been no less than exemplary. 

Ms. Napolitano, do you have some questions? 

Mrs. NAPOLITANO. This might not work too well, so they asked 

me to use this one. 

There aren’t any questions, but in the interests of time I am 

going to be very short and very specific, and Bruce and Frank, I— and also Deborah, I need to find out how many employees do you 

have and where are they placed, and what kind of business community do they serve? I mean, the number of businesses your staff 

serves, and how can we get the best—how can we help you increase 

the outreach to the businesses, because obviously you can’t have 

enough personnel? 

It is proven, I have had to take some of my chambers over some 

of the actual—the one-stop shops, and we have done all kinds of 

different things to be able to have—I don’t know of all of the things 

that are out there, and I would like you to share with us in how 

we can help you do a better job. And Frank, I won’t become one 

of those [inaudible]. As Mr. Manzullo, Chair. It’s that important to 

our businesses. 

Mr. THOMPSON. Congresswoman Napolitano, when in Washington they had the joint meeting with the procurement offices 

back there, we brought in, as I mentioned in my testimony, a thousand small businesses to line them up so they could be right there 

and interview with these procurement officers. We are going to 

take that on the road, and I have been assured that one of those 

12 meetings will be here in California. And I think that—too loud? 

Chairman MANZULLO. My district, too. 

Mr. THOMPSON. Oh, absolutely. Mr. Chairman, I can almost 

guarantee there will be one there around the corner from you. 

Chairman MANZULLO. That’s why I’m the chairman. 

Mr. THOMPSON. That’s exactly right, and I apologize for not mentioning that when I was talking to my good friend Congresswoman 

Napolitano here from California, because it is important that we do 

bring it out to the West Coast, because of course there is a lot that 

happens in Washington, DC. 

With staff, we are trying to reorganize the procurement staff that 

we have out here with our six offices in California. We want to 

19

make sure that they are persistent in what they are doing in working with small businesses. 

Our SBDC offices, as you mentioned, the one-stops, those are so 

important for those individuals to give counseling and direction to 

small businesses of how they can work with the SBA, and how they 

can work with the federal government, and that’s happening. We 

have some great SBDC directors. 

Mrs. NAPOLITANO. No, they are wonderful. I don’t dispute that. 

What I am trying to figure out is how many people do you actually 

have at those SBD centers, and more than that, I think California, 

because of the budget consciousness, is looking at cutting some of 

those offices. I want to be sure we continue to be able to have them 

there to provide the assistance. 

Mr. THOMPSON. Well, we might be leaner, but we’re going to be 

more—I don’t want to use the word meaner, but we’re going to be 

direct in what we do and try to focus. We are taking a lot of our— as you know probably better than most, a lot of our back room operations and loan collections, things like that, we are taking and 

trying to put those in certain centers around the country so that 

we can take our people that are in SBA offices that have been sitting at desks taking notes and writing papers, and doing those 

things, to get them out into the community so that our work force 

can really be out there to help small businesses. Right now we 

don’t reach the 24 million small businesses the way we should. The 

Internet is a big asset to us, and there’s a lot of these things, and 

small businesses will go on the Internet. There’s all kinds of opportunities for them, not only to register for loans, but also—I’m sorry, 

go ahead. 

Mrs. NAPOLITANO. We know that; the problem is these people 

don’t. They don’t know how to access that information, and unless 

you get those workers out here to actually sit and listen to them 

and give that information out to the Chambers and to the newspapers so they put it out and people can look at it, there is very 

little information filtering to the West Coast, and that is a fact. 

And that is why I am so concerned about how do we get the information out to a small business to become more informed and 

educated about how it is that they can do government procurement. 

And so that was the reason why I was asking. 

And you guys do a great job. The problem is you are understaffed. You don’t have enough time to service the hundreds of 

thousands of businesses in California, and that’s why I am trying 

to figure out how do we help you do a better delivery job, so that 

you can, because I’m sure if everybody here went to you right now, 

you would be swamped. You need to be able to have an effective 

method of being able to deliver, just like my colleague over here, 

Sanchez, had mentioned. Frank? 

Chairman MANZULLO. Frank, what’s the answer to the question? 

Mr. RAMOS. Thanks, Grace. Congresswoman, here is what I am 

willing to offer, but I have to do this very narrowly. And the reason 

why I want to do this very narrowly focus just on Department of 

Defense, Department of Defense. I will give you a quick example. 

We had a veterans forum with the other agencies including the Department of Energy, and somebody asked the question about security clearances, and it took a half hour to explain the difference beVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
20

tween the security clearance, which was top-secret from the Department of Energy, versus the security clearance from the Department of Defense. 

While you obtain the same result, the process is different. 

I am willing to bring a forum of Department of Defense personnel, if you would host it. We don’t have the resources. 

Mrs. NAPOLITANO. You have got it. 

Mr. RAMOS. It would be very narrowly focused in terms of howtos with regard to the Department of Defense, and we are doing 

this in the HUBZone up in Newark, New Jersey, the Chairman’s 

counsel, Nelson Crowther, is going to join us, we have—we’re 

bringing Native Americans, because they’re HUBZones, they bring 

contracting opportunities. We alluded to the Alaskan tribes, who 

have sole source, no contract threshold ceilings; we will also bring 

in the local commands to explain the how-tos. 

What I don’t like to do is bring Nelson Crowther, of the Chairman’s staff, doesn’t like these conferences, because you give high 

hopes for people assuming that you’re going to need contracts. I 

think it’s more important that we explain to them the requirements of how you do business with folks, past performance, how to 

team with other folks, and that is what I would like to do, and I’m 

willing to do this, with some lead time. 

Mrs. NAPOLITANO. You’re on, sir. And Ms. Sanchez is also going 

to be in on that, and I have invited Mr. Manzullo to come down, 

and not quite sure whether he can. But thank you so much. I appreciate that. 

Chairman MANZULLO. Thank you, Grace. I’ve actually got a follow-up question. During the direct testimony, Bruce, you talked 

about some event in Washington with a thousand small business 

people. Would you tell us about that again? And when did that 

take place? 

Mr. THOMPSON. This took place in May, I believe, Mr. Chairman. 

Every year for the past 34 years they have had the procurement 

hearings back there in Washington as kind of a—I haven’t been to 

it, but my understanding of it is that businesses come in and listen 

to basically what Frank was talking about. How do you get contracts, so forth, so on. 

This year for the first time what we did is we set up appointments with a thousand small businesses with prime contractors 

and also with the federal government to sit face to face and talk 

about these contracts and how you get them. And that’s the difference, Mr. Chairman, and this was the first year that this happened. And that’s what we’re going to take on the road. We are 

going to do an additional 12 of those around the country. 

Chairman MANZULLO. I don’t want to interrupt you, but——

Mr. THOMPSON. No, that’s all right. 

Chairman MANZULLO [continuing]. But we had a procurement 

conference back home; Deirdre Lee came in along with some of the 

highest officials, and we had about 250 people showed up. Even a 

lady that makes baskets. She said, who knows? The Department of 

Defense may need a basket. Maybe they do. I don’t know. But then 

we worked with—in conjunction with our local PTAC center, and 

it takes a while—I don’t want to use the word qualified, but to get 

the small business people up to speed. 

21

I want to see the Department of Defense, and the SBA, and the 

rest of the agencies, get a hold of the large corporations and say, 

‘‘You shall show up at this conference, and you shall bring with you 

requests for proposals.’’ Because they are doing business using government money, and I don’t see much excitement. 

If the beneficiaries of most of this money are big companies, then 

they should be the ones out there trying to find the little guys. 

With all due respect, not you. You’re there to facilitate the meeting. 

But as many meetings as I’ve been to, and to which my constituents go, it is the same thing: Where are the big corporations with 

the RFPs? And that is what I would like to see. 

They say, Well, you got to go online; Well, you got to do this; 

Well, you have to do that. Well, heck, just show up. You want to 

do business with the federal government, you are a big corporation, 

you got a big contract, then you shall, s-h-a-l-l, you shall be in 

Rockford, Illinois, or wherever it is, and you shall show up with 

contracts in hand, and willing, hungry, starving bidders over here. 

The area that I represent has a 30 percent manufacturing base. In 

1981 we led the nation in unemployment at 25.9 percent. 

More people were unemployed in Rockford, Illinois proportionately in 1981 than during the so-called Great Depression. I see zero 

incentive on the part of the major corporations whose legal task it 

is to bring in the little people that we represent. They don’t do anything. Sure they have people that are associated with them. Sure 

they outsource and everything. Sure they do this, they do that, but 

that’s the type of hearing I would like to have. I want them to just 

show up. There may be 100 people bidding for one contract, but at 

least there is a contract, and after a while the little guys get tired 

of going to schools. I see a lot of nodding going on around here. Little guys—little guys; that’s Midwest. What do you say in California? The word ‘‘guys,’’ is that okay out here? 

Whatever it is. But little guys are out there, and they come to 

these shows—Many of them run the machines at their little shops, 

and they get all the tools and are told to go on site and go to everything, and then nothing happens. But I would love to work with 

you to be able to have one of these forums. 

Mr. THOMPSON. We will do it. 

Chairman MANZULLO. Well, great. 

Mr. THOMPSON. Thank you, Mr. Chairman. We will take you up 

on that. 

Chairman MANZULLO. Okay. We’re going to have to move on. We 

have 13 witnesses on the next panel, and again, we want to thank 

you for coming and appreciate everything that you are doing, and 

you can applaud this panel. We’ll allow that here. (Applause.) 

Mrs. NAPOLITANO. The panel, before you leave, thank you very 

much. May I ask that you begin giving us some contacts, some of 

the California contacts for small business for defense so that we 

can, when we do our workshop, we can invite all those folks that 

you want to come in, especially the big guys. 

[Recess.] 

Chairman MANZULLO. We have a second panel divided in two 

groups because of the logistics of the cases. Jeff, your mike is on. 

How many more do we have here? 

[Whereupon discussion was held off the record.] 

22

Chairman MANZULLO. Let’s get everybody up here. Set the rest 

of them over here. That would be fine. While we are waiting, let 

me introduce, representing Congresswoman Solis—is Aiha Nguyen. 

Aiha, where are you? I tell you what, are you going to set up everybody over there? 

[Whereupon discussion was held off the record.] 

Chairman MANZULLO. I think we are going to start the testimony 

over here on this side, and I think that should work out okay. And 

Ray, if you would turn those name plates towards us, at an angle, 

and if those witnesses could come over and take their seats. 

Our next panel, we are going to start with David Bearden. Dave 

is the Deputy Assistant Secretary and Chief Operating Officer of 

the Economic Development Administration, EDA, with whom we 

work very closely in our district at the U.S. Department of Commerce out of Washington. You came all the way from Washington 

to be with us, Dave. We appreciate it and look forward to your testimony. 

STATEMENT OF DAVID BEARDEN, DEPUTY ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT, 

HOUSE COMMITTEE ON SMALL BUSINESS 

Mr. BEARDEN. Okay. Well, thank you very much, Chairman Manzullo, and also Representative Napolitano, for inviting me to be 

here with you today, and I appreciate the opportunity to talk to 

you about the Economic Development Administration’s Trade Adjustment Assistance for Firms program. 

Now, while the authorizing legislation for this program expired 

at the end of last year, President Bush was able to work successfully with Congress this year to reauthorize this program and to 

extend it through September 30th of 2007, and that was signed 

into law under the Trade Act of 2002 by President Bush last 

month, on August the 6th. 

My comments today will briefly summarize for you the purpose, 

the process, and some of the results of this program. 

The purpose of the TAA for Firms program is to help manufacturing and producing firms that have lost sales and employment as 

a result of increased imports of similar or competitive goods. The 

program is a unique federal response for mitigating the problems 

that firms encounter as a result of changing trade patterns. It is 

also fully consistent with the concepts of free trade. Instead of relying on quotas, and tariffs, and other types of trade barriers, the 

TAA for Firms program actually works with trade-impacted firms 

directly, and it helps them to become more efficient and competitive within the global marketplace. 

The Commerce Department supports a national network of Trade 

Adjustment Assistance Centers, or TAACs, to help injured firms in 

navigating their way through this TAA program. Currently there 

are twelve TAACs in the network. California here, for example, is 

served by the Western TAAC, which is sponsored by the University 

of Southern California. David Holbert here is the director of the 

Western TAAC, to testify before you today. 

There are three steps that a firm must go through in order to 

attain assistance under the TAA for Firms program: The first is 

certification, and the second is preparation and approval of an adVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
23

justment proposal, and then finally is the implementation of that 

adjustment proposal. 

In the first step, EDA determines that a firm is eligible for assistance under the TAA program. And the way they do that is the 

firm submits to EDA a petition which documents that it’s been adversely impacted by increased imports. 

EDA must find that the firm reduced its employment by 5 percent or 50 employees, whichever is less, it lost sales, and that there 

was an increase of imports of similar or competitive goods that that 

firm produces, and that increase significantly contributed to those 

losses. 

If EDA makes those findings, then a firm is issued a certificate 

of eligibility to apply for assistance. 

The second step involves the preparation of the firm’s adjustment 

proposal and then that is approved also by EDA. The adjustment 

proposal is essentially a strategy for guiding the firm’s recovery, 

and it may include technical assistance in such areas as marketing, 

product development and diversification, computer system enhancements, production and industrial engineering, and export promotion. 

And then finally the third step is the actual implementation of 

the firm’s adjustment proposal. And usually what happens is a firm 

will consult with a private consultant to actually implement those 

technical assistance tasks, and the firm will pay 50 percent of the 

consultant’s fees, and then the TAAC will pay the other 50 percent, 

up to an amount of $75,000. 

As far as the results of the TAA program, we have seen instances 

in which some firms have increased their sales between 13 and 40 

percent, and we’ve seen some other instances where firms have 

been able to decrease their production costs by as much as 40 percent. 

