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76–469 2012

IMPACT OF U.S. TRADE POLICIES ON SMALL 

BUSINESSES AND MANUFACTURING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON AGRICULTURE, ENERGY AND 

TRADE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

HEARING HELD 

APRIL 2, 2012 

Small Business Committee Document Number 112–062 

Available via the GPO Website: www.fdsys.gov 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

Page 

OPENING STATEMENTS 

Hon. Scott Tipton ..................................................................................................... 1 

Hon. Mark Critz ....................................................................................................... 2 

WITNESSES 

Thomas Cummings, Regional Director, Northeast & Mid-Atlantic Region, Export-Import Bank of the United States, New York, NY ................................... 7 

Joseph Hanley, Director, Mid-Atlantic Region, U.S. Department of Commerce’s U.S. Export Assistance Centers, Philadelphia, PA .............................. 5 

Peter O’Neill, Executive Director, Center for Trade Development, Pennsylvania Department of Community & Economic Development, Harrisburg, 

PA .......................................................................................................................... 9 

Walt Robertson, President, Johnstown Wire Technologies, Johnstown, PA ....... 23 

Justin McElhattan, President & CEO, Industrial Scientific Corporation, 

Oakdale, PA .......................................................................................................... 25 

David Groll, CEO, Circadiance LLC, Export, PA .................................................. 26 

APPENDIX 

Prepared Statements: 

Thomas Cummings, Regional Director, Northeast & Mid-Atlantic Region, 

Export-Import Bank of the United States, New York, NY ........................ 37 

Joseph Hanley, Director, Mid-Atlantic Region, U.S. Department of Commerce’s U.S. Export Assistance Centers, Philadelphia, PA ....................... 42 

Peter O’Neill, Executive Director, Center for Trade Development, Pennsylvania Department of Community & Economic Development, Harrisburg, PA ......................................................................................................... 47 

Walt Robertson, President, Johnstown Wire Technologies, Johnstown, 

PA ................................................................................................................... 54 

Justin McElhattan, President & CEO, Industrial Scientific Corporation, 

Oakdale, PA ................................................................................................... 57 

David Groll, CEO, Circadiance LLC, Export, PA .......................................... 59 

Questions for the Record: 

None 

Answers for the Record: 

None 

Additional Materials for the Record: 

‘‘Manufacturing Leads Pueblo’s Recovery,’’ Patrick Malone ......................... 63 


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IMPACT OF U.S. TRADE POLICIES ON SMALL 

BUSINESSES AND MANUFACTURING 

MONDAY, APRIL 2, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:01 a.m., Technology Center, 2000 Technology Drive, Pittsburgh, Pennsylvania, 

Hon. Scott Tipton [chairman of the Subcommittee] presiding. 

Present: Representatives Tipton and Critz 

Chairman TIPTON. Well, good morning. The hearing will come to 

order. 

First of all, I would like to thank Ranking Member Todd Akin 

and Mark Critz for hosting today’s hearing. I have to tell you it’s 

great to be here in Steeler Nation. I do have to note as I came 

through the airport—this time yesterday I was in Aspen and flew 

into the airport. And when I got there, I couldn’t help notice a Tim 

Tebow jersey, even though we will not be able to get credit for him 

any more. I guess he is up in New York. 

It is a pleasure to be here. While Mark does not like me to really 

remind him of last year’s playoff game, I must commend you and 

your mayor for following through on a friendly bet they made with 

Denver’s man. I hope that this friendly rivalry that we have in 

terms of football will continue and obviously wish both teams success, unless they are playing against each other. And I think we 

all know which side we all fall down on at that point. 

I would also to thank all of our witnesses for taking time on both 

of our panels here today. I note that you have full-time jobs and 

are willing to take time away from that. I think it is important. I 

want to let you know how much we appreciate it, and we do look 

forward to your testimony. 

Although Mark and I do come from different parts of the country, 

I know he shares my passion for increasing U.S. exports and ensuring fair trade practices for small businesses. Today’s hearing will 

provide an opportunity to examine the impact of trade policies on 

small businesses and identify best practices to increase U.S. exports. 

There is strong bipartisan agreement in Washington on the benefits of exporting. Exports are a major component of the U.S. economy, and they help support millions of good-paying local jobs. In 

2011 U.S. exports totaled 2.1 trillion, nearly 14 percent of the nation’s gross domestic product. 


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Although the benefits of exports are clear, only one percent of 

small businesses in the U.S. currently export. Along with limited 

personnel, small firm space and a number of tariff and nontariff 

barriers limit their ability to reach new markets. As a result, small 

businesses rely heavily on negotiated trade agreements to be able 

to remove those trade barriers and provide strong intellectual property protection and to streamline the trade process. In 2010, 

41μpercent of total U.S. exports were with countries with free trade 

agreements. 

While many firms benefit from increased international trade, 

some businesses may suffer as a result. Moreover, many small 

businesses become victims to unfair trade practices, such as price 

dumping and intellectual property theft. These predatory practices 

can be catastrophic for domestic small businesses. The federal government needs to use every tool available to combat these unfair 

trade practices to sure we do have indeed a level playing field. 

Last month Mark and I came together to be able to support legislation H.R. 4105 to amend the Tariff Act of 1930 to apply countervailing duties to nonmarket economies, such as China. This legislation is now public law, and it sends a powerful message to our competitors who are not complying with international trade rules. 

I have no doubt that U.S. small businesses can compete with any 

company in the world if provided with a fair and equal playing 

field. The multilateral and bilateral trade agreements, combined 

with a strong framework to be able to reduce trade barriers, increase transparency and strengthen trade enforcement. However, 

we must hold these countries accountable for unfair trade practices. 

Again, I would like to thank all of our witnesses for taking the 

time to be here this morning. We do look forward to your testimony. 

Now I would like to recognize the Ranking Member for his opening statement. 

Mr. CRITZ. To start off, I want to thank the Chairman at this 

particular time for making this journey out to Pittsburgh. Making 

football references and taking that a little bit further, something 

you may not be aware of is when John Elway was coming out of 

college, he had made the statement that if he was drafted by the 

Steelers, that he would go play baseball—he would not come to 

Pittsburgh to play football. 

Now, a lot of younger folks look at John Elway and say, ‘‘He is 

a great guy and we love him’’ and all this kind of stuff, but I still 

carry a little bit of animosity. So you are welcome for those Super 

Bowl trophies that he brought to Denver for not having in his plan 

to play football in this city. I really appreciate you coming here, 

Mr. Chairman. 

Now he is taking credit for the good weather outside. 

And I am not sure if that is true because you said you were skiing. Were you skiing yesterday? 

Chairman TIPTON. No. I did not get to ski yesterday. 

Mr. CRITZ. Okay. We appreciate you being here because this is 

an important issue and we will try with this hearing, to see where 

we can do better, where we are doing well, and where we can move 

this country forward. 


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Job creation is absolutely essential to move Western Pennsylvania’s economy forward. As we generate these new employment opportunities, we must do so in a way that provides a strong foundation for working Pennsylvanians. This means adding occupations in 

sectors that have a real future in our state and that pay well. And 

to do this, we need to look no further than our state’s manufacturing sector. 

Pennsylvania manufacturers employ more than 500,000 people 

and pay an average of more than 40 percent higher than jobs in 

other fields. As a result, manufacturing is a key to our economic 

recovery, and we must take steps to build on its successes. With 

95 percent of all consumers living outside the U.S., trade is critical 

to manufacturers. 

In fact, between 2003 and 2010, exports of manufactured goods increased by a hundred percent to more than $30 billion. In 2010, 

these exports supported more than 250,000 jobs in showing the real 

impact that trade can have not only on the industry itself, but also 

on our state’s economy. But even with these successes, it is clear 

that our manufacturers can sell even more goods to foreign customers. 

The reason is clear. Foreign companies cut corners in terms of 

damaging the environment and not paying a living wage. We cannot allow this to become a race to the bottom, and allow these 

lower standards to dictate U.S. policy. 

But adhering to these superior standards is not without cost. It 

is 20 percent more expensive to do business in the United States 

than it is in our nine largest trading partners. So while we do right 

by protecting our workers and safeguarding the environment, there 

is a real expense to doing so. Leveling this playing field is a challenging goal. Typically our country has tried to do so through free 

trade agreements, but more often than not, such a course has left 

something to be desired. While these FTAs benefit many U.S. companies, they often do so at the expense of U.S. manufacturers. 

To this very point, I opposed all of the recent agreements and 

took to the House floor in opposition to the South Korean Free 

Trade Agreement. This one agreement is estimated to displace 

109,000 jobs and increase our trade deficit with Korea by $16.7 trillion. 

On legislation this year, I also won approval of an amendment 

to require all agencies implementing FTAs to analyze and reduce 

their impact on small businesses, including manufacturers. Opening borders is just not enough. We also have to ensure that rules 

are not overly burdensome and stacked in favor of international 

competitors. 

To this latter point, we must take action to ensure these FTAs 

are held to the same standards as the U.S. It makes little sense 

to bring in new competitors and have a much lower cost of doing 

business. America is not going to lower its labor and environmental 

standards or permit human rights abuses, so we need to hold our 

partners to similar principles. Not doing so creates economic distortions as well as moral injustices. 