And also in 1998, an evaluation by the Urban Institute compared 

certified firms that prepared and actually implemented their adjustment proposals with certified firms that didn’t. Those firms 

that actually implemented their adjustment proposals survived at 

a significantly higher rate, added as opposed to lost more employees, and they achieved an almost double increase in their sales. 

And, Mr. Chairman, just the last thing I’ll tell you is that for 

those that are seeking more information about the TAA for Firms 

program, that may be interested in looking at the TAA for Firms 

web site, and that’s located at taacenters.org. And I thank you very 

much for the opportunity to visit with you today, and I would be 

happy to answer any questions. 

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

Chairman MANZULLO. Appreciate your testimony. Thank you. 

The next person to testify is David Holbert, who is the Executive 

Director of the Western Trade Adjustment Assistance Center, one 

of the 12 TAACs, located here in the Los Angeles area. Mr. 

Holbert, look forward to your testimony. 

24

STATEMENT OF DAVID G. HOLBERT, EXECUTIVE DIRECTOR, 

WESTERN TRADE ADJUSTMENT ASSISTANCE CENTER, LOS 

ANGELES, CALIFORNIA 

Mr. HOLBERT. Thank you, Chairman Manzullo, and Congresswoman Napolitano, for this opportunity to testify. Speaking on behalf of the TAA Centers across the country, we deeply appreciate 

the past support of the Congress to authorize and fund this program. Those decisions have saved and created thousands of jobs 

nationwide. 

The TAA Centers also wish to thank EDA, and Mr. Bearden in 

particular, for the energetic initiatives to improve this program 

that have taken form in the last year. 

My testimony will address two questions, why TAA for firms is 

particularly effective for trade-impacted firms, and what improvements could be made to the program. 

While the Trade Act does not specify the size of the business that 

may be eligible, very few participating firms employ more than 

500. The average is fewer than 100 employees. Nearly all are manufacturing or agricultural firms. Most are family owned or closely 

held. Typically, the principal owner is the chief executive, and the 

firm operates from a single location. 

Characteristics of these small firms and the nature of trade impact combine to create a crisis for otherwise viable companies. 

Whereas small firms tend to have narrow product ranges, a slight 

change in imports, invisible at the macro-economic level, can bring 

an aggressive new competitor to small firm’s market overnight. 

Lower costs and thereby lower prices, a common feature of imports, 

attract customers in rapid succession. Often, business decline occurs before correction can be implemented. 

Despite the talent required to found a small business, firms faced 

with low-cost competition find that they have to do something differently than in the past, and this requires new expertise. Further, 

since trade impact tends to occur pervasively in particular products, entire fields of industry can be threatened. Most importantly, 

a temporary and correctable crisis can threaten the livelihoods of 

employees and the life’s work of owners. 

By assisting firms with planning and the use of outside expertise, TAA for Firms brings an essential component of recovery into 

the trade-impacted firm’s near-term operations. Indeed, it has been 

proven time and again that by operating with exceptional quality, 

with cutting-edge designs, addressing a particular group of customers’ needs, and a host of other business improvements, producers can overcome competitors, even those with large price advantages. 

By helping to source and monitor as well as partially fund outside expertise, TAA for Firms makes implementation a reality at 

a time when its need is greatest and yet least feasible for a firm 

facing declining sales and job losses. Larger firms facing trade impact may rely upon internal financing or turn to sourcing abroad. 

Small firms do not have these options. Most importantly, a temporary and correctable crisis can threaten the livelihoods of employees and the life’s work of owners. 

Further, since trade impact tends to occur pervasively in particular industrial segments, entire fields of industry can be threatVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
25

ened with the potential of being lost forever to the U.S. industrial 

base. 

By assisting firms with planning in strategy and implementation 

of outside expertise, TAA for Firms brings an essential component 

of recovery into the trade-impacted firms near-term operations. By 

helping to source and monitor as well as partially fund this technical assistance, TAA for Firms makes implementation a reality at 

a time when its need is greatest yet least feasible for a firm facing 

declining sales and job losses. It often surprises observers that a 

common outcome of recovery is expanded exporting. 

During the five years from 1997 through 2001, the TAA Centers 

monitored results for 511 companies with just under 50,000 employees and $6.4 billion in sales. As a group, these firms had lost 

12 percent of employment and 10 percent of sales in the two preceding years. 

Since starting the program, the firms grew 29 percent in sales, 

stopped job losses, and gained 18 percent in productivity, more 

than double the national rate. 

The level of appropriation for TAA firms since 1997 has been between $9.5 million and $10.5 million annually. This year, the President’s proposed budget includes $13 million for TAA for Firms. 

This is a most welcome endorsement, and the only substantial increase proposed in recent years. 

Weeks ago, Congress passed legislation authorizing TAA for 

Firms for six years and recommending appropriations of $16 million annually. Yet without positive efforts, level appropriations 

would appear to be the most likely income. I ask the members of 

the committee to help see the adequate appropriations through the 

various processes of the Congress. 

Throughout this testimony I have referred to trade impact without precisely defining it, yet I am confident everyone present knows 

what I’m talking about. I’ve stood with company owners in their 

fields and factories, both of us convinced that the firm is trade impacted, but challenged as to how to demonstrate this. The Trade 

Act definitions, while certainly appropriate at the time of their creation, offer a qualified standard for today’s experience with trade 

impact. 

I would ask the committee to encourage your colleagues to consider anew the subject of what constitutes trade impact. 

In the Trade Act of 1974, Congress created TAA for Firms in 

order to save and create jobs and help American farms and manufacturers compete internationally without creating artificial trade 

barriers. Your wisdom in establishing this effective trade remedy 

is now obvious. 

I would emphasize that the small business owners that participate in this program face genuine crises of survival. We are told 

that firms like these are the bedrock of the economy and the engines of job growth. Their individual stories are dramatic and compelling. 

To the question as to how this program could—what improvements could be made to this program, I would say first, effective, 

more effective criteria for defining trade impact, and adequate resources for the program’s operation. 

26

I would conclude by again thanking the committee for your attention to this important matter for the nation’s small farms and 

manufacturers as well as the many and valued jobs represented at 

these enterprises. Thank you very much. 

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

Chairman MANZULLO. Thank you. Bruce, you are back for a 

cameo. 

Mr. THOMPSON. I can’t stay away, Mr. Chairman. It’s a pleasure. 

Mrs. NAPOLITANO. Thank you. 

Chairman MANZULLO. This time you are going to be testifying on 

efforts of SBA to promote small business expansion in the international marketplace. For those of you who are with the government testifying, I would ask that you localize your testimony. You 

don’t have to lobby us to get more money for your programs. That 

is not why we are here. That goes on all the time in Washington. 

There are a lot of people here who have come to this hearing whose 

businesses have been severely impacted, and they are coming here 

because they want help. I want you to testify as though you are 

speaking to them and not the two members of Congress, because 

that way, this becomes a full utilization of the resources here as 

opposed to the normal type of hearing that you can hear in Washington as opposed to a field hearing. So with that in mind, Bruce, 

give us your additional testimony. 

STATEMENT OF BRUCE THOMPSON, REGIONAL ADMINISTRATOR, REGION 9, SMALL BUSINESS ADMINISTRATION, 

SAN FRANCISCO, CALIFORNIA 

Mr. THOMPSON. I appreciate that, Mr. Chairman. I think you will 

find this is a local driven little talk here. 

With regards to international trade, opportunities are growing 

rapidly. The President sought and Congress recently granted a 

trade promotion authority. This authority will open markets for 

U.S. exporters through a new round of global trade negotiations 

which is very good for America’s small businesses. 

Ninety-seven percent of all exporters are small businesses with 

fewer than 500 employees, and two-thirds of those small exporters 

have less than 20 employees. The SBA has technical assistance and 

loan product guarantees specifically for exports. Also the SBA is a 

partner with our sister federal agencies in U.S. export centers 

(USEACS). There are 19 USEACS across the country, with locations in Southern California. 

The SBA also offers three financing tools developed exclusively 

for export development. They are Export Express, Export Working 

Capital Programs, or as we call them, the EWCP, and the International Trade Loan Program. 

The SBA’s new Export Express loan program, offering a maximum loan amount of $250,000, is geared towards small businesses 

that have export potential but require funds to cover the initial 

cost of entering an export market. A local example of a firm that 

used Export Express is Korea Crest, an exporter of piping insulation and industrial chemicals. Korea Crest received a working capital loan used in part to attend an international conference in 

Seoul. The SBA in association with California Center Bank financed their trade promotion costs. 

27

Paul Lee, the International Development Vice President of California Center Bank in Los Angeles, who underwrote the guaranty 

application, commented that this unique loan program can provide 

much needed trade promotion financing to America’s exporters, and 

we look forward to providing financing assistance to many more export businesses through the SBA. 

The SBA recognizes that many small businesses have difficulty 

in obtaining a short-term working capital loan because their collateral is tied up in long-term loans. The EWCP is designed to help 

these small exporters by supporting transaction-based loans. To 

make the EWCP even more user friendly for exporters and lenders, 

the SBA and the U.S. Export-Import Bank, Ex-Im, divided the export financing market with the SBA, extending guarantees of $1 

million or less, and Ex-Im Bank holds all guarantees over $1 million. 

Congresswoman, in your district we have provided nearly $5 million in export working capital financing to area businesses with 60 

percent of the assistance going to minority enterprises and 25 percent to women-owned businesses. The SBA has also had a very successful partnership with the State of California’s Export Finance 

Office, whereby we jointly guarantee loans to eligible small businesses. 

The SBA’s offices in Southern California have financed 470 

transactions for $207 million. Recently the Small Business Administration and Ex-Im entered into a small business initiative memorandum of cooperation. 

The first phase of this initiative is to leverage market resources, 

thereby raising awareness among lenders and exporters. 

Lastly, Mr. Chairman, you also wanted to discuss trade adjustment assistance for minimizing any adverse effects of trade agreements. The SBA offers the International Trade Loan program for 

those small businesses that have been adversely impacted by import competition. This program was designed to help small businesses improve their competitive position by providing eligible 

firms with necessary financing to support their export and upgrade 

their physical plant and equipment. 

Under this program the SBA can provide a repayment guarantee 

to commercial lenders for up to $1.25 million in combined working 

capital and fixed asset loans, including any other current SBA loan 

guaranties. 

Additionally, here in Los Angeles the North American Development Bank administers a loan program called the U.S. Community 

Adjustment and Investment Program, or CAIP. Through the Department of Agriculture’s business and industry loan guarantee 

program and the SBA’s 7A and 504 program, the CAIP provides finance resources in U.S. communities that need assistance adjusting to changes in trade patterns with Canada or Mexico. It is estimated that the SBA has helped to create or preserve over 5,000 

jobs. 

In general, the SBA’s programs can help people start a business, 

change, or modify their business plan, assist with advertising to 

different markets or any other management needs and financing. 

The SBA’s Los Angeles District Office and its Government Contracting and International Trade units are proud of the service 

28

they have provided to small minority- and women-owned businesses. 

While Administrator Barreto continually remind us that much 

remains to be done, it has been exciting and rewarding to work 

with the area’s entrepreneurs to support their business growth, 

thereby creating jobs and build stronger neighborhoods. The SBA 

is here to serve you as well as to listen so we can serve you better. 

Please note that I have also submitted written testimony with 

the committee, and once again, thank you, and I will be happy to 

answer any questions. 

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

Chairman MANZULLO. Thank you. Our next witness is Mary—is 

it Delmege? 

Ms. DELMEGE. Delmege. 

Chairman MANZULLO. Delmege. Sent here by, I guess, would it 

be your boss, Jeri Jensen-Moran? 

Ms. DELMEGE. Yes, sir. 

Chairman MANZULLO. As the senior advisor for the Trade Promotion Coordinating Committee. I was elected to Congress in November of ’92, and sat for years on the International Relations 

Committee, on the Subcommittee on International Economic Policy 

and Trade. And I recall, as I was sworn in on January 3 1993, that 

September 1st of 1993 was the deadline date by which the Trade 

Promotion Coordinating Committee was to come up with its report 

bringing together all 19 agencies involved in trade promotion, and 

they met the deadline. We were astonished, but we have found that 

some of the most prolific workers in the federal government have 

been those that are involved in trade. We look forward to your testimony. Thank you. 

STATEMENT OF MARY DELMEGE, SENIOR ADVISOR TO THE 

TRADE PROMOTION COORDINATING COMMITTEE, DEPARTMENT OF COMMERCE, SAN DIEGO, CA 

Ms. DELMEGE. Thank you very much. Thank you very much. Mr. 

Chairman, Representative Napolitano. Thanks for inviting us to 

this hearing. It provides an excellent opportunity to highlight the 

importance of trade for our economy and to talk about how small 

and mid-sized businesses are participating in global trade. 

I’d also like to discuss current efforts to ensure that the resources that are available to help small businesses participate in 

trade are delivered in a coordinated manner. Finally, I’d like to 

share with you some examples of small California firms that have 

recently succeeded in selling into overseas markets. 

With regard to the importance of trade, the facts speak for themselves, as my colleague from SBA said. Exports have accounted for 

nearly 30 percent of U.S. economic growth since 1989, and 97 percent of the U.S. businesses that export are small and mid-sized 

firms. 

In developing the National Export Strategy this year, we surveyed more than 1,000 small and mid-sized exporters. One of the 

things we learned was that many small and mid-sized companies 

that export regard trade as a core element of their business, and 

they expect it to serve as a continued source of revenue growth. 

29

Many of them also view their export sales as an important source 

of diversification when their domestic sales are either flat or declining. 

The majority of the firms surveyed have experienced growth of 

more than five percent annually in the past three years in their exports, and they expect their export sales will continue to grow more 

than five percent annually over the next three years. Of the small 

businesses, those under 100 employees, that export, 60 percent of 

those companies derive more than 20 percent of their total sales 

from exporting. 

There is no doubt about the fact that trade provides tremendous 

benefits for small and mid-sized U.S. companies, and it’s well 

worth the time and effort we are spending to make sure that services are delivered in a coordinated and effective manner. 

The Trade Promotion Coordinating Committee was established in 

1993 by executive order, pursuant to the 1992 Export Enhancement Act, and it was designed to provide a unifying framework for 

all of the different agencies that provide. 

Each year we produce the National Export Strategy. This year, 

the strategy was developed through a unique process. We reached 

out to U.S. firms in order to better understand their needs. In addition to the survey that I just mentioned, we also conducted numerous one-on-one interviews and focus groups. We also looked at the 

trade promotion practices of other industrialized countries to learn 

as much as we could about their best practices. 

All of this was used to develop a series of recommendations, for 

better customer service, better outreach, and better education. And 

a lot of the specific recommendations, as you know, go to the issue 

of training. Although the users of our services generally tend to be 

pleased, many of them told us that they would like to see better 

coordination between the agencies. They expect more seamless customer service, if you will. 

As a result of this, there is an interagency task force that’s working right now on developing a training proposal that will make 

sure that trade specialists who interact with clients are well versed 

in the full array of services available. Trade specialists should be 

able to match the needs of the clients with the most appropriate 

resources. The Commercial Service currently has over 300 international trade specialists in the field, and our goal is to develop 

them as true account managers who are able to provide clients 

with the full array of services. 

This isn’t really a new effort. It’s important to point out that the 

1993 National Export Strategy called for the creation of U.S. Export Assistance Centers. Right here in Los Angeles was one of the 

first four that was developed, and the work continues today with 

Ex-Im, SBA, and the Commerce Department working side by side 

to develop export services. 

So far this year, these offices in Southern California have counseled more than 1,100 clients and they’ve reported 480 completed 

export transactions worth a total of $180 million. 

I’ll just give you a couple of quick examples. One is a firm here 

in Santa Fe Springs. We helped them resolve an issue with Mexican Customs authorities, leading to the successful shipment of over 

$30,000 worth of refurbished electronics equipment. 

30

In another case, the U.S. Export Assistance Center helped an apparel manufacturing firm here in Vernon link up with our commercial officer in France, through a series of ‘‘gold key’’ meetings, and 

the company was able to expand their distribution network and 

generate sales in excess of $200,000 this year. 

These are just a couple of examples of local firms that have benefited locally, but we feel that provided these trade specialists with 

additional training and resources, we will be able to increase the 

scope of assistance that’s available to small and mid-sized firms. 

I very much appreciate the opportunity to testify, and look forward to answering any questions that you might have. 

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

Chairman MANZULLO. Thank you. The next two witnesses will 

split a five-minute segment. William Redway, who is the group vice 

president of Small and New Business Group, of the Ex-Im Bank, 

and who came in from Washington, and David Josephson, who is 

the regional director of the Western Region Office of the Export-Import Bank out of Long Beach. I look forward to your testimony. 

STATEMENT OF WILLIAM REDWAY, GROUP VICE PRESIDENT, 

SMALL AND NEW BUSINESS GROUP AND DAVID JOSEPHSON, 

REGIONAL DIRECTOR OF WESTERN REGION OFFICE, EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. REDWAY. Thank you very much, Chairman Manzullo, and 

thank you very much, Congresslady Napolitano, for giving us the 

opportunity to testify. I am Bill Redway, and I’m with the ExportImport Bank. For those of you that are not familiar with Ex-Im 

Bank, just briefly, we are the U.S. Government’s export credit 

agency. It’s designed to support U.S. exports by providing competitive financing. Other countries, almost every developed country, 

has an organization like us, the Japanese, the English, who do the 

same thing we do. 

We are a small agency. We’re about 420 employees with about 

110 of those employees in my group which is devoted to small business. 

We’ve got several mandates. We’re not supposed to compete with 

the private sector. We are supposed to support small business. We 

are—we have other mandates, exporting goods to Africa, this sort 

of thing. What this means, especially the business don’t compete 

with the private sector, is that we are the agency of last resort. We 

do the riskiest deals, we do the longest term deals, and we do the 

smallest deals. The private sector generally takes what is the middle, and we go around the periphery. 

The last year we did, we supported $12.5 billion of U.S. exports 

of which $1.7 billion, or 18 percent, were for small business; 90 percent of the bank’s transactions, however, were small business 

transactions. So that the picture of Ex-Im Bank is support for large 

business, but also a very, very large support for small business. 

Our small business programs, which the state of California has 

taken a lot of, has used very aggressively over the last 30 years, 

the first one is our working capital guarantee facility, which my 

friend from the SBA described their facility. Ours is similar. We do 

handle the larger transactions, but they’re still small. We did alVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00034 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
31

most $700 million of these last year, and 90 percent of those were 

for small business. 

It’s based on delegated authorities, so we delegate authority to 

banks, of which there are 70 in the state of California which are 

approved delegated lenders. Wells Fargo Bank here in Los Angeles 

was our Small Business Bank of the Year last year. 

Our other very large small business program is our insurance 

program which supports—which basically insures repayment by 

the foreign buyers so that we basically are taking foreign buyer 

risk. If you go into our insurance division, it looks like the commercial lending unit of any Commerce Bank, but it’s fairly sophisticated, and we did about 10,000 transactions in that division last 

year. 

Chairman MANZULLO. You have two and a half minutes there. 

Did you want to yield to your colleague there? 

Mr. REDWAY. What I’m going to do, I am going to do most of the 

talking, and David, who is going to be the California guy, who sits 

right here, he’s going to answer most of the questions. If that’s 

okay with you all. 

The biggest problem we have got is nobody knows who we are, 

so how do you get our name in front of—in front of small businesses here in California and all over the country? We have got a 

marketing budget by U.S. Government standards which is large, 

but it’s less than a million dollars, so you can see that is not large 

by most standards. We have six branch offices which spread the 

word. 

Last year we sent out 300,000 pieces of direct mail, we did 37 

trade shows, we did 60 seminars, and we’ve worked very hard with 

various trade associations around the country. We also worked 

with 39 city-state partners, of which Seafoe here in the state of 

California is a very active participant. 

I will talk a little bit about California at this point. The—and, 

David, you jump in if I don’t get any of this right. As I said, Wells 

Fargo Bank was our Small Business Bank of the Year last year. 

We’re also in the San Francisco area. The Silicon Valley Bank is 

our largest delegated authority lender, our most experienced. 

We did out of the state of California last year—no, I’m sorry, the 

first nine months of the year, $619 million, we supported. We have 

15 active insurance brokers who are promoting our products, and, 

as I said, we did SeaFoe, and we have got as a very active delegated authority lender. 

In this district, District 34, in the last five years, we’ve done a 

total of 23 transactions, of which 19 were for small business, a total 

of $158 million. So we have been fairly active here. That is not—

remember, it’s five years. It’s not a figure that I—it’s not a figure 

I am ashamed of, but it’s one I think can be very definitely improved on, if we can get the word to people on what our programs 

really are. 

Chairman MANZULLO. Let me make this suggestion. And, again, 

I want to emphasize the reason that we have the folks from Washington out here is not to justify the existence of the agencies. Nobody’s got any gripe at all. 

The problem is there is always a huge disconnect, and we see it 

happening today. The purpose of this testimony is not to edify Ms. 

32

Napolitano and me. We understand this probably better than most 

of you because we have to authorize a lot of it. I rewrote OPIC and 

TDA, and I was in the process of writing the Export Administration Act before I became Chairman of this Committee, but the purpose of your testimony, again, is not for us. What I would like to 

do is take an additional minute and a half, and tell the small business people here exactly what Ex-Im can do for them. Could you 

do that?

Mr. REDWAY. All right. 

Chairman MANZULLO. Appreciate that. Go ahead. 

Mr. REDWAY. Let’s start with the working capital guarantee program. This is an asset-based lending program which is designed to 

provide working capital for small firms. So if you are a small California exporter and you have an export order you need working 

capital to fill, and you’ve got an order in your hand, you can take 

that to your bank and say, hey, I have got this, the buyer—I’ve got 

a signed contract, the buyer looks like he is okay credit-wise, the— you, Commercial Bank, you, Wells Fargo Bank, take a look at that 

buyer, and if you think he is okay, you can approve it under your 

delegated authority and advance me the funds so I can build the 

widget that needs to be built. That’s the working capital guarantee. $700 million last year done that way. 

On the insurance side, again, you are a California exporter, 

and—I’m going to turn this over to David in one minute to give you 

actual examples. But you’ve got, say, a Brazilian buyer, and he 

wants—he places a million dollar order, he wants 90 days to pay. 

You are not going to take Brazilian risk. It’s just not a risk you 

want to take. 

So you say, okay, get yourself an insurance policy, and Ex-Im 

Bank will go and insure that buyer as long as the credit is good, 

because again, reasonable assurance of repayment, we are not an 

aid organization, we are a commercial organization. We look at the 

Brazilian buyer, we say, that’s okay, we will give you an insurance 

policy against commercial and political risks, and that is what that 

does. 

Now, the California exporter can then take that to his bank, any 

bank, and they will advance against a federally insured receivable, 

not a Brazilian receivable. That is what we do. We did 10,000 of 

those deals last year. 

Mrs. NAPOLITANO. Would you mind telling the audience what 

countries you are in, what countries you’re not in? 

Mr. REDWAY. We are open in just about every country in the 

world. The ones we are politically prohibited from, I’m thinking, 

say, Libya, Cuba, right, those countries we are not open, but every 

other country we are in, with some exceptions. It’s a long list, but 

basically, most of the countries that you would be dealing with, we 

are open. 

Mrs. NAPOLITANO. And you now have a working agreement with 

Mexico, I understand, which you didn’t have it for many years. 

Mr. REDWAY. We do a ton of—Mexico is our biggest market. Yes, 

we have a very strong working agreement with Mexico, and all the 

way through. Latin America is our largest area. 

I might just finish with this and say that—and this is a political 

statement, I suppose, but we have a small business set-aside which 

33

with our reauthorization has just been doubled, so we are going to 

try and be twice as aggressive as we have been in the past. I think 

you all are very familiar with that, and I am open for any questions, and Dave in particular. 

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

Chairman MANZULLO. So, bottom line is, if companies are already exporting, then they can go to you, but if a company, a small 

business person wants to get involved in exports, the best place to 

go is to the local USEAC center. Is that correct? 

Mr. REDWAY. Right. 

Chairman MANZULLO. Dave, you want to answer that? 

Mr. JOSEPHSON. Right. We have—in our office, we get the full 

spectrum. We get extremely experienced exporters that need to 

fine-tune their risk portfolio when they come in to Ex-Im Bank for 

insurance; we get middle size and small businesses that need working capital; and then we get hopefuls, you know, they have a formula in a garage, and their wife has a brother in the Ministry of 

Industry in some country, and they—they don’t have a business 

plan, they don’t have anything, except a dream; so we have a 

SCORE representative who can help the new businesses actually 

get equity financing and a business plan up and running. 

I think our colleague from the Small Business Administration already noted that if they need working capital under one million, we 

refer them to Small Business Administration. If it’s over a million, 

we do the underwriting on that transaction. 

Then some of them come in as you mention. They really want to 

expand their market so then we send them to the DOC for a whole 

array of products and services that they offer through their foreign 

commercial center. 

Chairman MANZULLO. So, if you get somebody here that doesn’t 

even know if he or she has a product to export, the very first stop 

they would go to would be the United States Export Assistance 

Centers or the Small Business Development Centers? Would that 

be correct? 

Mr. JOSEPHSON. The first stop would be the DOC. The DOC can 

go into any country. 

Chairman MANZULLO. Okay. Now, where do people contact the 

Department of Commerce in this area? 

Mr. JOSEPHSON. In one of 19 USEACS, is it? 

Ms. DELMEGE. Here in Southern California we have five offices. 

We have two in Los Angeles, one in West L.A. And one in downtown Los Angeles. 

Chairman MANZULLO. Okay. Now, for the folks in Los Angeles, 

then, Grace, do you have the number there for the USEAC office, 

at your office? What phone number? We’re getting very practical 

here, folks. What phone number? Way in back. Yes? Is that Ray? 

Go ahead. 

Mr. REDWAY. The number is back in the office, Congresswoman. 

Mrs. NAPOLITANO. Well, I know we have it, but this place doesn’t 

have it. And that’s why it should be out to the business. 

Chairman MANZULLO. Okay. Well, they could contact your office, 

and you can get that to them. So, if you want to export, get a hold 

of Grace. Yes, sir. Back with your hand up. 

34

AUDIENCE MEMBER. We have a flyer out here that has phone 

numbers and contact names. 

Chairman MANZULLO. That’s great. 

Mr. THOMPSON. He works for the SBA, Mr. Chairman. 

Chairman MANZULLO. Good. That’s great. 

Mrs. NAPOLITANO. Mr. Chairman, I’ll take the prerogative as 

your host—hostess, that the SBA representative, Mr. Alvarado, has 

been exemplary in working with my small businesses. In fact, we 

have a gentleman sitting in the back, Ron Beilke, just opened his 

business, and he can’t say enough about SBA. He’s got several people here. I just want to tell you that he does great work. 

And while a lot of people don’t know, it’s important that they realize that you don’t have that kind of big staff, so they need to be 

patient. However, small business doesn’t have the time, so it’s important that we kind of understand different agencies’ roles in 

what it is they need to learn about, and while we have you here, 

we are taping it, hopefully we will get it running and capable so 

business can understand it, but it’s not all the time—how many 

people come in here to listen and understand and learn and get 

educated, and this is one of the things I hope you will help all of 

us be able to better do the outreach to our businesses so that we 

can have you better—how would I—not prepared, you are prepared, able to deal with the influx of business. 