In a similar vein, it is crucial to ensure that foreign countries are 

not undervaluing their currencies. Doing so distorts trade and puts 

U.S. companies at a major disadvantage by artificially increasing 


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the price of our exports while decreasing the price of imports. It is 

a double-edged sword for domestic manufacturing, and action is 

long overdue. 

Aside from these multilateral matters, there are tools right here 

in the U.S. that manufacturers can use to increase their competitiveness abroad. This includes specialized programs that assist 

companies in selling their products in foreign markets. Individually, none of these programs are sufficient to shift the balance of 

the U.S. trade deficit, but when taken as a whole, these initiatives 

can play a useful role in stimulating manufacturing exports. 

Among the agencies providing services are the International 

Trade Administration which, through its U.S. Export Assistance 

Centers, can assist in identifying international customers, create 

market entry strategies, and help with often complex foreign rules 

and paperwork requirements. 

Other agencies, including the SBA and the Ex-Im Bank, provide 

specialized financing packages for U.S. exports. These loans and 

lines of credit are often essential in completing a foreign transaction. 

Finally, it is worth noting that Pennsylvania’s very own and 

award-winning Center for Trade Development provides tools for 

those looking to sell abroad. Taken together, these programs provide the means for Pennsylvania’s manufacturers to win new foreign customers. With the U.S. economy continuing to recover and 

many international markets in disarray, this is a time of transition 

for the manufacturing industry. While the debt problems in continental Europe continue to create uncertainty, the growth of Asia 

and Pacific Rim economies represent real opportunities for our 

manufacturers. 

Regardless of these ups and downs, one thing is certain, and that 

is that we need Pennsylvania’s manufacturing sector to be strong 

and ready to take advantage of any and all foreign market opportunities. As the largest sector in terms of gross state product, and the 

fourth largest source of jobs, manufacturing is central to the future 

of the Keystone State. Given this, it is clear that anything we can 

do to strengthen the manufacturing sector’s ability to compete globally will come back to benefit our state many times over. 

We want to thank all of the witnesses in advance, and I look forward to their testimony. Thank you, Chairman Tipton, and thanks 

again for bringing up the market economies legislation that was 

passed earlier. Working together, we can help solve U.S issues. 

It is good to have a chairman like Chairman Tipton, because we 

are always trying to figure out how we can do things that help our 

nation. 

And with that I yield back. 

Chairman TIPTON. Well, thank you. 

I would like to be able to explain our lighting system. In Congress, when they ring a bell, we just stream out and walk over to 

vote as soon as the bell rings. 

Mr. CRITZ. I salivate. 

Chairman TIPTON. We have a little variation on that. Just to explain them to you, you will each have five minutes for your testimony. The light will start out as green and then when it turns yellow, you will have one minute remaining. Then when it turns red, 


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if you could, go ahead and wrap up your statement. And we will 

certainly let you finish with that. 

So with that, we would like to go ahead and begin with our testimony here. 

I would now like to yield back to the ranking member to introduce our witnesses. 

Mr. CRITZ. Thank you, Chairman. 

I will go through all three of your bios and then, Mr. Hanley, if 

you will start off with your testimony. 

Joseph Hanley is the director of the Mid-Atlantic region for the 

U.S. Department of Commerce, U.S. Export Assistance Center, 

which covers New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, North Carolina and South Carolina. In this 

capacity, he oversees the provision of assistance to businesses seeking to export their goods abroad. 

Thank you for being here. 

Thomas Cummings is the Northeast and Mid-Atlantic regional 

director for the Ex-Im Bank of the United States. In this capacity 

he is responsible for bank sales and marketing to small businesses 

in a 16-state territory, which includes all of Pennsylvania. 

Since 1934 the Export-Import Bank of the United States has 

been the official export credit agency of the United States federal 

government, providing loans that help create and sustain U.S. jobs 

by financing sales of U.S. exports to international buyers. 

Thank you for being here. 

Peter O’Neill is the executive director of the Center for Trade Development. The center directs Pennsylvania’s Export Assistance 

Program. It has won numerous awards and in 2010 assisted over 

1350 companies through its overseas trade representatives and its 

regional export network partners across the state. The program directly generated $483 million of new export sales from businesses, 

supporting more than 6,400 jobs. 

Thank you very much for being here. 

Mr. Hanley, if you would open up with your opening statement. 

STATEMENTS OF JOSEPH HANLEY, DIRECTOR, U.S. AND FOREIGN COMMERCIAL SERVICE NETWORK; THOMAS P. CUMMINGS, REGIONAL DIRECTOR, EXPORT-IMPORT BANK OF 

THE UNITED STATES; AND PETER C. O’NEILL, EXECUTIVE DIRECTOR, CENTER FOR TRADE DEVELOPMENT, PENNSYLVANIA 

STATEMENT OF JOSEPH HANLEY 

Mr. HANLEY. Thank you, Chairman Tipton and Representative 

Critz, for the opportunity to testify today on behalf of the International Trade Administrations and U.S. & Foreign Commercial 

Service, US&FCS, and supporting the National Export Initiative by 

helping grow U.S. exports, assisting its small business growth, and 

supporting American jobs. 

Products and services carrying the ‘‘Made in the USA’’ designation are valued around the world for quality and reliability. Jobs 

supported by exports increased to 9.7 million in 2011, up 1.2 million since 2009. 


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In 2011 each billion dollars of U.S. exports supported just over 

5,000 jobs. Through February 2012, U.S. manufacturers alone have 

added 429,000 U.S. jobs since 2010. Moreover, the Department of 

Commerce estimates that exports contribute an additional 18 percent to workers’ earnings in the U.S. manufacturing sector, and 

workers in export-intensive service industries earn 15 to 20 percent 

more than comparable workers in other industries. 

As the key U.S. government export promotion agency, the 

US&FCS delivers export promotion events and customized exporting solutions to U.S. small- and medium-sized businesses to help 

them compete and succeed in the global marketplace. 

Domestically, we have 108 U.S. Export Assistance Centers, and 

we have 112 offices located in the U.S. embassies and consulates 

in more than 70 countries around the world to provide export services, including market intelligence, business matchmaking and 

trade counseling to U.S. businesses looking to expand through exporting. 

US&FCS’s three centers in Pennsylvania—located in Pittsburgh, 

Philadelphia and South Central Pennsylvania—have delivered over 

4,000 individual trade counseling sessions and customized services 

to over 1,000 Pennsylvania businesses in FY11 and FY12 to date, 

resulting in 257 Pennsylvania companies reporting 688 export successes to 91 different countries valued at over $500 million. 

75 percent of Pennsylvania companies reporting these successes 

were small or medium in size. 62 percent have less than 100 employees. RPM Industries is a great example of the way in which 

small companies can be successful exporters, and of the value of 

federal export assistance. 

Located in Washington, Pennsylvania, RPM Industries manufactures prelubrication and fluid evacuation systems for use in heavyduty diesel and gasoline engines. To expand business opportunities 

in Brazil, RPM turned to the US&FCS to augment its export development strategy. RPM participated in one of US&FCS’s annual 

spring trade missions, Trade Winds, which took place in the spring 

of 2010 in Brazil. 

By the close of this year, RPM expects sales of nearly $1 million 

of its systems to Brazil and is working to expand into other South 

American markets. Recent examples of our domestic outreach to 

help US&FCS export abroad included a visit by our colleague from 

the U.S. Embassy to the European Union in Brussels, to conduct 

a three-city tour to update Pennsylvania exporters on product 

standards in the European Union. 

We partnered with local development district offices throughout 

the tour to maximize our client outreach. As a result, over 96 

attendees, representing 56 Pennsylvania companies, participated in 

these events. Indeed in the past 18 months, the Pittsburgh U.S. 

Export Assistance Center has regularly worked with a broad range 

of federal, state, and local government agencies, as well as the private sector, to deliver or support over 60 outreach and educational 

events across Western and Central Pennsylvania. 

Efforts to enhance U.S. commercial competitiveness can be 

thwarted by markets distorting unfair trade practices of foreign 

governments and firms. To ensure that all industries facing unfair 

competition are able to take advantage of available trade law remVerDate Mar 15 2010 22:15 Nov 09, 2012 Jkt 076469 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\A469.XXX A469

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edies, the International Trade Administration’s Import Administration has established the Antidumping and Countervailing Duties 

Petition Counseling and Analysis Unit. 

The unit’s main responsibility is to help U.S. industry understand the unfair trade laws dealing with dumping and unfair foreign government subsidies as well as the process for filing a petition, requesting the initiation of an investigation. 

On February 28, 2012, the President signed Executive Order 

13601, establishing the Interagency Trade Enforcement Center or 

ITEC. The ITEC, led by the Office of the U.S. Trade Representative 

and the Department of Commerce, will coordinate the enforcement 

of U.S. trade rights under our International Trade Agreements and 

the enforcement of domestic trade rights by leveraging existing and 

additional resources more efficiently across the administration. 

Secretary of Commerce John Brice has also made supporting 

business investment in the United States, which is key to promoting economic and job growth, one of his priorities. Select USA 

is the first federal government-wide initiative to facilitate foreign 

business investment, attraction, retention, and expansion in the 

United States. 