You are saying you’re doing a certain amount of money in my 

district. That’s not enough. And I can tell you because we have got 

thousands upon thousands of businesses that are looking for help, 

and yet, if I send them to you, you are not going to be able to deal 

with them, because there is so many. You don’t have that kind of 

personnel. And, again, my frustration is that there’s too many bureaucrats doing things in Washington and not enough down here. 

Chairman MANZULLO. Well, I guess on that note, everybody here 

has a purpose in dealing with the small business people, and our 

goal, Grace, is to make sure that anybody who wants to get involved in the exports, really all they have to do is call your office, 

and you’ll get them over to the nearest USEAC center, and that 

will put into operation the folks from SBA, the Department of Commerce, and the Ex-Im Bank. Okay. I guess we’ve made that point. 

Our next guest is Raul Hinojosa. Is it a member of your family 

that is a member of Congress, from Texas? 

Mr. HINOJOSA. Yes. The southern part of Texas, yes. Related, 

yes. 

Chairman MANZULLO. Southern part. He’s way at the bottom of 

Texas down there. Anyway, Raul is the Research Director of the 

North America Integration and Development Center, School of Public Policy and Social Research, University of California at Los Angeles. That’s quite a title there. We look forward to your testimony. 

Mrs. NAPOLITANO. Not only that, Mr. Chair, but he’s also what 

I consider to be the brains behind NADBank. 

35

STATEMENT OF RAUL HINOJOSA, RESEARCH DIRECTOR, 

NORTH AMERICAN INTEGRATION AND DEVELOPMENT CENTER, SCHOOL OF PUBLIC POLICY AND SOCIAL RESEARCH, 

UNIVERSITY OF CALIFORNIA LOS ANGELES (UCLA), LOS ANGELES, CALIFORNIA 

Mr. HINOJOSA. Thank you, Grace. And thank you, Mr. Chairman. 

I do in fact run something called the North American Integration 

and Development Center. And I am proud to say what we do at the 

Center is focus on the questions of globalization, its impacts, both 

positive and negative, and how do we create public policy to make 

globalization a win-win proposition, particularly for local communities, and I am proud to say that we enjoy very good support from 

unions as well as small business Chambers of Commerce, and we 

try to be very, very sort of evenhanded in our analysis. 

I just want to make two quick points about the nature of small 

businesses in the international arena. One, from the tracking information that we have, and I have prepared some testimony for you 

on this as well as some policy initiatives. One quick thing, small 

businesses, the reality of it is, they are not actually in the tradable 

sectors of the economy. Ninety-five percent of small businesses, as 

you know, are in what are called the nontradable sectors, so they 

are not very participatory right now. 

Hispanics, interestingly enough, Hispanic businesses and Hispanic workers are much more represented in the tradable sectors 

of the economy, which means both exports, which is potentially 

positive, but also imports, which is very—affecting this area. So we 

are looking at both the job gains and the job losses. 

In particular, though, one thing I want to point out, that a lot 

of the debate on globalization has concentrated on these job losses 

and job gains, is actually missing what I actually think is a very 

important part of the picture, particularly in Southern California. 

Our relationship to the world is actually much more through immigration and through remittances, and a very large untapped resource is immigrant entrepreneurs, and that is what I want to 

focus a little bit on. 

We have a project now at UCLA that we think that immigrant 

entrepreneurs, small business entrepreneurs are an incredible 

asset for the United States in terms of the ability to link up with 

markets and with new types of joint ventures all over the world 

that is unique to the United States, unlike actually many parts of 

Japan, for example, which doesn’t have that type of ability, and 

particularly from a small business perspective. 

We are now working with Hometown Association of Immigrants 

from Mexico, Central America, Vietnam, and India. I am going to 

mention just one of 20 projects that we are incubating to create, 

for example, wireless technology here by Indian and Chinese companies, that are now providing Internet connectivity in the rural 

countryside and immigrant centered regions of Mexico to reduce 

costs of telecommunications and remittance sendings, which represents more than 50 percent of what immigrant households, 

transnational households, spent. Both here in the U.S. and abroad, 

50 percent of their income goes to financial services or to telecommunications, very high cost. 

36

Here is a small company, rooted here, developing this new type 

of technology. What is the problem? The problem is that we—our— and these gentlemen and ladies are—have developed a very important base here in the United States for small business support. 

What we really need to do is get it globalized, transnational 

small business development activities. And that was actually the 

idea that we originally had six years ago, with the North American 

Development Bank, to create, in the case of North America, a unified strategy for supporting these types of transnational small businesses. 

Multinationals have it. They have the transnational law firms, 

they have the transnational banks. It’s very hard for the small 

businesses to break into that. 

I know that Hector Baretto with SBA has now opened up an 

SBDC in Guadalajara, first of its kind in the world. You know, it’s 

not really off the ground yet, and in part we really need to have 

a great deal more focus. NAFTA is a perfect place to really even 

out these benefits in this community which is also potentially the 

most at risk, which I was pointing out. 

So I would suggest a couple of very concrete points. One is that 

we work with the North American Development Bank. I would love 

it if your committee worked more closely with SBA to develop this 

strategy on a bi-national basis, go down to the Bi-national Conference that is going to be held with legislators from both countries, 

in November, with—President Bush is now apparently going to go 

down there to raise this agenda item. 

Secondly, broader point, we are about to negotiate something 

called the Free Trade of the Americas Initiative. The small business agenda has to be on these globalization discussions. If not, 

people are going to continue to be left out of the process, and my 

time is up. There’s a lot more that I think that we can talk about 

at the local level that there are really opportunities to advance 

along these lines. 

Chairman MANZULLO. I appreciate your testimony. I also am a 

member of the Financial Services Committee, and I sit on the subcommittee that deals with the multilateral development banks, and 

next time you are in Washington, please stop by and you can take 

out Grace and me for some coffee, and look forward to exploring 

this on a greater level with you. 

Mr. HINOJOSA. Absolutely. 

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

Chairman MANZULLO. Our next good follow-up witness is Hugh 

Loftus. Hugh is the director of the Community Adjustment Investment Program of the North American Development Bank in the 

City of Industry in California. Hugh, look forward to hearing your 

testimony.

STATEMENT OF HUGH LOFTUS, DIRECTOR, COMMUNITY ADJUSTMENT AND INVESTMENT PROGRAM, NORTH AMERICAN 

DEVELOPMENT (NAD) BANK, CITY OF INDUSTRY, CALIFORNIA 

Mr. LOFTUS. Thank you, Mr. Chairman. I am pleased to be here 

today, and thank you, Congresswoman Napolitano, for including 

me in the program. I have submitted some remarks which I will 

37

let stand on their own, since they went in a direction which was 

not of the chairman’s wishes, to be a little bit more practical in 

terms of how we can interact directly with businesses. Does give 

me an opportunity to answer the question and also talk about one 

of the fundamental problems in the way we’ve approached our particular program. 

We were established to go in to help communities as opposed to 

businesses or individuals deal with NAFTA impacts measured by 

job losses by trying to replace jobs in the community so we did not 

try and preserve businesses that were being negatively affected, we 

did not impose on the Department of Labor’s issues in working 

with workers. We tried to take a regional community-wide look at 

how can we create replacement jobs. 

We work very closely with the SBA and with the U.S. Department of Agriculture, augmenting and enhancing their loan programs for small business, trying to overcome with the resources we 

had some of the perceived problems that we felt both caused businesses to hesitate in pursuing the opportunities, typically the fees 

and costs associated with that or the processing time associated 

with that, and to encourage them, if they were going to pursue the 

program, to look at actually possibly borrowing more money, expanding more rapidly because of some of the cost savings that we 

could afford. 

I have nothing but compliments for our friends at SBA and 

USDA that we have worked with over the years, but the critical 

element that is involved in that process, and alluded to by several 

other groups, are the commercial lenders in the marketplace. 

What we have found over the six years of our program in working with these agencies is that we can have a very effective program in rural and smaller communities because we can become a 

visible entity. They can see a transaction; they can identify our 

participation; they can think of us as a resource and a tool, which 

is what we want. You take that same program, and put it in a 

large urban area like Los Angeles County, and getting visibility in 

Los Angeles County is the hardest thing you can do in the world. 

We have had meetings with lenders, we have had meetings with 

businesses, we outreached to Chambers. If you don’t turn a meeting into a transaction within 48 hours, within another 48 hours, 

that meeting never took place. Life goes on, and memory diminishes. 

So we have found that the one—the critical element for us to 

work with is a better way to engage the financial institutions. Candidly, the program that we put together was designed to enhance 

small businesses, to attract them and to give them an incentive. 

The cost of that is an additional work burden on the banks. They 

have to take on more burden to process the loans the way we’re 

doing them in order to garner benefits for their borrowers, and 

which basically, in summary, there is really not very much in it for 

the banks. 

And so, for the smaller communities, where the bank is an integral part of the community, and works with the businesses on a 

daily basis, we have been successful. In the larger communities, we 

have been told by some large banks, that they simply cannot interrupt their normal production process by identifying the occasional 

38

transaction that might qualify, and could save—in the maximum it 

could save the small business $25,000. 

Chairman MANZULLO. Hugh, let me interrupt here in your time 

left. When would a small business person come to you or a local 

community come to you for your services at the NADBank? 

Mr. LOFTUS. Let me answer that—I’ll flip the question. We deal 

at the community level, and when we identify a community as becoming eligible for our program and using the resources at the 

NADBank, they provide us with regular analysis of data where we 

can identify NAFTA-impacted communities. We bring them into 

the program, at which time we notify the elected representatives, 

both federal, state and local. 

We do outreach through the SBA’s auspices to the local institutions and notify them they now have eligibility for the program. We 

provide them with brochures, and there are copies of those outside 

on the table. That’s how they would know that they were in the 

program and get information as to what the program would do for 

them. 

Our program basically only has about $20 million in funding. 

There’s very little money, so there is not much interactions directly 

with small businesses per se. 

We have made a total of five direct loans under our program 

which says we will lend directly, where one of the government 

guaranteed loan programs or a regular conventional loan isn’t applicable, but it is still supposed to be a reasonable credit, and there 

aren’t an awful lot of those out there. 

So we have in a few cases found transactions where we can participate as a direct lender. Primarily we direct borrowers to the 

bank, to the local resource centers that they’ve got, the Small Business Development Centers, SBA offices, and just ask them, do you 

have a bank in your community that is willing to take the additional time—and it isn’t much, probably takes an extra two or 

three days, is all the process through our program, to save the applicant the cost of the guarantee fee or to assure that in the case 

of the Department of Agriculture that the loan guarantee funds 

will be available to cover them, because we actually can supplement the Department of Agriculture’s capacity to issue guarantees 

by giving them additional funding when a qualified loan comes 

along. 

We also do the same thing with SBA, but with SBA last year I 

think we did 100 loans. The SBA probably did 30 or 40,000. So 

with the SBA, we are not a huge program. 

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

Chairman MANZULLO. I appreciate your testimony. Okay. We are 

going to shift gears just a little bit here and go to the issue of import duties that have been placed upon steel under the Section 201, 

of the Trade Act, and we are going to have a pair that will testify 

together, Anita Huseth, President, and John Reynolds General 

Manager of Mace Metal Sales here in Los Angeles. Whoever wants 

to start and control the time, can go first. Anita, would that be 

you? Go ahead. We look forward to your testimony. 

39

STATEMENT OF ANITH HUSETH, PRESIDENT, MACE METAL 

SALES, LOS ANGELES, CALIFORNIA 

Ms. HUSETH. Thank you, Mr. Chairman. I would like to thank 

Congressman Donald A. Manzullo, Chairman of the Committee on 

Small Business, for inviting me to represent my company, Mace 

Metal Sales, Inc., a steel service center located in Los Angeles, 

California. I would also like to thank Congresswoman Grace 

Napolitano for hosting this meeting in her district. 

My husband and I initially started Mace Metal Sales in 1971, 

and have seen it evolve into a successful company during these 31 

years. My husband Marvin ran the business for 20 years, and upon 

his death in 1991 I took charge. 

As a steel service center, we deal primarily with carbon flat 

rolled steel. We store, cut or process the steel for end users. 

We are proud to say that we never turn down a customer, no 

matter how small the order may be, and consider ourselves a customized service center because we adhere to the customer’s most 

demanding considerations. Perhaps this is the reason for our success. We continue to put food on the table for 29 American families, 

provide full medical coverage for all the family members, and fund 

employee to retirement one hundred percent. We solve our own internal problems. 

President Bush stated that small business owners account for the 

majority of employment in this country. 

NEGATIVE IMPACT OF SECTION 201 ON MACE METAL SALES

We do not have enough domestic mills here in California. We are 

put on allocation with lead times that are not dependable. What 

used to be six- to 12-month steel contracts with our customers are 

now three-month contracts because of the steady rise in steel 

prices. It is very difficult to keep going back to our customers and 

informing them that the steel is not available, our allocation allotment has been reduced or our lead times are now pushed out another two to four months. 

This year, we had to turn down at least $2 million worth of business simply because the steel was not available. 

We have layoffs, and the final end is unemployment. It is obvious 

that Section 201 is not working for us, and the domestic mills cannot do the job, simply because they do not have the capacity, material, or work force. 

To meet our needs, the mills will have to supply us with the additional 25 percent of steel that we normally import. 

Something can be done and action must be taken to rescind or 

amend Section 201 and open the door for more steel to come in and 

give us relief. 

Our problems are serious, and we need help. Thank you. 

Our general manager of Mace Mills, John Reynolds. 

STATEMENT OF JOHN REYNOLDS, GENERAL MANAGER OF 

MACE METAL SALES, LOS ANGELES, CALIFORNIA 

Mr. REYNOLDS. I’d like to thank you for giving me the opportunity to testify today. I just want to make everybody aware, that 

Mace Metal Sales has been a very good supporter of domestic mills 

in the past, and will continue to do so in the future. 

40

However, we do disagree with the 201 decisions for the following 

reasons. 

Never before have the prices increase at this rate. Since March 2002, depending on the product, prices have gone up $20 to $40 per 

ton every 30 to 60 days. Overall, we have seen a 40 percent increase that’s very difficult to pass on to our customers, and we 

don’t know where it’s going to end or how far—or how much longer 

it will last. 

It’s just been too much too soon for our customers to absorb. 

They are losing business at an alarming rate to countries such as 

China who are importing finished goods into this country at prices 

below the raw material cost. So maybe the 201 decision should 

focus on some issues like that instead of raw material. Raising 

prices for those type of customers is not the answer. 

Allocations, steel shortages and lead times. What can be said? If 

you don’t have steel, you can’t sell it. We have been cut back by 

roughly 30 to 40 percent. Without imported steel, the domestic 

mills cannot produce enough steel to supply this market. Therefore, 

we have shortages, which leads to allocation, which leads to loss of 

business. 

If we cannot get enough steel for all of our current customers’ requirements, they must buy elsewhere, and so they’ll go shopping 

around and we lose part of that business too. 

In July, we were asked to place orders through the end of the 

year. That is a six-month lead time. In this business, that is way 

too long. It is only a guess at that time how much steel you are 

going to need and at what sizes you can bring in. When we get 

calls for future inquiries, at the time we cannot accommodate the 

customers simply because all of our steel has already been ordered 

and has been booked. 

One of our suppliers called and said, ‘‘I had to reduce my allocation by another 400 tons for the fourth quarter of the year 2002, 

simply because the third quarter allocations, 400 tons of it could 

not be produced and had to move over into the fourth quarter.’’ I 

don’t understand that. I don’t know why I have to pay the price for 

their failure. They also explained that they can only roll so many 

tons, which is another problem out here on the West Coast. There 

are simply not enough suppliers. 

Number three is the loss of business. If you take points one and 

two, high prices, long lead times along with not enough steel, and 

it all adds up to loss of business, and there’s just not enough—not 

only for the current business, but future business as well. 

It is our position that the 201 decision should be reconsidered. 

It seems to help only a few and not the majority in the steel industry. 

While Mace is a small minority woman-owned business and may 

not seem significant in the context of the entire steel industry, 

don’t forget, there are thousands of us out there. Thank you very 

much. 

[Applause.] 

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

Chairman MANZULLO. These must be the steel users. 

Let me introduce again, representing Hilda Solis, member of 

Congress, Aiha Nguyen. Are you here? She had to leave. We have 

41

also been joined by Tony Cardenas, California Assembly Member 

from the 39th District. Tony, where are you? Why don’t you stand 

up. 

Then Grace wants me to reemphasize that you can validate your 

parking at the sign-in table. Is that correct? 

Mrs. NAPOLITANO. Right there. 

Chairman MANZULLO. Okay. The next witness will be Bart 

Alcamo, President of RBK Tool & Die Company, on behalf of the 

Society of the Plastics Industry, Incorporated. We look forward to 

your testimony. 

STATEMENT OF BART ALCAMO, PRESIDENT, RBK TOOL & DIE 

COMPANY, ON BEHALF OF THE SOCIETY OF THE PLASTICS 

INDUSTRY, INC., MODESTO, CALIFORNIA 

Mr. ALCAMO. Thank you, Chairman Manzullo and Representative 

Napolitano, for calling this field hearing of the U.S. House of Representatives’ Small Business Committee to address a number of important issues affecting small businesses in California. 

On behalf of The Society of the Plastics Industry, I would like to 

address one of the issues slated for your consideration today: The 

adverse impacts on companies from the recent tariffs on steel. 

Founded in 1937, The Society of Plastics Industry, Inc. Is the 

trade association representing one of the largest manufacturing industries in the United States. SPI’s 1,500-member companies represent the entire plastics industry supply chain, including processors, machinery and equipment manufacturers and raw material 

suppliers. The U.S. plastics industry employs some 1.5 million 

workers and provides $330 billion in annual shipments. 

The plastics processing industry is the fourth largest manufacturing industry in the United States after motor vehicles, electronics and petroleum refining. California, it must be noted, ranks 

number one in the country in terms of plastics jobs, 147,000 persons. 

The State ranks second for shipments, shipping more than $27 

billion in plastic raw material, products and equipment. In the sixcounty region from Los Angeles to San Diego, the plastics industry 

is responsible for more than 70,000 jobs and $14.3 billion in shipments, and Los Angeles County has more plastics jobs than any 

other county in the entire United States. 

Thus, I don’t think there should be any doubt about the significance of the plastics industry to the United States, California, or, 

in particular, this region of California. 

Ours is an industry that has grown more rapidly than overall 

manufacturing for the past 25 years, as it has continued to adapt 

to meet the ever-growing needs of consumers and to meet everchanging economic challenges. Today, however, the industry is certainly facing some particularly tough times, as it has been hard hit 

in the past two-and-a-half years during the nation’s economic slowdown. 

For example, the plastics equipment sector experienced a 40.4 

percent decline in shipment in 2001 compared to 2002. Shipments 

of injection molding machines, the largest industry equipment market, dropped nearly 50 percent from quarter four, 2001 compared 

to quarter four, 2000. The hope that 2001 was a bottoming out of 

42

the equipment market did not materialize as the first quarter of 

2002 continued the downward trend, with an additional 23.3 percent slowdown compared to the previous year. 

The current economic climate for the plastics equipment sector 

has been very hard indeed, with frequent announcements of layoffs 

and plant closures that hurt American workers and the industry. 

In one company survey of 1,000 moldmakers, another plastics industry equipment segment, the average profitability for 

moldmakers is down to just 1.4 percent. 

All this serves to explain, as you may have been wondering, why 

the plastics industry is here to testify before the Small Business 

Committee on the effects of the recent Steel Tariff’s decision by the 

Bush Administration. And that is because the equipment and mold 

sectors of the plastics industry are steel consumers, and the President’s imposition of tariffs on steel has exacerbated an already 

challenging situation. 

As an example, Universal Dynamics, a plastics auxiliary manufacturer, experienced a 20 percent increase in their steel price immediately following the tariff’s decision. Its steel suppliers have 

told them that another increase may be expected in September. Estimated annual costs to this company for steel price increases are 

more than $100,000 annually. While this company has grown to 

meet the global demands of the worldwide plastics industry, uncertainty about if and when a steel increase may happen, or how 

much the increase may be, adds another level of uncertainty to an 

overall already volatile economic environment. 

Another large diversified company, ITW, which is a major plastics processor and employs some 52,000 workers in plants in 43 

countries, believes that the tariff’s increase may cost the company 

nearly $20 million annually in additional duties. Other major plastics equipment manufacturers have experienced price increases 

ranging from 9 to 16 percent since March 2002, when the tariff was 

implemented, with increases growing to more than 35 percent over 

the past year. 

While there have been exclusions granted from the U.S. Trade 

Representatives for certain steel imports, steel consumers are still 

feeling the pinch. One plastics company, for instance, applied for 

21 exclusions from the tariff, to have only four granted. 

Chairman MANZULLO. Your time is up, but tell us about your 

own company. 

Mr. ALCAMO. Our company has had some experience with the 

steel increase in the tariffs. However, it’s been minimal to us because there’s been a lack of work because of the uncertainty of the 

manufacturers placing orders. 

Chairman MANZULLO. You have had a double whammy. 

Mr. ALCAMO. Got a double whammy. 

Chairman MANZULLO. Okay. Does that conclude your remarks? 

Is that really everything you wanted to say in there? 

Mr. ALCAMO. Yes. It pretty much concludes what I had to say. 

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

Chairman MANZULLO. Okay. We’ll get that in the Q and A. 

Thank you. The next witness is Terry Bonds. Terry is the District 

Director 12 of United States Steelworkers of America, came all the 

43

way from Albuquerque, to be with us, and here you are, Terry. We 

look forward to your testimony. 

STATEMENT OF TERRY BONDS, DIRECTOR, DISTRICT 12, 

UNITED STEELWORKERS OF AMERICA, ALBUQUERQUE, NEW 

MEXICO 

Mr. BONDS. Good morning. My name is Terry Bonds, and I’m the 

director of District 12 of the United Steelworkers of America. I represent 40,000 men and women who work in many industries within 

nine southwestern states, including California. 

I would like to thank the Committee on Small Business Chairman Manzullo for giving me the opportunity to address the issues 

of international trade and steel tariffs. I’d also like to express my 

appreciation to Congresswoman Napolitano for inviting me to this 

hearing in her home district. 

Following the Asian economic crisis, steel imports destined for 

Asia and Europe were diverted to the U.S. steel imports rose from 

31 million tons in 1997 to 41 million tons in 1998, and reached 

nearly 40 percent of the market. 

Domestic steel prices fell by 30 to 40 percent. The price of hot- rolled steel fell from an average of $340 per ton in 1997 to $210 

per ton by December 2001. 

Currently there is a global over-capacity of 250 million tons. 

The impact of the steel crisis of 1997–2002 cannot be overstated. 

Since 1998, 35 companies have declared bankruptcy and 17 have 

ceased production. Over 50,000 steelworkers lost their jobs. More 

than 100,000 retirees have lost their health care benefits, and the 

benefits of another 500,000 retirees are at risk. 

Last year the International Trade Commission found that imports had seriously injured domestic steel producers. Following the 

most thorough investigation in its history, the FTC recommended 

tariffs and quotas be applied to 16 of 33 products. 

On March the 5th, 2002, President Bush ordered tariffs on 14 of 

those products starting at 30 percent this year, falling to 24 percent next year, and then 18 percent in the third year with regular 

schedules resuming in the fourth year.

ITC Commissioner Hilman has estimated that the section 201 

tariffs apply to only about 29 percent of all steel imports. Some legitimate exemptions have been issued, though hundreds of the 727 

exemptions are for products that the domestic industry has the capacity and willingness to produce. Too many unfounded exemptions 

will undoubtedly weaken the 201’s effectiveness. 

The President’s 201 decision was not intended to be a permanent 

solution. In fact, this temporary safeguard provides a 3-year reprieve during which the reduction of global over-capacity, the lessening of retiree health care liabilities, and the consolidation of the 

domestic industry must occur for future viability. 

Some have expressed concern about recent price increases. Reasonable price increases were to be expected. Worldwide, prices have 

increased for reasons other than the 201. Current steel prices in 

the U.S. remain below 1997–1998 levels, and below their 20-year 

average. 

No one wants to pay higher prices, and steel-consuming companies are no different. Steel producers have invested $60 billion to 

44

improve quality and lower prices. But the ’98–’01 import prices 

were not fair market prices, but rather unfair dumping prices, 

against which U.S. producers simply could not compete. Steel consumers couldn’t compete with imports dumped at 30 to 40 percent 

below domestic prices, and they shouldn’t expect steel producers to 

do so either. 

With steel at $210 a ton, no steel producer in America can survive. For steel consumers to expect artificial prices is not only unrealistic, it is an endorsement of dumping, a clear violation of American and international trade law. I am not assuming that they have 

felt no impact. We have members employed by steel-consuming 

firms as well as steel-producing companies. We must search for a 

balance to allow both to survive. But, it seems to me, for America 

to survive, as we know it, our nation must have a strong steel industry. We must be able to produce our own steel. 

My hope is to present a balance, a view towards survival for our 

steel and steel-consuming industries, rather than a short-sighted 

view. It is not in America’s interest to allow the steel industry to 

vanish, not for our infrastructure, not for our national security. 

America has seen the danger of relying on foreign oil. Repeating 

this misfortune in steel would be a mistake and a threat to our 

economy. The day our government refuses to use our trade laws to 

rightfully defend American industry is the day we become solely 

subject to the WTO and global markets that have no regard for 

America’s workers, producers or consumers. 

Revoking the tariffs would be misguided. If Congress wishes to 

help steel producers and consumers, it should pass H.R. 4646, the 

Steel Industry Legacy Relief Act. This bill would provoke consolidation, protect retiree health care benefits, and foster a more level 

playing field since many foreign governments provide workers and 

retirees with national health care. It could even help steel consumers by reducing the cost of American steel. This bill has gained 

175 co-sponsors since its introduction in May, and we hope to see 

its expeditious passage. 

Thank you for allowing me to share my views regarding this important issue of international trade and steel tariffs. I look forward 

to responding to your questions. 

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

Chairman MANZULLO. Thank you, Terry. Appreciate it. We are 

joined also by Kimberlee Tachiki. She is the Senior Field Deputy 

for Congresswoman Lucille Roybal-Allard. Kimberlee, where are 

you? Thank you for coming. Appreciate it very much. 

The last witness is Tom Martin, who is the Chair of Government 

Affairs of the Small Manufacturers Association, SMA, out of Pomona, California, and we look forward to your testimony. 

STATEMENT OF TOM MARTIN, CHAIR, GOVERNMENT AFFAIRS, 

SMALL MANUFACTURERS ASSOCIATION (SMA), POMONA, 

CALIFORNIA 

Mr. MARTIN. Good morning, Mr. Chairman. I wish a special good 

morning and hello to Congresswoman Grace Napolitano, who 

through redistricting now represents Pomona, where my employer, 

Coast Foundry and Manufacturing, is located. 

45

I am a member of the Board of Directors and legislative chair for 

the Small Manufacturers Association of California, SMAC, an organization representing about 1,000 small manufacturers in California. 

David Goodrow, Chairman of the SMAC, has asked me to speak 

to you because our company has an intimate knowledge of this import-export issue. I am also on the Board of Directors of the California Small Business Association, another major and active organization that represents small businesses throughout California. 

More importantly, I am a full-time paid employee, and manager 

of insurance and safety for Coast Foundry and Manufacturing, Inc., 

a Pomona company, which manufactures price competitive water 

control valves for the toilet industry. 

While Coast is an industry leader, and may be the largest producer of toilet valves in the world, today we employ 210 people. 

Two weeks ago we employed 240, and we will say unequivocally 

those 30 jobs were lost to unfair imports. My remarks today are 

primarily on behalf of members of the SMAC, including Coast 

Foundry. 