Select USA services and supports state, regional, and local economic development organizations. It also provides current prospective business investors with a single point of contact to agencies 

across the federal government. In the last three decades, the worldwide stock of foreign direct investment has grown from 700 million 

in 1980 to 19 trillion in 2010. 

To increase the economic competitiveness of our U.S. businesses, 

US&FCS is working diligently each day at home and abroad to connect small- and medium-size enterprises with 95 percent of consumers living outside the United States. U.S. businesses, particularly SMEs, have the full support and assistance of the U.S. government to enter and expand their business in foreign markets. 

Thank you again for the opportunity to appear before you today, 

and I look forward to answering your questions. 

Mr. CRITZ. Mr. Cummings. 

STATEMENT OF THOMAS P. CUMMINGS 

Mr. CUMMINGS. Good morning. Thank you, Mr. Chairman, for 

the invitation to testify here in Pittsburgh today and speak about 

the role of the Export-Import Bank of the United States, Ex-Im 

Bank, or the Bank, in supporting small business exporters and 

their important contribution to U.S. job creation. 

I am happy to say that the bank has stepped up its challenge by 

helping businesses, large and small, increase their exports, thereby 

supporting U.S. jobs. During fiscal year 2011, the bank’s overall financing has exceeded 32 billion for the first time. The financing 

supported over 40.6 billion in exports and more than 3600 companies and helped to support nearly 290,000 U.S. export-related jobs. 

I am proud to say that the bank set a record in fiscal year 2011 

by financing more than 6 billion in financing to small businesses. 

In fact, small business comprises 87 percent of the transactions we 

did at the bank last year. 

During the last four decades that I have been involved in export 

finance, the need for Ex-Im Bank has never been greater nor the 


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challenges more daunting. As the official export credit agency of 

the United States, Ex-Im’s mandate is to enable U.S. companies, 

both large and small, to turn export opportunities into sales that 

help create and sustain U.S. jobs. 

The bank achieves its mission by providing export financing 

through loan guarantee and insurance programs when the private 

sector is unwilling or unable to do so. Ex-Im Bank also tries to 

level the playing fields by meeting and financing competition that 

foreign export credit agencies provide to their businesses. 

Ex-Im Bank is careful not to compete with the commercial sector 

in helping finance exports. Our activity typically increases during 

economic downturns and provides an alternative source of financing when commercial bank financing is not available. Since 2008 

the bank has operated at no cost to the U.S. taxpayer because it 

is financially self-sustaining. Ex-Im Bank more than covers its administrative costs and loan loss reserve expenses through its fees. 

Over the past five years, Ex-Im Bank has generated 1.9 billion 

in excess revenues for the U.S. Treasury. As a result of our diligent 

credit review and management, the bank has a loss ratio of less 

than 2 percent, which is well below that of commercial banks with 

similar activities. 

During the financial crisis, when private sector trade credit and 

political risk insurers were withdrawing coverage and reducing 

credit lines, Ex-Im Bank maintained a consistent underwriting philosophy and did not withdraw coverage or reduce lines. Notably, 

the bank even offered coverage to exporters on buyers that the private sector had denied, all with excellent results. 

Ex-Im Bank offers three basic financial products: Loans, guarantees, and credit insurance. Direct loans provide financing to foreign 

buyers for their purchases of U.S. goods and services. These loans 

can cover up to the lesser of 85 percent of the contract value or 100 

percent of the U.S. content. 

Loan guarantees cover the repayment risks on the foreign buyer’s debt obligation incurred to purchase U.S. goods and services. 

The coverage is 100 percent of the financed portion, which can be 

up to 85 percent of the contract value or 100 percent of U.S. content, whichever is less. 

Working capital guarantees provide a repayment guarantees to 

a lender on secured short-term working capital loans extended to 

qualified exporters. Under this program the bank is actually guaranteeing the exporter performance risk. These guarantees cover 90 

percent of the loan value, and the lender is at risk for 10 percent 

of the loan value. 

In fiscal year 2011, Ex-Im Bank authorized approximately 2.1 

billion in small business working capital guarantees compared to 

1.45 billion in fiscal year 2010. 

Export credit insurance helps U.S. exporters sell their goods by 

protecting them against the risk of nonpayment by foreign debtors 

for political or commercial reasons. This allows the exporter to extend credit directly to their international customers and compete 

with the terms being offered by exporters from other nations. 

In fiscal year 2011, Ex-Im Bank authorized over 3.27 billion in 

export credit insurance to small businesses. Small business transactions are in excess of 85 percent of the bank transactions. During 


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the year, the bank conducted 32 global access forums to raise 

awareness of Ex-Im Bank’s products to small businesses. All of the 

bank’s field offices are dedicated solely to small business outreach 

and support. 

Within the next three months, the bank will also be opening four 

new field offices. They will be located in Atlanta, Minneapolis, Detroit, and Seattle. This will be in addition to the eight existing field 

offices. 

Ex-Im Bank’s small business authorization numbers are showing 

rapid growth after reaching 3.8 billion in 2008, 4.3 billion in 2009, 

5.1 billion in 2010, and just over 6 billion in 2011. The bank knows 

it must do more, especially for more small businesses. 

So last year we introduced a new insurance product called Export Express Insurance. The product is geared toward the smallest 

of exporters. The market has reacted well to this new product, and 

we have issued over 200 express insurance policies; that is, 200 

small businesses that can now sell overseas without the fear of not 

getting repaid on competitive open accounting foreign sales. 

We are currently in the midst of launching a brand-new product 

called Global Credit Express. This product is a working capital loan 

facility from Ex-Im Bank for amounts up to a maximum of 

$500,000 to small business exporters. This product is designed to 

fill a void. Banks were unwilling to finance small loans, so Ex-Im 

Bank decided to finance them directly. Anticipated demand is huge. 

Supply chain finance, the bank provision, competitively priced 

working capital financing to businesses that supply products or 

services to large U.S. exporters. The program works to approve 

lenders with existing supply chain finance programs, enabling the 

lender to purchase accounts receivable from small business suppliers whose goods will be part of the export. 

Mr. CRITZ. You can enter the rest of your remarks for the record. 

Mr. CUMMINGS. Okay. 

Mr. CRITZ. Do you want to go through your conclusion? 

Mr. CUMMINGS. That will be acceptable. The global marketplace 

is truly brutal and competitive for businesses large and small. 

Commercial bank lenders typically limit the amount of exposure 

their customers can have in the various regions around the globe. 

Many banks are less willing to finance deals today than they 

would have just a year or two ago. The need for Ex-Im Bank products has never been greater. The export agencies above the governments around the world are extremely aggressive in supporting 

their exporters. U.S. exporters have a right to demand the same 

level of support. 

Thank you. 

Mr. CRITZ. Mr. O’Neill. Would you also explain how is it that you 

ended up in between the two title agencies. 

STATEMENT OF PETER C. O’NEILL 

Mr. O’NEILL. First of all, welcome back. Welcome home, Congressman and welcome to the Chairman. I have submitted written 

testimony to you, and I thought I would take a couple minutes to 

summarize some of that for you. 

Pennsylvania has the largest state-sponsored trade program in 

the country. And some often wonder why. Why Pennsylvania and 


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not other states? I do not think that we are geniuses at trade development, but what we have is the fortune to have a continuity 

of political support at the state and at the governor level through 

several different party changes over the last 25 years. 

Export promotion has continued to be supported throughout the 

last two and a half decades. That is a unique thing. Unfortunately, 

not a lot of states can attest to that. Trade budgets rise and fall 

with political shifts in priority and budgetary issues, but we have 

been able to maintain fairly stable budgetary support throughout 

the years. We have been able to evolve and refine our program over 

time, to the point where we have a very grounded program that 

really does address some of the major obstacles for small- and midsized companies to export. 

You can distill these down to two or three points. Companies do 

not have the time to develop and explore international markets. 

They do not have the money to go explore international markets. 

They may not have the managerial know-how to understand the 

mechanics of exporting and they cannot mitigate the risk and thus 

they do not do more and that is why we have the one percent export rate. 

That is why we have 15,000 exporters, many of which only export to one or two markets. It is abysmal. We need to do more, and 

this is an appropriate thing for government to do, to help lift these 

companies into international markets by providing programs that 

bridge those gaps, the money, the time, the managerial know-how, 

and the mechanics of it. 

If you think about it, we do not really get involved with trade 

policy at the state level. It is not our job to do that. If you are the 

defense bringing trade policy to level playing fields and address unfair competition, then we are your offense in terms of working with 

companies to get them into the market. 

I also want to mention technology for a second. I know we are 

talking about manufacturing today, but the merge of technology 

and manufacturing is real. It is happening. And I think it is going 

to be harder and harder to separate the two because anybody who 

is competitive in the manufacturing industry in the United States 

who is exporting today hopefully has a layer of technology embedded in that manufacturing process that makes them globally competitive. So I think we need to talk about technology as well and 

the merging of manufacturing in technology now and even increasingly in the future. 