I am sure, if we look closely, small manufacturers can find many 

good things about exporting, and even a few good things about importing. Dr. James Morrison, president of the Small Business Export Association, on May 15, 2002 told the Congressional Committee on International Relations, ‘‘While there’s no doubt that 

some of America’s biggest companies can continue to increase their 

exports, the largest untapped resource for American exports is 

small and medium-sized companies.’’

Some of our SMAC members are exporters or want to be exporters. They are looking for customers offshore who can afford our rising prices. California proudly announced this is the fifth largest 

economy in the world. Unfortunately, in the eyes of California manufacturers, service industry jobs, and lawyers filing lawsuits drive 

our economy. California legislation is raising our cost and quickly 

making it noncompetitive in the Continental U.S., especially if your 

company manufactures price-sensitive products. 

California has the second highest minimum wage in the Nation, 

and might soon be first. Our legislative costs and taxes to run a 

business are major. Private companies in most inland states cannot 

or more importantly will not support the high wages and benefits 

costs that California manufacturers must charge. They go offshore 

in search of cheaper but comparable products. Often they find products that are visually comparable, and occasionally they are comparable in performance and quality, but the bottom line is they are 

cheaper. 

Manufacturers that want to stay in California have to look offshore for clients who want the quality we produce, not just the low 

prices and lax quality coming from overseas. 

You were kind enough to offer me the opportunity to address federal programs to support small business exporting, improved trade 

adjustment assistance and to minimize the adverse impacts resulting from trade agreements, imports and tariffs. Although the 

SMAC fully supports trade adjustment assistance, I will not be discussing that today. 

46

We have members who export, or want to export to virtually 

every country and every continent except Antarctica. When we export to those countries, we often find ourselves in a quagmire, 

where regulations in the receiving country can change overnight. 

We have one member who exports to an American-owned production facility in China. Our member’s product is palletized on hardwood pallets because China said they would not accept standard 

softwood pallets. In fact, China threatened to remove the product 

from the pallets, burn the pallets, and charge the expense back to 

the customer, which in turn would be charged to the export seller. 

Now China has determined they will not accept hardwood pallets 

because they are not totally hard woods. They argue that even with 

hardwood pallets, certain portions are soft wood, and might harbor 

bugs and insects. If it is decided that wood-burrowing bugs have 

attacked the soft wood portions of the hardwood pallets, the shipment will be returned at the expense of the exporter, and the importer on their end will also be chastised and possibly barred from 

importing into the Chinese market. 

The exporter, our member, is looking for realistically priced plastic pallets, while still trying to keep costs low to compete. China realized that the expenses will have to be eaten by the exporter or 

paid by the customer. Neither is a positive for the exporter. If their 

cost drives too high because of these irksome regulations, the Chinese believe our exporters will bail out and/or American companies, 

already lured to China, will buy Chinese produced products. 

The Chinese are not the only ones looking to create markets for 

their plants’ products at the expense of outsiders, but their low 

labor, subsidized materials and large manufacturing base make 

them a natural. 

In his remarks to Congress, Dr. Morrison noted that a positive 

government study on exporting stated, ‘‘The report calls for better 

training, better measuring of results, and imparting a big picture 

national goal of promoting exports to all government export promotional personnel, as opposed to narrower agency goals.’’ He also 

said, ‘‘National export strategy requires a collective effort at all levels of government. Exporting companies won’t be interacting with 

agency officials in Washington; they will be dealing with lower 

level officials in federal offices across the country.’’

This is especially true in California. We have a mindset that says 

we are a part of the Pacific Rim. We have two major ports within 

minutes of this hearing room. California now looks to the government to provide them support in California, not Washington. But 

we do look to the Congress to protect us by providing a level playing field. A tariff on us should be matched by a tariff paid to us. 

If we are forced to pay greater tariffs going out than they are paying coming in, you are exporting our jobs. When a competitor 

makes price-sensitive products, is able to put that product on our 

dock, ready for inland shipment, that it costs lower than we pay 

for basic materials, we should tell our employees to go home. We 

cannot compete. There is more, but if you’d like me to stop, I will. 

Chairman MANZULLO. The written testimony will be made part 

of the record. Okay. Ms. Napolitano, do you want to ask some questions? 

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

47

Mrs. NAPOLITANO. This is the part where we start asking some 

of the questions that we have in mind so that the general public 

can get an idea of what happens. And I will start off with David 

Holbert, and USC. How many personnel do you have, sir? 

Mr. HOLBERT. There are five individuals that work in our office. 

Mrs. NAPOLITANO. Five individuals. And you cover all of Los Angeles or all of the—— Mr. HOLBERT. We cover California, Arizona, Nevada, and Hawaii. 

Mrs. NAPOLITANO [continuing]. With five people. 

Mr. HOLBERT. With five people, yes. 

Mrs. NAPOLITANO. Again, Mr. Chair, this is why it’s important 

that we let our people know how understaffed some of our agencies 

are. And I just was amazed because I didn’t know you were there, 

and I just wanted to bring that out. So that do you think you will 

be able to handle some of the input that is going to be generated 

from here, some of the questions, some of the businesses that may 

want to be able to get assistance from your agency? 

Mr. HOLBERT. Yes, most certainly. I brought some brochures and 

I will be here to speak to people, and available on the phone as 

well. 

Mrs. NAPOLITANO. Thank you so much. Mr. Thompson, my 

friends and former colleague, you saw Mr. Carvanas. He just—— Mr. THOMPSON. Did he already leave? 

Mrs. NAPOLITANO [continuing]. He was there a minute ago. I 

don’t know where he went. 

Mr. THOMPSON. He is probably out helping somebody. 

Mrs. NAPOLITANO. Oh, good. How many employees do you have? 

Mr. THOMPSON. Do I personally have? 

Mrs. NAPOLITANO. No, in your agency. 

Mr. THOMPSON. In the region? 

Mrs. NAPOLITANO. Correct. 

Mr. THOMPSON. It varies. About—the average is 17 employees 

per office, and we have nine offices within the region. L.A. is larger, but, you know, Hawaii is smaller, and so it averages out to 

about 17, 18 employees. 

Mrs. NAPOLITANO. So, that is still very understaffed, am I correct? In other words, to be able to handle the assistance to the 

many small businesses of California, especially Southern California. 

Mr. THOMPSON. We have our challenges, Congresswoman. And 

we are trying to deal with those. I would like to keep my job, 

so——

Mrs. NAPOLITANO. I understand. Thank you. No, I understand. 

What I am saying to these people is that, you know, you have 

many agencies. May I ask, then—let me put it another way—what 

time do you have to interact with other agencies, so you know what 

everybody is doing, so you can channel some of these individual 

businesses that have issues, to the correct agency and to be able 

to come up with programs that are going to help everybody? 

Mr. THOMPSON [continuing]. I think the important thing is that 

we leverage our employees and we leverage the amount of money 

we get from Congress with the State of California, with the community colleges and other organizations, to provide the information 

and the business assistance as needed. The SBDCs, the other orgaVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
48

nizations, State of California and some other organizations, and of 

course you’ve heard here with exporting. And that is the important 

thing, to try to get as much bang for our buck wherever we are at. 

That is our goal, and that is what we try to do. 

I know that the staff in Los Angeles is very capable and they accomplish those things, they are in the Chamber of Commerce’s offices in the outlying areas. Any place we need to be, we are at. 

Mrs. NAPOLITANO. I don’t know about the L.A. one. I know about 

Glendale, because we worked very much in hand with Mr. Alvarado. 

Mr. THOMPSON. Well, that is L.A. That is the L.A. office. 

Mrs. NAPOLITANO. Oh, that is the L.A. office. 

Mr. THOMPSON. That is the L.A. office. And we have one in Santa 

Ana and San Diego.

Mrs. NAPOLITANO. Do you have any businesses coming to you for 

small export assistance? 

Mr. THOMPSON. We do, and we have experts in each one of our 

offices for export. And then of course we have our two USEAC representatives that cover the six offices here. The USEAC offices in 

the Southern California area, there are six of those and they rotate 

a day here and a day there, to make sure that they have appointments and so forth and so on. 

And then of course we use the SCORE counselors which—or executives, retired executives, where we possibly can, and we are always looking for those that are involved with exporting in their 

past so that they can give the advice and counsel that’s needed 

there too. 

Mrs. NAPOLITANO. Thank you. The businesses that are here I 

think want to learn where they can go, where they can get assistance, the correct—they want to be guided to an agency that is not 

going to say, ‘‘Well, I can’t help you if somebody else is going to,’’ or referrals. And as you well know, and we have been working on 

that, is the work reduction, which hopefully will come about so 

maybe the agencies can begin to work on how they can at your 

level recommend to Congress where we can begin cutting down so 

that individuals don’t have to go through a myriad of red tape and 

paperwork to be able to get the assistance they need because they 

don’t have that kind of time. Thank you very much for being here. 

Mr. THOMPSON. Thank you. 

Mrs. NAPOLITANO. Ms. Delmege, does your agency work in cooperation with the other agencies in regard to—well, the same 

questions, basically. 

Ms. DELMEGE. Sure. I am wearing two hats here. One is with the 

U.S. Department of Commerce as part of the local network, and the 

other being with the Trade Promotion Coordinating Committee, 

which is tackling just those issues that you are raising, of coordination between the different agencies. 

Here in Los Angeles County, we have two offices, one in downtown L.A., and one in West Los Angeles, and I believe that there 

is a total of eight trade specialists there. Again, we are co-located 

with SBA; we work very closely with Ex-Im who is in the offices 

as well. 

Mrs. NAPOLITANO. Okay. But, again, you are talking about L.A. 

Most of my businesses won’t go, can’t go, don’t have the time, don’t 

49

even know where you’re at, and West L.A. is out of the question. 

Anything in this area, or anything between here and Orange County? 

Ms. DELMEGE. Generally speaking, no, I mean, in short. But they 

go out to the companies. I mean, you should understand that most 

of the time they are not sitting behind a desk down in L.A. 

Mrs. NAPOLITANO. No, I understand. 

Ms. DELMEGE. They are out. 

Mrs. NAPOLITANO. How many employees do you have? 

Ms. DELMEGE. In Los Angeles County total I believe we have 

about eight employees. I don’t have the exact number. 

Mrs. NAPOLITANO. Thank you so very much. 

Ms. DELMEGE. You are welcome. 

Mrs. NAPOLITANO. I don’t mean to belabor, but I just wanted to 

show that, you know, we just don’t have the amount of personnel. 

To Mr. Hinojosa, and I guess I am skipping because we are running short on time, but you and I go back a few years, and I can 

remember when NAFTA was passed, I wasn’t there for the vote, 

unfortunately, would have voted the way I normally would, although I believe totally in trade, I think that there are several provisions that are not included in NAFTA or any other trade agreement. My concern has been for the communities. Now, you have 

funding that was allocated by Congress for the NADBank, which 

was in what amount, sir? 

Mr. HINOJOSA. Well, actually there was an appropriation made by the U.S. and the Mexican government of $450 million plus guarantees by the U.S. and Mexican government totaling essentially a 

capitalization of $3 billion, and I hope I know where you are going 

with this. 

Now, after seven years of operation, those $3 billion in capitaliza- tion has led to a total, what is it, about $20 million in loans 

throughout this entire period of time, which I consider a disgrace 

given the nature of globalization, and the incredible challenge that 

NAFTA in particular has meant for the context of globalization. 

Mrs. NAPOLITANO. And then it follows up with the question of 

the training funding that was supposed to be made available to employees who have been displaced, and the companies who had lost 

business because of flight into the Maquilas or into other areas, 

and what has happened to that? 

Mr. HINOJOSA. That’s the NAFTA TAA program that’s administered out of the Department of Labor which is a separate program, 

with a separate line item which continues to be funded. We—I 

mean, what’s interesting, we think that that program right now is 

reaching about 60 percent of the workers that really should be eligible. But there is a large number of workers who would fall under 

these categories. 

And by the way, I would say the same thing about the small firm 

trade judgment assistance. I think there is a massive undercount 

of the affected firms and affected workers that—from international 

trade activities. And I think that this frankly is the problem with 

the NADBank. 

The NADBank was created, but it’s then—in a sense, it was also 

fought tooth and nail by the people in the Treasury Department 

against creating it, because everybody who knows in this context 

50

of debating globalization, nobody wants to focus on the adjustment 

costs associated with international trade. They like the positive 

benefits, and that is great, and I agree that we should push that; 

but I think that part of the problem we have in this country right 

now is by not really stepping up to the plate to deal with the workers and the firms that are affected in a negative way, which is not 

that much, by the way. It’s a pretty small number. 

If you really look at the real impacts of all of the—job impacts 

given all of the job market of the United States, it’s still pretty 

small, but we refuse to really step up with I think aggressive programs to deal with the dislocation, and not enough program, and 

I completely agree with you, to take advantage of the incredible opportunities that a particular place like Southern California can 

offer in trade. 

Mrs. NAPOLITANO. Thank you. What is the—very quickly, just 

what is the percentage, the interest rate, that NADBank charges? 

Mr. HINOJOSA. NADBank basically charges triple A financing 

rates. It’s not—it’s not the type of lending—not the type of rates 

that should be charged for the type of rates they are going to adjust. 

Mrs. NAPOLITANO. Thank you, Mr. Chair. 

Chairman MANZULLO. Thank you. The issues are all over the 

place. Before we conclude, and before I ask my questions, I want 

to thank everybody for coming here. I appreciate your patience. 

I am going to limit my remarks on the steel issue. As far as I 

know, the only committee that held a hearing on the issue of steel 

was our Small Business Committee. There are 17 full committees 

in the House of Representatives. Several of them would have direct 

jurisdiction, including Ways and Means, on the issues of tariffs. 

And no one would even touch this subject. 

Our committee did for a couple of reasons. Number one is that 

we were being contacted both by management and by union. 