Right now downstairs we have nine of Pennsylvania’s representatives meeting with companies one-on-one to talk about what is 

stopping you from exporting more and how can those nine representatives from Korea and Dubai and Brazil help them demystify 

those markets and figure out how to enter those markets in a costeffective manner. 

This is trade promotion at the grassroots level. There is nothing 

particularly sexy about it, but we are able to move the needle and 

help a lot of companies in the last 15 years really demystify markets and be at a comfort level in exporting that heretofore they had 

not been able to do. 

I would also like to talk quickly about STEP. I know your committee is responsible for helping the State Trade Export Program. 


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I cannot support it enough. It came at just the right time for us. 

As robust a program as we have had, we have taken our lumps 

when it has come to budget cuts over the years. This year would 

have been a very difficult year for us. We would have had to collapse 25 percent of our operation due to the issues we have here 

in Pennsylvania with regard to budget. 

It has plugged holes for us. It has been able to allow us to launch 

25 outbound international trade missions. It has allowed us to give 

grants to companies to offset the cost of international market exploration and it has allowed us to do deep market research for companies that otherwise could not afford to. It has been very, very important to us, and I appreciate that. I hope you can continue to 

support that. 

I know this is only funded for two years, but if Pennsylvania’s 

history is any indication here, and a lessen, it is the continuity of 

the program over time to allow it to evolve and refine that I think 

will bear fruit in the next five to ten years. 

As far as federal state cooperation is concerned, we work very 

closely with our folks in Pittsburgh and in Philadelphia. I think 

there is more we can do. I worry about lack of flexibility and deployment of federal assets when it comes to different states. 

Vermont is very different than Pennsylvania. Is it possible beyond 

that, just simply the number of federal people you deploy in each 

state—is it possible for the federal folks in our state, for example, 

to adapt their program to be more responsive to the local environment both in the metropolitan regions as well as in the state as 

a whole. 

I think we ought to talk about flexibility there that I do not see 

right now, but we are happy to share and cooperate, as we have 

been in the past. I think the future is bright. Thank you. 

Chairman TIPTON. Thank you, Mr. O’Neill. And thank you all of 

you for taking, again, the time to be able to testify here. 

I will start out with a question. Mr. Hanley, I recently held an 

information center with colleagues in my district. As we were talking beforehand, they did an excellent job, and I want to be able to 

communicate and if you would pass on as well. We have been here 

in Pennsylvania. Our thanks for all of their hard work on that. 

My question is in regards to the role of the SBA and Department 

of Commerce in promoting international trade. The SBA has been 

expanding their International Trade office in recent years, and it 

appears to be duplicative of the Commercial Service. How does the 

SBA fit into your mission of helping small businesses export? 

Mr. HANLEY. Well, thank you, Chairman Tipton. And it is certainly a timely question with the advent of STEP. We are six 

months into the STEP program. Before I address your question, if 

I could just quickly mention for the record that we had a typo in 

the first page of the written testimony that was submitted, and an 

important one, quite frankly, I think. 

We have helped companies export for the first time, or increase 

their exports, 75 percent, not 55, for small- or medium-sized businesses. So for an organization that prides itself on the work we do 

for small- and medium-sized businesses, to understate how many 

we have helped certainly hit me right in the heart when I saw 

that. So I want to get that corrected for the record. 


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As far as the STEP program is concerned, yes, the STEP program has certainly changed the landscape, so to speak, across the 

country, as Pete mentioned, and in states all around the country, 

to help companies to export. We have been working with SBA directly on the deployment of the STEP money. We have gone to 

meetings with SBA on several occasions to provide our input and 

our guidance, given 30 years of attention to export promotions specifically. 

In our worldwide network, we certainly have a lot to offer in 

terms of how that money can be best utilized for SMEs. So we have 

met with SBA in Washington, in fact, when Doverspike right here 

served on the panel that reviewed STEP grant applicants for disbursement of SBA STEP grant monies. At the same time, we are 

working with the states directly. 

In the first year, we sat down with all the states to help them 

devise a plan to utilize that money. With our expertise, both domestically and abroad, we have had a great opportunity to advise 

the states and to work with the states to put that money to work. 

Many of the states, unlike Pete’s job here, do not have as robust 

and as big a budget. So they turn to us to execute around the 

STEP grant monies. So when the money is dispersed to the states, 

we, in the best case have put together a plan with those states on 

where we can receive their trade missions. 

Our message to the states throughout this process has been 

given our capacity constraints around the world and to work with 

us early and often in developing a plan and a proposal for SBA so 

that we are in the best position to help them execute around that 

STEP grant money. As I said, with 30 years of experience focusing 

on only export promotion, we have the expertise and the worldwide 

network to make things happen for SMEs. So that is sort of the 

STEP grant side. 

Just quickly if I can mention the finance side of it, SBA has, as 

you know, for years provided international finance tools, just like 

our friends at Ex-Im Bank, to help our small businesses to export. 

SBA, in fact, is co-located with Export Assistance Centers in 19 different locations, if I have my number correct. That has changed up 

and down slightly. In that fashion, as we are going out and working with small businesses to advise them on developing new markets, invariably finance is part of that discussion. Finance has to 

be a part of marketing. 

So by having SBA located with us, we are able to give a powerful 

one-two punch, bring in the SBA finance experts, and deliver the 

finance programs alongside the marketing and new market development programs that we offer. 

Chairman TIPTON. Just to kind of follow up just a little bit on 

that, I am a small-business man. That is my real life. Some of the 

duplicative services, do you see that some of the SBA’s actions 

being duplicative of the Commercial Service end of it? 

Mr. HANLEY. I do believe that the district offices, the Small Business District office and SBA, in general, has responded to the 

President’s call to support the National Export Initiative, a government-wide approach to making exports a priority in business development. 


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SBA’s programs—while the SBA district office, in fact, has begun 

to join us, Pete and I sat down the district office just a couple of 

weeks ago to talk about STEP grant funding for next year. I think 

their entry into this area is a new but welcome one. At the same 

time, SBA’s programs through the SBDCs—the SBDCs have been 

tremendous partners of ours throughout the years. 

The SBDCs at the universities have that research capability and 

are able to work with us to extend outreach into more companies. 

So SBDCs have been a historical partner of ours. The district offices, I think through the advent of STEP, have begun to engage 

us. 

The district offices obviously have a lot on their plate beyond export promotion, and they are doing a lot of other things. I do not 

even pretend to know all the things on their plate. But I know they 

have a lot happening out at the district offices beyond exports. 

Then the last part of SBA that has historically worked with us 

has been their SCORE program, which are retired executives that 

volunteer. To the extent that we can secure retired executives with 

international business experience, I think that is a tremendous 

way to augment what is going on at the Export Assistance Centers 

to bring that real-world business experience into our SMEs. 

Not all SCORE volunteers have international business experience, so it is not effective in all cases. But to the extent SCORE 

can be sort of developed into, also, a cadre of international business 

executives retired, that would be a welcome addition to SBA’s program. 

Chairman TIPTON. Thank you. 

Mr. O’Neill, the State of Pennsylvania, like many states, has its 

own trade promotion office to be able to assist exporters and importers. Your state also has offices in 10 international countries. 

Do you believe the federal government is doing an effective job 

of complementing the state’s operations and mission? 

Mr. O’NEILL. That is a good question. Yes and no. I think it is 

a bit of a challenge for a state like ours. Again, why does Pennsylvania have such a robust program? Yes, I mentioned the historical 

nature of it. Perhaps also there is some echo effect of it being walloped during deindustrialization in the 1950s and 1960s and needing to address that in some way. 

We took it upon ourselves, many years ago to build a program 

that would be all our own. I think the issue here is that the challenge is too large for any one organization to address the lack of 

performance and the historical underperformance of Pennsylvania 

or the country as an exporting nation. We do not do a very good 

job. It is not in our blood. It is certainly in the Germans’, who have 

been traders for thousands of years. It is only in the last 30 years 

that we realized there is another market out there and that indeed 

that market is much, much larger than our own. Companies are 

beginning to get it, but at the rate that we are going, we are barely 

scratching the surface. 

With a large program like our own, we work with perhaps 10 

percent of the exporting community in any given year. That is not 

going to be enough. So between the federal and state assets on the 

ground in Pennsylvania, it is helpful. And we do coordinate. We 

rely on the feds in areas where we are not. 


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We are in 21 countries, covering about 40 markets that we think 

are the most promising. But the rest of that world is unknown to 

us, and we have to rely on the federal assets to help us in those 

markets. 

The international buyer programs, the gold key services that are 

provided, the advocacy that is done, very often we have a company 

with an issue that is really at the national level. I have got to go 

to my federal partners to help with that. So I would say there is 

duplication—it is not in the sense that I have needs that cannot 

be filled even with as good a program I have. I am glad they are 

there, that they can back me up on issues and in markets where 

I am not. 

So I would say it is a good partnership. It can be better. I think 

with STEP it has created a dialogue now, not only in Pennsylvania, 

but around the country, as: What are states going to do? How are 

they either going to start a program, bolster a program, or expand 

a program? How are they going to do it in concert with the federal 

government? That is a dialogue that is beginning, and it really 

needs to be encouraged. 

Chairman TIPTON. Thank you. I appreciate that. 