Unions—with the steel consumers. There are actually more union 

members involved in steel consuming than there are in steel producing, which is a pretty interesting aspect. 

In fact, in a hearing that we held on July 23rd of this year, a 

fellow by the name of Robert Herrman, who was the head of the 

United States Steelworkers Local 735–14, which represents 250 

workers of A.J. Rose, in Ohio, testified that he thinks that the 

union workers who use the steel are being treated like second-class 

union workers to the union workers that manufacture the steel. 

(See Hearing Serial No. 107–66) This is not an easy issue. 

And I would say to you, Mr. Bonds, that the issue is not with 

the unions. The issue is with the dang steel companies that are 

gouging, and with the Attorney General that refuses to answer our 

letter where we asked for an inquiry as to why these domestic steel 

companies have to gouge. 

In fact, the word that they used in their language, is, quote, 

‘‘profit recovery,’’ end of quote, that they have been gougers. The 

U.S. steel producers, and I name them, Bethlehem Steel, LTV, you 

go right down the lineup, we have evidence of their gouging—We 

have a book of Steel Letters that I delivered to the Secretary of 

Commerce, where Bethlehem Steel says, ‘‘All right, because of the 

steel shortage we had to raise prices.’’ Excuse me. They created it 

51

with the Section 201 which was done simply for political purposes. 

Because the steel shortage, the steel companies have unilaterally 

broken steel supply contracts with steel distributors or directly 

with the steel-using manufacturers and used the word profit recovery to say they want more money. 

That is not the fault of the unions. I listened to your testimony, 

and the premise of it is correct. In fact, you will find, Terry, that 

if you interview 100 steel-using industries, 99 will agree with the 

basic premise that they would be willing to pay a little bit more 

for the price of steel in order to keep manufacturing here stateside. 

I have a huge industrial base back home, and there isn’t one person in that group that is being hit, such as some of the people here, 

that doesn’t agree with the basic premise. 

The problem is called greed, and it’s the greed on behalf of these 

steel manufacturing companies, that they think they can come in 

there and arbitrarily raise prices, and really—and I hate to use the 

word since it is made of steel—put the screws to the people that 

are using the steel. 

And I know you agree with me, that these steel companies, you 

can only charge so much before they become noncompetitive. 

We talked to a fellow yesterday. Here is the irony of it. We have 

a company in Ohio who testified at our hearing in Washington that 

had a contract to supply a steel-made product to another American 

company. He had an American manufacturer that used an American steel to supply an American purchaser, the best of all the 

worlds. 

Because of the increase in the price of U.S. steel to the domestic 

steel user, that company has to lay off people, and guess which 

country they lost their steel contract to supply a U.S. manufacturer? They lost it to China. I’m sorry, it was a New Jersey company, and it was a union company. 

And what we are seeing here is the ill-fated results of what happens in a classic trade war, which was started for political purposes. 

Now, I agree with the fact that we should not give up our protections. In the area that I represent, I testified before the U.S. International Trade Commission, on a Section 332 petition that was 

filed by the National Tooling and Machining Association. These are 

the little guys that obviously do tooling and machining. 

And the basis of my testimony there was similar to the 201 by 

showing that there has been a tremendous hit in the tooling, the 

machining, and also the molding industries. Using the same argument as yours, Terry, that what is going to happen is that people 

who make the molds go offshore. You want to be able to make a 

mold, to make a shell casing, for example, in a time of national 

emergency. What we found, what Phil actually found in doing the 

research is the Bureau of Labor statistics, which does the core research for the number of jobs that are in any particular sector, 

stated that the city of Rockford has only 570 tool and die jobs. Now, 

this was a city founded by the Swedes in the 1850s that brought 

with them their expertise in carving wood, and they actually invented the lathe in Rockford. This is where it all started. In the 

process of developing tools to carve the wood, when the machine 

52

age came along and steel came along, they took that artistry of 

wood carving and turned it to the artistry of steel carving, and thus 

the birth of the tool and die industry in Illinois. 

My dad was a union machinist, and was a union carpenter, and 

came up through the ranks in that way. But what we found was 

the Bureau of Labor statistics does not understand the city of Rockford, when they say only 570 people are employed in the tool and 

die industry. Now, two shops alone employ over 570 people. And 

what we were trying to do is to try to educate our own Department 

of Labor, that, get this, the United States government does not understand the importance of manufacturing in this country. It has 

no clue. Because they do not have the correct figures. 

In Rockford, Illinois, with 150,000 people, we have 1,100 factories, most employing less than 100 people. And if our own U.S. 

Government does not have the correct figures, does not have a clue 

as to what is going on in the manufacturing, Terry, how could they 

have any clue as to what is going on in the manufacturing of steel, 

and its importance in America? 

Mr. BONDS. In the first place—— [Applause.] 

Mrs. NAPOLITANO. Now you understand why I invited him. 

Chairman MANZULLO. And steel is manufacturing. 

Mr. BONDS. Do what? 

Chairman MANZULLO. Manufacturing of steel is manufacturing. 

You are included in with that segment. 

Mr. BONDS. Well, I think in the first place, if you look at the reason that prices have risen, it is not altogether to do with the 201. 

I mean, we have closed 20 million tons of domestic steel capacity 

here in this country. Thirty-five steel companies are bankrupt right 

now. Seventeen of them have gone out of business. 

So I am not sure there is anything particularly wrong with steel 

companies who have been losing money for the past decades to 

want to make profit. If they don’t make profits, we are not going 

to have a steel industry, and we are competing with a steel industry worldwide that is subsidized by its federal governments, that 

where they provide national health care, and our steel industry in 

this country just simply cannot compete. Prices must rise. 

And even though prices have risen, they are still below where 

they were in, you know, three years ago, and below the 20-year average. So if we are going to have an economy and a national defense system and infrastructure, we must have a steel industry. 

Chairman MANZULLO. I understand. But my question, which is 

more of a comment, is that when you testified, you said, well, what 

we need here is balance, and I turned to Phil Eskeland, and I said, 

the man understands what is going on——

Mr. BONDS. I do. 

Chairman MANZULLO [continuing]. But you can’t justify price 

gouging, and I don’t think you are. For example, if every steel mill 

in this country were still operating at 100 percent capacity, during 

normal times, and don’t even look at the market today, that would 

only fulfill 75 percent of the demand. 

So there is just no way that the American guys can fulfill 100 

percent of the demand that is going on in this country so you have 

to bring in the imports. 

53

But the point that I am trying to make with some of the fellows 

here, what Anita is testifying to, the price of your steel went up, 

what, 20 to 40 percent? 

Mr. BONDS. Forty. 

Chairman MANZULLO. Yes, it went up 40 percent. And the tariffs 

are only 30 percent. And if you take some of the folks back home, 

we have got a shortage situation. This is the weirdest thing in the 

world. I am the guy that got tool grade steel excluded from the tariff, because those are the cutting knives, the very high-density steel 

that you need for the knives, because the tool and die industry 

would have been devastated on it. We worked with the USTR on 

that all the time. But we have a situation going on back home, follow me closely on this, because this is what happens when you impose these tariffs. 

The foreign company that was supplying this particular type of 

steel, which a U.S. steel manufacturer said they could fulfill, but 

as to which there is a letter on file saying that they cannot make 

fulfillment, that foreign steel manufacturer is going to set up operation in the United States to be in direct competition with the domestic guys. That is being brought about by the tariffs, Dave is 

raising his eyebrows over there, saying this has got to be the 

weirdest thing in the world. But it’s what happens when we get 

into these trade wars. 

Now, the European Union is in the process of slapping retaliatory tariffs against the United States because of the tariffs. Now, 

one of the things they want to slap tariffs on is Harley-Davidson 

motorcycles. Okay? Now, you know what could happen is if those 

retaliatory tariffs are slapped, if the EU imposes retaliatory tariffs 

on the motorcycle industry, that entire motorcycle manufacturing 

sector in the United States could leave this country and go overseas and set up shop. We are dealing with huge, huge repercussions of what is going on here. 

My entire life in Congress has been in manufacturing. Before 

that when I practiced law, when as a sole practitioner in a town 

35 miles away from Rockford, Illinois, I never had less than 65 to 

80 pending petitions for bankruptcy because of the devastation that 

took place in 1981. It is not just steel. 

It’s the fact that Paul O’Neill is a great American, formerly with 

Alcoa. He believes in a strong monetary policy for the United 

States, and the stronger our dollar is the better. Even though it’s 

taken a 10 percent reduction from the EU in the past several 

years, our guys in Rockford are still having enough difficulty dealing with the Chinese, but now they got to deal with the Germans 

and Italians particularly on the sales of the machine tool industry. 

There is a huge show that is going to be started in a few days 

in Chicago, probably some of you go to here, on machine tools. It’s 

not because of cheap imports that are from China; it’s because of 

U.S. domestic monetary policy that makes us unable to compete 

with the Germans and the Japanese, who have several times gone 

in there and shored up the value of their own currencies, and the 

United States does nothing about it. And, I am a Republican. Complicated issues. Very complicated issues. Go ahead, Terry. 

Mr. BONDS. I don’t disagree with a lot that you have said. The 

problem is, I don’t think there was a choice. The international—the 

54

ITC voted six to nothing to institute this policy, and the president 

agreed with it, with the ITC. 

Chairman MANZULLO. Right. 

Mr. BONDS. The reason is because I don’t think there was a 

choice. If there would not have been action taken we would not 

have a steel industry. We are not even sure we are going to assist 

steel industry now. 

Chairman MANZULLO. We agree with you. 

Mr. BONDS. But I certainly agree with you on another point, it 

is not just steel. It is manufacturing in total in this country. I represent in the southwest people who make copper, the copper mines. 

We once had 60,000 members in that industry. Now there’s probably less than 3,000, and aluminum, the same way. I worked for 

Alcoa at Point Comfort, Texas as a millwright before I went to 

work for the United Steel Workers. 

My home plant at Point Comfort, Texas, is now in danger of 

being closed. We are in danger of losing manufacturing in this 

country, and the only people that we can turn to to help us is our 

government, and we need help. 

Chairman MANZULLO. Terry, as you said it, it’s a matter of balance; it is a matter of fairness. Now, the steel companies have until 

I believe it’s September 5th to come up with a plan for restructuring. Regardless of where you go in this country, we have that 

problem with manufacturing. 

But let me make these observations. We came up with a list of 

ten reasons why manufacturing is getting hit, and among those are 

the steel tariffs. Anything that happens in this country that makes 

it less competitive for American manufacturers is bad news across 

the board. We haven’t even gone into what it has cost the little 

guys especially for the tremendous spikes and the high costs of 

health care insurance premiums. 

That led to your legacy cost and you’re bankrupt there. We had 

Dr. Roger Ferguson, who was vice chair of the Fed, come out to our 

Congressional District last week. He is second to Greenspan. He is 

an economist you can understand, which is sort of unusual, but 

that’s why I asked him to come out I asked Greenspan as a matter 

of a courtesy, but I really hoped that Dr. Ferguson would have 

come out, and he chose to do that. 

He sat down with our local manufacturers for the number one 

purpose of whenever the Fed decides to change the interest rate, 

they should look at all these economic indicators. We especially 

wanted him to bring into consideration the indicator that looks at 

what is going on in machine tool sales, because if machine tools 

aren’t being ordered, that means no new products are coming out 

on the market, and that’s the first indicator of an economic slowdown. 

The testimony of the men and women involved in manufacturing 

back home came down to this issue; can the United States ever 

have a recovery from the recession without buttressing up its manufacturing base? I asked Dr. Ferguson to work with me on an econometric model. 

For the first time in 150 years the city of Rockford, Illinois, has 

gone to more jobs in the service sector from those in the manufacturing sector. Some of the increase in jobs is a debt collection comVerDate 0ct 31 2002 16:08 Nov 05, 2002 Jkt 082504 PO 00000 Frm 00058 Fmt 6633 Sfmt 6602 E:\HR\OC\B504.XXX B504
55

pany that opened up in Rockford, and that’s a job, it is employment, et cetera. That’s the first issue, that he has agreed to work 

with us on. 

The second thing is if you don’t have an economy based on manufacturing, in addition to mining, agricultural, then who is going to 

be leading in this country? 

And Grace and I share the same concern. We vote differently on 

the trade issues. I have two young men working for me on the committee have been in Shanghai now for two weeks that have been 

trolling for contracts with the Chinese companies, and American 

companies doing business in China. If this product, for example, is 

made in China, 52 percent of the content represents a product that 

is shipped into China. Are you with me? 

What we found out when I was in China in January, and I will 

go back probably in November or January again, is that the American manufacturers that have picked up and moved from the 

United States to China have a whole developed system over there 

of civilian procurement. They go out and access companies around 

the world, looking for materials to put into the stuff in China, for 

either domestic consumption in China or for exports. 

We can still be competitive, even in China, in certain areas if the 

American companies that have left behind the little guys with 

whom they were doing business, would simply turn their eyes to 

the West and say, ‘‘We can still access from American manufacturers.’’

Now, what does that do? It changes the conversation on trade because there is nothing that will bring more hallelujahs and high 

fives and shouts back home, when a little guy lands an international agreement. 

And second of all, it shows that free trade does in fact work. We 

don’t even use the word ‘‘free trade’’ any more, it’s called fair trade. 

The word free trade indicates that somebody is getting something 

for nothing and somebody is being gouged. And so the word free 

trade shouldn’t appear on any more trade agreements. It should 

not be the North American Free Trade Agreement; it should be the 

North American Fair Trade Agreement, because if it can’t be sold 

on the basis that it is fair, then it shouldn’t be passed. 

And so what we are doing is we are working with American companies and set up a program called America’s Jobs First whereby 

American companies and foreign companies who are interested in 

maintaining a manufacturing base in this country will start using 

American companies. This is where the Department of Commerce 

has to get involved. Somebody has to sit down with the American 

companies and say, ‘‘You may save money by outsourcing back 

home.’’