I will just open this up for the whole panel. Considering that 

only one percent of small businesses in the U.S. export, what do 

we need to do to get more to be able to participate? You just mentioned downstairs that you have people that are sitting down and 

trying to find out why, what is inhibiting you from being able to 

export. So I open it up. I would like to be able to hear your 

thoughts. 

Mr. HANLEY. You are absolutely right. Those are paltry numbers 

Pete mentioned and you mentioned. We do need more SMEs to be 

involved in exporting. And what can we do. That is a question we 

ask ourselves every day at the Export Assistance Centers. 

Websites, our newsletter outreach, working with partners to multiply and get the message out. It is a challenge that we face. 

First of all, I think the sheer numbers are incredible. I think 

there are over 11,000 manufacturing exporters in Pennsylvania. In 

order to make that change, this is really a people-to-people business. Websites can help in your efficiency, and indeed we are certainly hopeful that we could develop more effective websites for 

more online service, so to speak. But at the end of the day, just as 

business is people to people, working with companies and helping 

them to export, to develop those international business plans, to 

get them to move off those one or two markets into four or five, 

it is people-to-people work. 

Having the people on the ground in the field to do the outreach, 

to do the counseling, to develop the credibility with the small business that, in fact, we can make a difference in that small business’ 

business plans takes looking them in the eye, takes going out and 

meeting with them at their place of business. 

You cannot do it from behind a desk or behind the phone. You 

cannot do it from Washington. You need that field base here, and 

then you have to have the capacity abroad to deliver those products 

and services that are going to make a difference for the small business. 


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We could probably talk about this for a day. But at the end of 

the day, if you do not have people out there working directly with 

these small businesses, they are not going to get to where they 

need to go. 

Mr. O’NEILL. It has always been my dream to have a map of 

Pennsylvania with every exporter plotted on it so I know where 

they all are, I know where the clusters are, just to plan my day, 

to go make company calls, to do it most efficiently. I cannot do 

that. The only people who have that information is the U.S. Census 

Bureau, and that information is not available to us. I don’t think 

we are going to change that any time soon. 

But there is an indication that all of the gold is right there, and 

I can’t tap it in order to plot those companies. So what I have to 

do is go look for databases to buy or borrow or beg for and plot 

them myself. 

It is a shame, because if I had it, not only would I be able to 

more effectively task the staff to get out and talk to companies in 

a more efficient manner, but we would be able to tell the story to 

people such as yourselves by looking at a picture as opposed to giving a nine-page testimonial as to what the potential is and what 

the challenge is. Because a picture is worth a thousand words, as 

you know. That is a big issue for us. 

There’s also issues with federal data sharing. The U.S. Department of Commerce cannot readily hand over their database of clients to us for us to process and work with as well. There are issues 

there. And Joe probably understands the statutes better than I do. 

We don’t have any blanket agreements that we are allowed to 

share information because of privacy issues. 

Data management, we are working on that to be more efficient 

data managers of the client information we have, who is out, where 

do they want to go, where are they now, how can we get them into 

the third and fourth and fifth market. 

Then, finally, as Joe says, at the end of the day, we cannot be 

as efficient as we possibly can be. This is human capital. We have 

got to meet people face to face. They have got to trust you. You 

have got to build a relationship with them, and they have got to 

take your word that you have their best interest at heart. As much 

as we don’t want to hire any more people, once you have done everything else to increase your efficiency, you have got to put people 

on the ground, knock on doors and say why aren’t you exporting 

more. 

Chairman TIPTON. Mr. Cummings. 

Mr. CUMMINGS. I agree with my two colleagues. I think the important thing is to be able to look people in the eye, tell them what 

it is they have the ability to do. 

The other part of it is we are also trying to eliminate some of 

the risks of them doing business internationally, whether it be 

through some of the commercial service programs. For ourselves 

often it is through our credit risk insurance program where a company doesn’t have to be concerned that they may not get paid on 

their overseas sales, because now they can insure that receivable. 

That gives them a lot of confidence. 

After the meetings many times, they know who they can contact 

if they do have a question, if they do have a problem, so the compaVerDate Mar 15 2010 22:15 Nov 09, 2012 Jkt 076469 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 E:\HR\OC\A469.XXX A469

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nies don’t feel like they are going it alone. I think that that’s a very 

important thing, that they know they are going in as a group rather than going it alone. It makes all the difference in the world. 

Chairman TIPTON. Certainly I want to be respectful of your time. 

Just give me ‘‘You bet’’ or ‘‘No, it hasn’t’’ or ‘‘Maybe in between.’’ 

Do you think the U.S. economy and small business exporters in 

particular are better off with free trade agreements in place or 

worse? 

Mr. Cummings. 

Mr. CUMMINGS. I feel in general better off. 

Mr. O’NEILL. I have looked at some of the charts of trade both 

pre and post-FTA. The needle doesn’t move much. It is not that it 

is a windfall for companies or a major threat. In looking at charts 

pre and post, there isn’t an immediate change. It is a gradual uptick, but I think that is just global trade taking on continuous momentum. 

Chairman TIPTON. Mr. Hanley. 

Mr. HANLEY. Yes. I feel overall FTAs bring about more opportunities. 

Chairman TIPTON. Great. Thank you so much. 

I would now like to yield Ranking Member Critz for his questions. 

Mr. CRITZ. Thank you, Mr. Chairman. I neglected to thank the 

Pittsburgh Technology Council for hosting us and allowing us to 

use their facility. Thank you very much for this opportunity. I find 

it amazing that you have nine trade representatives on the floor 

below us today doing exactly what we’re trying to do to the SMEs, 

so I think this is fortuitous. Thank you to the Pittsburgh Technology Council for hosting us. 

I think I have about 30 questions. 

Chairman TIPTON. I have a gavel. 

Mr. CRITZ. And you are not afraid to use it. 

In talking with Michael Day, who is on the Small Business Committee staff, something came to light that I took notes on, and have 

a prepared question. 

You’ve been talking about face to face, and I understand. That 

makes a lot of sense. I deal and we deal on our Committee frequently with small businessmen who have no time to do anything 

other than the job that they’re doing, including many times marketing their own company within their market, let alone going 

after outside opportunities. 

Well, in Commerce’s recent budget submission, 15 additional staff and nearly $20 million of funding was requested to build the 

Export.gov version 2.0. Do you believe this money would be better 

spent in face-to-face assistance like what you provide at the local 

level here in Pennsylvania? 

Anyone who wants to comment; probably Mr. Hanley would be 

prudent. 

Mr. HANLEY. The effort here is not to take a website and use it 

to replace face to face. The effort here is to, in fact, allow our highly trained, highly skilled trade professionals around the country 

and the world to focus on those higher value-added business development work to be done with our small businesses. So in that effect, if a company simply needs some market research that is writVerDate Mar 15 2010 22:15 Nov 09, 2012 Jkt 076469 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\A469.XXX A469

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ten by our colleagues, say, in Brazil, rather than dialing up the Export Assistance Center and asking us to go find that research and 

then send it to them, that company would be able to easily access, 

get online and pull down that research directly. Not to say that we 

are not there to help them, not to say that we are here to say go 

to the website. 

An Export Assistance Center’s culture, if you have worked at 

them, as you know, is to provide that level of client service. But 

to the extent somebody needs an HS code for their product, to the 

extent they can go online and pull down that HS code rather than 

calling up a trade specialist in an export assistance center, again 

it frees up the time that our trade specialists and our overseas staff 

are working to develop new markets, new business lines and new 

business channels for those companies. 

So to the extent that that market research, some transactional 

questions can be answered online where some self-serve can take 

place, I think that is going to make us more efficient. At the end 

of the day, our performance metrics won’t change and our metrics 

will be export successes and has that client, in fact, concluded an 

export sale as a result of our work. So that’s the effort to bring up 

to current standards what was probably state of the art ten years 

ago so these companies can get online and register. 

By the way, our vision here in the field is that when a company 

gets online, registers and pulls down some research and asks for 

some information, that that will go right to that local export center 

who then can see that the client that they are working with on perhaps new business development in Europe is also pulling down research, for instance, on Mexico. So we are better capable, better positioned to help them in the long run. 

So it is the chain of efficiency and better service we believe, not 

an idea of replacing people on the ground with a website. 

Mr. CRITZ. Pete, how much do you use the website Export.gov? 

Mr. O’NEILL. I don’t use it myself personally. 

Mr. CRITZ. I mean, does your staff? 

Mr. O’NEILL. I’d have to guess at that, but I would imagine not 

a heck of a lot. There is kind of a triage system when we meet a 

company and assess their capability to export and assess their interest and figure out whether their interests align with what the 

international markets are telling us, that our staff both in Harrisburg and around the state will go to Export.gov and other websites 

to see if we have a match, see if what the company makes actually 

is relevant to the market that we are targeting. So it does happen. With that said, $20 million is a lot of money. 

Mr. CRITZ. STEP I think got 30 million; right? 

Mr. O’NEILL. 30 million. 20 million is a lot of money. I would 

hope three years from now we can sit down and show that that 60 

million has paid off in spades for you and all of us. I think it will. 

It might take a little while. 

If I had $20 million right now, I think we would go back and put 

more people on the ground and sit down and talk with the companies to bring these companies into markets as opposed to the—the 

smaller the company, the less likely they are going to go to that 

website, because, as you said, he doesn’t have the time for it. He 

does not have the staff to do it. 


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We built those kinds of websites ourselves, humble versions of 

the website you speak of, Virtual Trade Adviser, which is a quick 

snapshot for the company of where in the world should I go. It was 

a quick snapshot. Cost us a hundred thousand dollars. To get companies to go to that website, just to simply go to it was like pulling 

teeth. The road is littered with websites that are export diagnostic 

tests, see how ready you are or here is the world, go ahead and explore it from the comfort of your chair. 

It’s real difficult to get hundreds and hundreds and hundreds of 

companies to use it. What I find is staff use it, federal staff, state 

staff, and private consultants use them and then package those 

and sell those to the company for a price. That happens. 

Mr. CRITZ. I understand. If we’re talking about one percent exporting, we need to be better. So I understand the efficiencies. But, 

again, in dealing in foreign markets, is that personal touch really 

that important; that we’re going to get more bang from our buck 

by going and investing in more personal face-to-face kind of stuff 

than in becoming more high tech? 

Maybe the paper is better than the electronics. That is what we 

are trying to figure out, too; how best to move forward. 

Pete and I were discussing earlier the lack of access to information as to who is doing work where. We were talking about how 

Census actually promotes its small business portion, that it has all 

the data that we are talking about. So if we are looking for who 

is trading or who is doing work with Brazil, they can push that information out. So there has to be more coordination there to make 

that data more available, more accessible, so you can be more efficient as well. 

Mr. HANLEY. If I could just add? 

Mr. CRITZ. Sure. 

Mr. HANLEY. Because this sort of dovetails with Chairman Tipton’s question about SBA and our website, and this is not part of 

the new website development, but it is going on today with Export.gov. 

As U.S. companies get on Export.gov and register, there is a 

process by which they take a look at those companies that register. 

Those who are new to export, who have not been involved in exporting yet, those are referred over to SBA. Then those who are export ready or are exporting to one or two markets, that’s typically 

our sweet spot. 

So many small businesses only export to one or two markets and 

are best positioned to grow their exports. Those export ready companies have been referred over to the Department of Commerce. So 

in that fashion in Washington, we are seeing the direction of new 

to export versus export ready companies so that we can then place 

our assets around the world, a hundred people, six locations in 

China, for example, to better support those export ready companies. 

So I just want to pull those two thoughts, two questions together. 

Thank you. 

Mr. CRITZ. Thank you. 

Pete, you mentioned the Gold Key program. We have noted for 

Pittsburgh-based companies, international sales account for eight 

percent of their business. This international expansion doesn’t 


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come easily. The Department of Commerce offers Golden Key 

match-making services which link small manufacturers here in the 

U.S. to foreign buyers broad. However, we continue to hear that 

the cost of this program is prohibitive for many small firms. 

Mr. Hanley, how is your agency making this program more affordable for small manufacturers under the national export strategy, and what is your experience with Gold Key? 

Mr. HANLEY. Right now the Gold Key service costs $700, and 

being someone who is out there working with clients, you get all 

different reactions to that $700 I can assure you. The U.S. Department of Commerce is mandated by the Office of Management and 

Budget Circular 25 to fully recover costs on any fee-based programs 

or services that we provide to individual businesses. 

So we are always working with OMB to be in compliance with 

their circular, with their requirement that we recover full costs. So 

it is really OMB’s direction that guides us towards our fee-based 

structures. 

Mr. O’NEILL. As far as we are concerned with regard to Gold Key 

services, it is nice to be able to say our mantra is give everything 

away for free; give it away till the hurts. At some point the company needs to buy in, because if you give everything away for free, 

they don’t necessarily take it seriously or value it. We understand, 

and we are conscious of that. But it becomes pretty clear very 

quickly whether you have got a company that is very serious about 

a market or whether they are fishing, and we can figure it out pretty quickly. 

So we do try to give everything away for free including what 

would be a Gold Key service that our state overseas offices provide. 

Certainly in markets where we don’t swim, we are going to go to 

them for help. I just think it is one more obstacle for a small company. $700 

may not sound like a lot, and I’m sure the value in many posts is 

well worth it and beyond, but it is one more thing that a company 

has to tally up when they are contemplating that overseas trip. 

Our STEP grant money is available for Gold Key on a matching 

basis pay for Gold Key subscription services, and we are happy to 

apply it. It has not been used much this year, but we do make it 

available so that it does subsidize the cost of the Gold Key so we 

can cut that $700 fee to $350 with our grant courtesy of STEP. 

Mr. CRITZ. Mr. Cummings, we left you alone pretty much the 

whole time. I have one question for you. 

Last year the average Ex-Im loan size in Pennsylvania was more 

than $16.4 million, significantly higher than the average SBA loan 

in the state, which was about $275,000, and far exceeds the size 

of loans for which there is currently the greatest demand. $16.4 

million is a big loan for a small business. 

What mechanisms are in place to make sure these loans the 

agency reports are going to small businesses, that they are actually 

small businesses? 

Mr. CUMMINGS. We do follow all the guidelines to make sure that 

what we classify as a small business is, in fact, a small business 

by definition. But you do run into a lot of problems when you do 

averages. As soon as you start talking averages, when you do, for 

example, a transportation division of GE up in Erie, and that falls 


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in, those numbers are in the hundreds of millions of dollars bring 

the averages way up. 

In actual loans in last year, we only actually did 18 loans. Most 

of what we do are actually insurance and guarantees. And most of 

the loans generally are larger dollar transactions. But you will see 

next year a real drop right to the floor in the size of the loans because under our new Export Express product, we are actually going 

to be directly doing loans directly to U.S. exporters in support of 

their exports. The largest loan will be $500,000. We are starting at floor zero and going up to $500,000. The reason we are doing this is because 

we have identified a need in the market for very, very small loans. 

The commercial banking sector said that they can’t make money on 

doing that size loan. So we decided to do them ourselves. 

We tried to make it such a simple loan, that they get a referral 

in from a commercial bank just that they were doing business with 

the bank. We do a simple credit score on the company. As long as 

the credit score is acceptable, they are going to get a loan from ExIm Bank with a maximum loan value of $500,000. We are estimating, we are expecting most of them to be in the $300,000 range. 

So if we do a fair amount of loans, and I believe we will in your 

district, Congressman, you are going to see those numbers really 

drop. 

Mr. CRITZ. Those are small loans, but are they also what would 

be classified as small business small loans? 

Mr. CUMMINGS. Correct. In order to qualify for this program, a 

company has to be a small business. Generally we don’t even find 

that large businesses are looking for loans in that range. 

Mr. CRITZ. It is 11:00, and we have a second panel. 

So my last question is: If you had one closing comment to make, 

to say what we can do in our Subcommittee and our Committee assignment regarding a program that is working, something that you 

have seen that needs a little bit of a tweak, if it is coordination, 

if it is helping make sure the federal and state agencies are coordinating so we don’t have duplication or we are getting the best bang 

out of our buck; is there one thing that you would like to mention? 

I will go right to left. Mr. Hanley, starting with you. 

There is one thing sticking in your craw that says boy, if Congress would just do or not do this? 

Mr. HANLEY. When the President’s National Export Initiative 

was announced two and a half years ago, I watched that announcement, and I said finally, wow, exactly what we do. It now is being 

elevated to the level of importance it deserves to help small businesses and help this country add jobs. 

In that time, as you know, we have had some difficulties in having the priorities of the President’s National Export Initiative supported in terms of budget. So we have an opportunity, I think, this 

year, once again, to support the President’s National Export Initiative through his budget request. That for me would be an important step in the right direction. 

Mr. CRITZ. Pete. 

Mr. O’NEILL. Better coordination of the federal government in domestic trade programs. We have got a number of different programs coming at us, and we try our best to incorporate those into 


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the state construct, but there are surprises that come our way. 

Small business development centers just trained 18—we have 18 

SBDCs in the state, and now each one of those has an international trade coordinator. I am not sure what they do or what 

their mandate is, but we have them and we have to figure out what 

we are going to do. 

That was a surprise to us that that was coming down the pike. 

We have got the MEP program that is now supporting the export 

tech program, which is a multi-day export training program going 

on, not in concert with us. We learn about these things after the 

fact and we try to adapt where we can to be good partners and 

players. But we are really not trainers. That is not what we do. 

I think better coordination. I know we have an export promotion 

cabinet through the NEI. I think there has got to be some kind of 

just take a moment and hear from the states’ perspective to make 

sure the states are in line and attuned to what is coming at us 

from several different agencies all at once. 

If I can just cheat for a second, and say one more opportunity. 

We started in concert with the Pittsburgh Technology Council 

this export tech program which is a $200,000 grant from EDA, the 

idea being small technology firms need to go international often 

well before a product or a service is even fully realized. They need 

to go find venture capital abroad. They need to find research partners abroad. We just proved this last week when we took six biotechnology companies to Amsterdam for our bio-Europe show. 

Five of those six companies were not classified as profitable, and 

you can understand why. Because they are startups in many cases. 