And let me conclude on this note. I have talked too long already. 

I sit on the Financial Services Committee, and the main guys came 

in from WorldCom MCI, crook de la crap. These are the scumbags 

of society who come in and do what they have done to their workers. One of the interesting people that came in is a fellow who I 

call ‘‘Grab Man.’’ It is Grubman. He was the stock analyst. His contract was terminated, and he got a golden parachute of $30 million. 

Just amazing. Terry, I don’t think you make that much. Not quite. 

56

But somebody asked him a question. He is the stock market analyst with the financial house of Salomon, Smith, and Barney. Somebody asked him a question, and his answer to this really says 

where we are in America today in our state of manufacturing and 

in our state of business. He was asked how did we get to this point 

where we could have a system whereby there is so much greed 

within this system? And he said, ‘‘The problem with America’s companies today is that there is no long-range planning. The longest 

range plan that goes on is the next quarterly dividend.’’

Now, I submit to you, the difference between a dividend of 28 

cents and 27.9 cents could mean an American company being involved, and preserving the American manufacturing base. So if everything is driven based upon what that next quarterly dividend is, 

how do you bring about change in short-term thinking? 

We had a guy back home, Jack Packard, who ran a company 

called Alcoa Tool before it got bought up by a major international 

company. Even during the height of the depression or recession of 

1981, he didn’t lay off one person. He contacted all of his shareholders, there was a huge number, and said, ‘‘You can vote us out 

of office if you want but we are not going to incur a dividend until 

we all work through this thing, for two reasons. Number one, these 

people have families, and number two, where are we going to get 

the work force if we let them go now?’’ So we just continued to 

struggle with that. 

Grace has a request that for the first ten people that line up 

there from the audience, we are going to take ten one-minute statements, not questions. Everybody get in line. And then we will limit 

it to one minute, because then we will close up here, and I have 

to go to San Diego. Okay. Go ahead. 

Mr. BEILKE. Mr. Chairman, Congresswoman, I just want to say 

how glad I am to have the opportunity to be here to show my appreciation for the effort your office made, along with the SBA, in 

helping me start my business. My Wiener Schnitzel franchise in 

Pico Rivera just got off the ground, and it’s a two-and-a-half-year 

dream on my part to operate my own business. I live in the city 

that I opened the business, and I feel it’s a great opportunity. 

I would like to thank the efforts of the SBA. I know Albert Alvarado is here, the director of the L.A. office, along with Lorenzo Flores, the assistant director, and they provided—being able to work 

with them directly provided me with great insight on what I was 

getting into, made me really dig down and do the research I needed 

to do. I learned the SBA isn’t necessarily an agency that just giftwraps a bag of money for you. They make you make sure you know 

what you are doing, what you are getting into, and I think obviously that’s the best way to proceed, and I feel comfortable, and in 

fact—and also I’ll mention obviously working with Grace’s office 

and her staff, helping me through the process——

Chairman MANZULLO. One minute is up. Do you want to state 

your name and spell the last for the record. 

Mr. BEILKE [continuing]. Yes. My name is Ron Beilke, B-E-I-LK-E. And I also want to present something for Grace and for 

Alberto. Be real quick. 

[Applause.] 

57

Chairman MANZULLO. Okay, appreciate that. Next witness. State 

your name and spell your last name. 

Ms. BRUCE. Mr. Chairman, Congresswoman Napolitano, my 

name is Edna Bruce, E-D-N-A, B-R-U-C-E. I have the pleasure to 

serve as Director of the County of Los Angeles, Office of Small 

Business. We would not have an Office of Small Business if the 

Board of Supervisors had not been concerned that too many county 

contracts were going to large corporations, $4 billion of contracts, 

and we would not have a Small Business Office if we had not gotten a grant from the Economic Development Administration, two 

grants actually from them, specifically for international trade. 

We also have had two grants from the Department of Defense, 

and I want to say how nice of you to have the hearing here, because I can see my good friend Bill Redway, and Frank Ramos, 

from the Department of Defense, and local friends Hugh Loftus, 

and Alberto Alvarado, they have been very kind to us. 

I want to say just one thing and then I will close. We have had 

four trade missions, specifically for small businesses. One to South 

America, two to the People’s Republic of China, one to South Africa, and one next month to the People’s Republic of China. One of 

the major problems—— Chairman MANZULLO. Edna, your minute is up. 

Ms. BRUCE [continuing]. Oh, thank you. Sorry. 

Chairman MANZULLO. Anybody else that wants to come up here 

for one-minute testimony? Dale? 

Mr. CONGELLIERE. Dale Congelliere from the Walker Corporation 

(See page 170). 

Chairman MANZULLO. Spell the last name for the record. 

Mr. CONGELLIERE. C-O-N-G-E-L-L-I-E-R-E. I had one question 

that I wanted to ask and that is for the steel industry, or the steel 

manufacturers industry producers. Why is it that Nucor made profits for so long in this economy, and why is it that they did such 

a great job in making profitable steel, whereas all the other ones 

were going under at the same time? 

Chairman MANZULLO. Does anybody want to handle that? Nucor 

is a mini mill. Did you want to try and handle that, Terry? 

Mr. BONDS. Nucor was, I guess, a prime example of the mini 

mills which re-melted scrap. A lot of the large integrated mills that 

made steel from iron that they made from ore, they just couldn’t 

compete with it. 

Chairman MANZULLO. Much cheaper to melt the scrap than it is 

to work from the ore. 

Mr. BONDS. A lot of the integrated mills are now trying to go to 

that mini mill strategy, but it takes a lot of capital and when you 

are losing money, and you are strapped with all of the baggage 

that they have——

Chairman MANZULLO. Different equipment. 

Mr. BONDS. They are having trouble getting to—the financing to 

go to that mini mill strategy. 

Mr. CONGELLIERE. I was just going to recommend that we as a 

nation or in this industry look to some similar situations like that 

that we can come up with some more profit. 

Chairman MANZULLO. Okay. Dale, your time is up. Anybody else 

that wanted a one-minute? Come on up. Go ahead. 

58

Mr. WOLFE. My name is Charles Wolfe, and my company is C. 

Wolfe Industries. 

Chairman MANZULLO. Want to spell your last name, Charles? 

Mr. WOLFE. W-O-L-F-E. We are a contract manufacturer. We are 

in Congresswoman Napolitano’s district. We are job producers of 

steel parts. That’s all we do, is make parts from steel. We know 

our business very well. We have contracts with some of our suppliers. We have limited our cost increase at this point to about 25 

percent. 

If we were buying in the open market we would be paying 40 or 

50 percent more for our steel. Our major customers have contacts 

in Asia. They buy over there. We are under pressure to keep our 

prices down. We cannot pass this along. 

The other things that have happened is that we are faced with 

the inability to get steel, and the quality of what we are getting 

is going down. There is a disregard for quality, period, and we buy 

from mixed metals, but we are all in this thing together. This tariff 

is not working. This cost our company $45,000 last month, compared to the prices we paid for steel in January and February. 

Chairman MANZULLO. Appreciate your testimony. Anybody else 

want to give a one-minute? Okay, Ms. Napolitano. Why do I have 

a hard time? Is it Italian names? I have a hard time. Napolitano. 

Do you have any concluding remarks? 

Mrs. NAPOLITANO. Well, you have another—— Chairman MANZULLO. Oh, I’m sorry, go ahead. 

Mr. JENSEN. Robert Jensen, J-E-N-S-E-N. I work for North Star 

Company (See page 171). I want to thank you for the opportunity 

for coming, Mr. Chairman, Mrs. Napolitano. We are a custom roll 

former. In the year 2000 we rolled form 62 million feet of product. 

Much of that in steel. Today, we are one of Mace Metal’s customers. Also today we are faced with shortages. About 70 percent 

of everything we do goes into the construction industry, much of 

which we have to have what is known as graded steel. It is unavailable. If it is available, the prices have gone up 40 percent. We 

are looking at more increases this month and by the first of the 

year. We have had suppliers cancel contracts for blanket orders, 

and we are noticing a 20 percent reduction in sales, last year, and 

at least another 15 percent reduction on sales this year because 

now we are starting to get finished goods, competing goods coming 

in on performance suppliers. 

Chairman MANZULLO. Thank you. Anybody else? Okay. Oh, our 

State Assemblyman here from California. And thank you so much, 

Grace Napolitano, Congresswoman, for bringing this hearing to 

your communities here. 

You want to spell your last name for the record, for the court reporter? 

Mr. CARDENAS. C-A-R-D-E-N-A-S, Tony Cardenas. I represent 

the San Fernando Valley, just down the ways a little bit, little 

warmer than it is here, and I just wanted to come here today to 

listen to the hearing. It was very informative. 

And also I brought with me a representative from Rayes Construction, minority-owned business, 8(a) approved union business 

that does concrete work. They do big storm drains and bridges and 

things of that nature. And I was encouraging them to come. To be 

59

quite honest with you, they’re kind of intimidated, ‘‘What am I 

going to go to a hearing for?’’ I said, ‘‘I will be there with you. I 

will explain to you.’’ Forgive me for the whispers in the background. I was just explaining to him how important it is to notice 

the connections and to listen to everything that is going on. Working with government can be quite complicated, but when you really 

get down to it there is a lot of good people there who want to put 

the product out, who want to help our local businesses. And that’s 

why you are here. Thank you. 

Chairman MANZULLO. Tony, appreciate your input. Anybody 

else? Okay, Grace, concluding remarks. 

Mrs. NAPOLITANO. Thank you, Chairman Manzullo. I think all of 

you can understand the frustrations that the Small Business Committee has, when it has the different federal agencies testifying, especially when they don’t meet their minority caps, the minority 

owned, women owned, veteran owned, disabled owned, et cetera. 

But you also must understand that we are but one of the many 

committees that deal with small business, and with all the other 

issues. You need to be able to be more vocal as business people, to 

your elected representatives, to your agencies that are within your 

reach that you know about. You need to be proactive. Like Assemblyman Cardenas was saying, you need to understand how government works. If you don’t, ask, and if you don’t ask, you won’t know, 

and you won’t get the assistance, as Mr. Beilke has. He came to 

me, and we put him in with the SBA. 

There are many things that hamper the ability of small business 

to be successful. Let’s not have government be one of them. I certainly thank my Chairman for consenting to come to California 

during this heat wave. And, Tony, I’ll argue we probably were as 

hot as you were in the valley, because this is the first time we have 

had this high of heat in this area. 

But I thank all the panelists that came, Director Bonds and Mr. 

Thompson, my good friend, and hope that this will not be the last 

one, Chairman Manzullo, because you can see the need in this 

area. When you have 12 million people just in the L.A. County, you 

have hundreds and thousands of businesses that need help, and we 

could certainly be able to put that expertise to work in your area. 

We need to maybe communicate with some of your businesses 

and see how we can help each other. I don’t want my businesses 

to go to your state, but I certainly would want to know what we 

can do to help. 

To all of you, thank you for enduring with us. Ron Uwi from the 

Business magazine is here. A lot of people who didn’t get a chance 

to speak because this is all formulated to get information from the 

agencies so you can hear and listen and learn, and please contact 

them. Before they leave this building, get their card, get their number, interact with some of the businesses that are here. We have 

already had some of the businesses talk to each other. This is 

where you come in, you the business people. It isn’t like, well, I am 

shy, I don’t want to talk. I don’t mean to disparage anybody, but 

you need to be more outgoing, and participating, so that people can 

hear and see where your problems are, and hopefully guide you to 

an agency that can assist you, and being able to make that connection so you can be successful in your business. 

60

Thank you from the iron workers and the people who came here 

to testify on the steel industry’s woes, and I agree with you, there 

is a lot that can be done. We have the pros and the cons, and we 

need to listen to both sides, which we have today. 

On the small business export, I think we have a lot of potential, 

I mean, a tremendous potential, for small business to get involved. 

Their problem is, as you all know, they don’t have the time to come 

and sit with an agency to find out how they can prepare themselves to go do the exporting, and with the small business issues 

that Mr. Manzullo and the rest of the committee, I can’t thank him 

enough, because he has been, as you’ve heard, an advocate, a tireless advocate for small business, and he sits and he argues with 

the generals and with the agency heads to the nth degree, short 

of getting rude with them, in fact, I think we all do, because we 

are frustrated at their inability to hear what we hear from you the 

business people, you, the ones in our back yard, who come to us 

with your problems that can’t get addressed by those agencies. 

So, again, thank you very much, everybody, for being here, and 

Mr. Manzullo, I certainly want to make sure that—I’ve already 

thanked staff before, but I don’t know that you know who they are. 

My staff please stand up, Edla, Bernie, Homa, Ray, Amelia, and 

you see some of the staff outside. These are the guys that put this 

together. And my husband walking in the door, the other 

Napolitano, that you can’t mention it, Mr. Manzullo. It’s amazing. 

Thank you very much. 

[Applause.] 

Chairman MANZULLO. I want to again thank you, Grace, for your 

leadership. Those of you who are represented by Congresswoman 

Napolitano, you just don’t realize the tremendous advocate that you 

have in Washington. She is a very close friend of mine, and a person who really keeps on top of things. You know, Grace, perhaps 

we should take credit for this. As we have been having this hearing, the SBA put out a press release that I got on my Blackberry 

e-mail. It says, ‘‘SBA to bring more export financing to small businesses through the enhanced Export Express loan program.’’ See, 

that is just the result of you and I being here and the folks coming 

in to testify already. 

In conclusion, I want to thank everybody for coming. The people 

that are here from the government, their biggest concern is that 

they are out there ready, willing, and able to let you know of the 

services that are available from them. They spend more time on 

that trying to bring you into the loop so they can help you out. 

I hope this has been of help to the people that have been here. 

Again validate parking at the sign at the table, and this committee 

is adjourned. 

[Whereupon, at 12:15 p.m., the committee was adjourned.] 

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