But that doesn’t mean they don’t need to get abroad for very good 

valid business development reasons, and yet we could not get reimbursed from the STEP because they weren’t classified as profitable. 

The STEP program has to allow us to work with nonprofitable 

companies. It is not that they are basket cases, because we don’t 

want to work with companies that are not going to go anywhere 

either, but a carve-out that would allow us to work with small tech 

startups. Because these are the future. The product life cycle, the 

way it is treated these days is technology is turning the product life 

cycle on its head. It doesn’t work the way it used to. 

These companies need to be abroad. They need our assistance 

just like anybody else. We need to remove that profitability clause 

or at least amend it in the STEP program, and that would be a big 

help to us. It is not as if we are going to shift everything in that 

direction, but it is an important component of our overall economy, 

and I think it should be reflected in the STEP grant. 

Mr. CRITZ. Mr. Cummings. 

Mr. CUMMINGS. An agency like ourselves, we are a very small 

agency, we operate very similar to a small business. We have seen 

huge, astronomical growth over the last few years. I think the only 

thing we need is to make sure that Congress is aware that as we 

are growing, the need for resources will grow as well. 

Mr. CRITZ. Mr. Chairman, I wanted to leave enough time in case 

you had any second round questions that you got a chance to ask 

them. 

Chairman TIPTON. I appreciate that. 


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I appreciate all of you as we discussed beforehand obviously 

being able to export. I think Pennsylvania is to be applauded in 

terms of how aggressively you have moved into the international 

marketplace, be able to reach out. I think it has modeled certainly 

a number of our states because when you look at the multiplier 

bringing in fresh dollars back into our economy, that is obviously 

a very critical, critical component for us and a great field for us to 

be able to cultivate as Americans, and something we certainly 

ought to be able to grow. 

I would like to thank all of you for taking the time to be able 

to participate today and assisting small businesses with those export opportunities. With limited time and personnel, small firms do 

rely heavily on the states and the federal government obviously for 

assistance, and we need to make sure that these programs do work 

in unison to most efficiently assist small business while they are 

trying to export. 

I’m a small businessman, and I think you verbalized very well 

that you are in the business of doing your business. So it is a little 

bit of a daunting thing to try and figure out all the different machinations to go through to try and generate those overseas dollars. 

As you note, once that door is open, you see the profitability. As 

we saw in terms of some testimony as well, the actual income flowing in to the people who do the work increases as we increase those 

exports. 

So this is something that truly is important and that we cer- tainly need in these budgetary times, the country with $15.5 trillion in debt, to make sure that we are not only maximizing our 

profit centers that government can help us with, and exports are 

certainly one, but we are making sure that we are using those dollars efficiently, not getting the overlaps and make it streamlined. 

It is just business and something we need to work on. 

So we certainly look forward to working with you and my colleagues to identify the best ways to increase the number of small 

businesses who do export. I would like to thank you again for taking the time out of your workday to join us and giving me the privilege to come here to Pittsburgh and make it back home with the 

Terrible Towel. 

Thank you. 

[Recess.] 

Chairman TIPTON. I see our second panel is already seated. Gentlemen, you probably heard as we began the first panel this morning, we have our witness lights. The Ranking Member is here. I get 

interested in taking notes, and he pays attention to the lights. You 

will have five minutes for your testimony. When it gets down to 

one minute, the yellow light will come on, and then when the red 

light comes on, if you could wrap up the testimony. I will try and 

help a little better this time. 

Thank you again for being here. With the introduction here, I 

will yield to Ranking Member Critz for introductions. 

Mr. CRITZ. Thank you, Mr. Chairman. Thank you, gentlemen, for 

being here. I will do the same as I did in the first panel. I will read 

each bio, then we’ll go right to left with statements. 

Walt Robertson runs the Johnstown wire mill, which is actually 

in my district up in Johnstown. I appreciate you being here. JohnsVerDate Mar 15 2010 22:15 Nov 09, 2012 Jkt 076469 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\A469.XXX A469

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town Wire Technologies was originally a division of Bethlehem 

Steel and is the largest producer of value-added carbon and alloy 

wire in North America. It focuses on high margin segments where 

metallurgical quality is the differentiating factor. 

The company operates from a single 638,000 square foot facility 

in Johnstown and employs 260 people, 210 of which are represented by the United Steelworkers. 

Thank you for being here. 

Justin McElhatten is the president and CEO of Industrial Scientific Corporation located in Oakdale. The company started in 

1976 as the research division of National Mine Service Company. 

The division was formed to develop methane detectors for underground mines. In 1985, NMS sold the division, and Industrial Scientific Corporation began independent operations that year. 

ISC develops, manufactures and services fixed and portable gas 

detection equipment. Key markets include utilities, oil and gas, 

steel and coke and the military, and it is active worldwide, either 

direct or through distributors. It has more than 850 employees 

worldwide. 

Thank you for being here. 

David Groll is the founder and CEO of Circadiance. Circadiance 

develops, manufactures and markets respiratory products for people with sleep disordered breathing or who need noninvasive ventilation. 

Mr. Groll holds a Bachelor of Science degree in biomedical engineering from the University of Texas at Austin and a Master’s degree in manufacturing assistance engineering from the University 

of Pittsburgh. 

Thank you very much for being here. 

Walt, if you would start. 

STATEMENTS OF WALTER ROBERTSON, JOHNSTOWN WIRE 

TECHNOLOGIES; JUSTIN MCELHATTEN, PRESIDENT, INDUSTRIAL SCIENTIFIC CORPORATION; AND DAVID GROLL, CEO, 

CIRCADIANCE 

STATEMENT OF WALTER ROBERTSON 

Mr. ROBERTSON. The headline in the American Metal Market 

last Monday was China Downstreamed Steel Push is Called Worrisome. Unfortunately my industry, wire and wire products, has been 

living this reality for many years. By the way, wire and wire products are everywhere, nails, staples, paper clips, telephone pole 

hardware, nuts and bolts for cars and other uses, concrete reinforcement, book binding wire, chain link fence; and literally hundreds more items are made from wire. 

Now, back to China, who has built the largest steel industry and 

wire rod, the raw material for wire, has been their main focus. 

China has 65 percent of the world’s production capacity for wire 

rod, while they have roughly 45 to 50 percent for other steel products. The key issue, however, is China’s border tax regime where 

they impose a 15 percent export duty on wire rod and interestingly 

don’t impose any export tax on other steel products. 

Now the bad news. The export duty has forced all of this wire 

product production into their domestic market at below world marVerDate Mar 15 2010 22:15 Nov 09, 2012 Jkt 076469 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 E:\HR\OC\A469.XXX A469

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ket pricing giving their wire and wire products producers a significant cost advantage, and then on the export, they get a 5 to 15 percent back rebate. A powerful combination. 

The results are they’ve flooded the world with cheap and dumped 

wire and wire products for the last 10 to 12 years. In the last 10 

years in the U.S., China has gone from virtually a zero market 

share to supplying about 20 percent of our entire industry. This 

border tax manipulation violates several WTO rules, but they defend their actions using an environmental defense, and the 

U.S.T.R. has been reluctant to challenge them even though the 

U.S. and Europe recently won a similar case on basic steel inputs 

at the WTO. 

The results have been devastating as far as job loss and shuttered businesses of all sizes, and the list of wire products that 

aren’t made in the U.S. anymore is long. However, once you read 

a Chinese government five-year plan, it is clear that their strategy 

is all about creating jobs in China. The obvious problem in the U.S. 

is the commensurate loss of jobs and, in this case, mostly small privately-owned companies, many of whom are no longer in business. 

The good news is that five years ago, our industry started using 

U.S. trade laws to defend our markets against dumped wire and 

wire products from China and other countries. Starting with the 

garment hanger case, our industry won a series of antidumping 

and countervailing duty cases. In fact, my company is currently involved with five other companies in an AD and CBD case against 

China and Mexico for galvanized wire. 

I testified two weeks ago at the ITC in the final injury determination hearing, and we believe that the ITC will uphold the 

Commerce Department’s duty determination that imposed antidumping duties on China from 194 percent to 235 percent and AD 

duties on Mexico from 21 to 38 percent. 

These trade law remedies have provided much needed relief for 

our industry, but there are two problems that make addressing the 

numerous dumping issues we face quite difficult, particularly if 

you’re a small business. 

First, unless the Commerce Department tracks your product or 

products of interest in a separate category, it is difficult to gather 

the needed information on imports to build the facts for a case. 

This is particularly true for small companies and even groups of 

small companies that tend to find niche products or markets so 

they can compete successfully. 

In our industry, there are literally, as I said, hundreds of wire 

and wire product items produced. The solution is to make industrywide cases easier to develop and submit instead of the cumbersome 

201 and 301 trade remedies. 

Secondly, bringing an AD or CBD case today costs the petitioners 

in excess of $1 million. That’s a challenge for small businesses even 

when your confidence is high, because it takes about 10 to 12 

months for a case to go through the system, and that means even 

for a successful case, the payback is not timely. The cost is based 

on the legal complexity and other demands inherent in the case, 

and it is very difficult to do without legal counsel. I don’t really 

know the solution to that problem. 


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Another problem with successful trade suits is enforcement. I’ll 

spare you the details, but be assured that the circumvention and 

fraud issues are numerous. In fact, in the case of China, there’s a 

clear pattern of fraud and circumvention highlighted by websites 

that promote triangular trade through other Asian/U.S. trade partners. 

Our industry regularly meets with customs personnel, and we 

have been at the forefront of promoting the enforcement act. Of 

course, recent legislation just signed by the President confirms 

Congressional support for applying AD and CBD cases to nonmarket economies, and that is very timely and very important. 

China historically has given massive subsidies to their manufacturers. Their major subsidy, however, is their undervalued currency. The fact is that China has created the greatest mercantile 

system since the 18th century through their subsidies, border tax 

regime and many other distorted practices. Their undervalued currency is the thread that weaves the system together into a powerful economic machine. 

Those of us outside the beltway are intrigued by the political maneuvering of the currency bill, but we do appreciate Senate Representative Critz’ leadership on this issue in the House. Please understand that many of us in industry regard China as an important 

trading partner with great potential as an export customer, but we 

just don’t understand why there is such a great reluctance to hold 

them accountable for their actions that in almost every case are 

counter to their WTO or GAT commitments. Thank you. 

Mr. CRITZ. Mr. McElhatten. 

STATEMENT OF JUSTIN MCELHATTEN 

Mr. MCELHATTAN. Thanks for the opportunity to address you. Industrial Scientific is a global manufacturer and technology provider 

serving the needs of those people who work in those dangerous 

workplaces in the world. 

We manufacture gas detection equipment that monitor 

atmospheres that can poison you. They can explode. They can asphyxiate you. We do this in order to preserve human life. We serve 

a variety of industries. 

Our equipment is in use in some of the high profile operations 

in the world, for example, CERN, the large hadron collider, in 

Switzerland and France, and we’re also on board the International 

Space Station. We have four manufacturing operations in four locations, Pittsburgh, Pennsylvania; Shanghai, China; Arras, France; 

and Dortmund, Germany. We employ 900 people across 22 countries, and we have had strong growth over our 27 years so far. 

A key factor in growing from 30 employees in 1985 to almost 400 

employees in the U.S. and we created over 60 manufacturing-based 

jobs here in the last year, has been expanding sales to international customers. Over half of our production is sold outside the 

U.S. 

I want to speak about one very specific issue as it relates to U.S. 

trade policy, and that is export controls. Some of our products we 

manufacture, for example, the ones that monitor gases, such as sulfur dioxide or chlorine, are considered dual use, meaning these 

products can have commercial applications in addition to military 


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or proliferation applications. As such, our products are subject to 

certain export controls that are terribly costly, complex and burdensome in service to our customers. 

Further, the potential penalties for noncompliance are incredibly 

harsh and potentially very costly to a growing company. In order 

to ensure full compliance, we focus on a variety of points in our 

business process. The first is monitoring and control at all points 

of order entry globally at an individual order level to ensure that 

we don’t have denied parties, that we verify the end use and we 

have other proper verification. This many times creates potential 

opportunities for delays of getting life preserving equipment to our 

customers. 

Secondly, we have to monitor and control our distribution channels. We are selling into over a hundred countries and in many 

cases intermediary distributors, and we have to monitor those 

channels. In product development, monitoring and controlling our 

own product classification as they relate to export control. We have 

to do an export review assessment required during the preliminary 

product development to determine whether the new product will require license for export. Then we have to do continuous follow-up 

assessments prior to the launch to see if there’s been any changes 

made in the classification. 

And then, finally, continuous training of employees related to export compliance concerns, and there’s also expenses related to export compliance guidance and advice from legal counsel, et cetera, 

et cetera. Additionally, we are limited as a company in our ability 

to confer with non-U.S. based consultants regarding technologies 

and, in some cases, to hire non-U.S. citizens for certain positions 

due to concerns about the de-export of technology. These limitations hinder development efforts in a very competitive market. 

My request is fairly simple. I would just ask first that you recognize the tremendous burden that this system, the export control 

system, places on a company’s growth and nimbleness as it seeks 

to serve its mission in preserving human life in our case and, secondly, that you seek ways to simplify the export control process for 

growing companies or just in general. 

In summary, the increasing emphasis being placed on export enforcement and increased penalties can be counterproductive. It is 

counterproductive to promoting exports. Consideration is needed to 

develop ways for the government to partner with industry to facilitate export compliance, to enhance legitimate trade while preventing harmful exports. 

Thank you for the opportunity to talk to you. 

Mr. CRITZ. Mr. Groll. 

STATEMENT OF DAVID GROLL 

Mr. GROLL. Chairman Tipton, Congressman Critz, good morning. 

Thank you for the invitation to speak before you today. 

I would like to applaud this Committee’s efforts regarding free 

trade agreements with Colombia, Korea and Panama. I urge continued efforts to reduce barriers to markets in Asia and Latin 

America, in particular Brazil. Circadiance designs, manufactures 

and sells face masks for the treatment of obstructive sleep apnea, 

a condition that affects an estimated 30 million Americans and 100 


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million people worldwide. Although we do sell in over 30 countries, 

less than ten percent of our revenue is from sales outside of the 

U.S. This Committee’s efforts to remove trade barriers support our 

goal of growing our export business faster than our overall business. 

There are two main issues facing the medical device industry, 

that while domestic policies, they affect our competitiveness. Those 

two main issues are medical device levy tax and competitive bidding. As an American medical device manufacturer, I am staunchly 

opposed to the medical device levy tax. This job killing provision 

was included in the Patient Protection & Affordable Care Act 

signed into law in 2010. According to the Act, a 2.3 percent excise 

tax will be imposed on the total revenue on all U.S. manufacturers, 

medical device manufacturers regardless of whether the company 

generates a profit. 

The tax will impact countless small manufacturing businesses 

throughout the country. For instance, our company’s budget calls 

for us to spend ten percent of our revenue on research and development. Should the medical device levy go into effect beginning in 

2013, as called for in the Affordable Care Act, we will have no 

choice but to cut our research and development spending by an offsetting amount. This will result in a 23 percent reduction in our 

R & D spending. 

Companies throughout our industry face the same challenge. The 

result can be devastating for innovation, impeding job creation and 

weakening the position of the United States as the global leader in 

medical technology innovation. Should the Affordable Care Act survive the Supreme Court challenge, I urge you to support the efforts 

of Representative Erik Paulson to have this provision of the Affordable Care Act repealed before it becomes law at the end of this 

year. 

Circadiance sells primarily to home medical equipment providers 

who provide our products to their patients and bill their insurance 

providers, including Medicare. The Medicare Modernization Act of 

2003 established requirements for a competitive bidding program 

for certain home medical equipment and supplies. Under the program the centers for Medicare and Medicaid services award contracts to suppliers for the bid items. 

Competitive bidding was rolled out in nine metropolitan areas in 

2010 and is currently being extended to an additional 97 areas this 

year. Competitive bidding is deeply flawed. First of all, it is anticompetitive as it reduces the number of suppliers in the market 

forcing many of the small businesses to close. 

It reduces access to care, patient choice and quality of care. It 

forces patients, most of whom are senior citizens or disabled, to 

switch away from local providers they rely on and trust. We have 

already seen the results of competitive bidding in the initial nine 

competitive bidding areas. There has been a drop in submitted 

claims in these areas reflecting more restricted access to approved 

Medicare suppliers. 

At the same time, there’s been a rise in the same beneficiary 

group in emergency room admissions reflecting inevitable shifting 

of care from the low cost home-based model to the much higher 

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petitive bidding is causing the cost of Medicare to go up in direct 

conflict with the goals of the program. 

I urge members of this Committee to support H.R. 1041, the bipartisan bill, to repeal competitive bidding. In turn, I urge the 

Committee members to support the alternative known as the Market Pricing Program which, like competitive bidding, is based on an 

auction process but addresses the flaws of the competitive bidding 

program. The Market Pricing Program will meet the goal of lowering prices for medical equipment, not restricting access to the 

system for seniors and those with disabilities. 

Currently the Market Pricing Program is pending a score from 

the Congressional Budget Office. I urge Committee members to 

pressure the CBO to present this score as quickly as possible so 

that the market pricing program has a chance to replace the flawed 

competitive bidding system before the end of the year. 

The U.S. medical device industry is a net exporter. I urge you to 

continue to provide access to international markets, to seek a simple and fair tax code that treats all companies equally and to support efforts to replace the flawed Medicare competitive bidding program. 

I have included additional comments which are in my written 

testimony for the public and Committee record. Thank you for the 

opportunity to speak today. 

Chairman TIPTON. Thank you, gentlemen. I certainly appreciate 

you all taking the time again to be here. I will start out with questioning here. 

First of all, Mr. Groll, you caught my attention in regard to the 

excise tax, medical device excise tax. When you’re talking about increasing or reducing your R & D, did you say 23 percent? 

Mr. GROLL. Yes. 

Chairman TIPTON. That’s obviously how you make a better product. Do you have any kind of forecast that should this actually 

come into place, how is that going to impact your sales? How is 

that going to impact jobs? 

Mr. GROLL. Well, in the short term, the sales are going to be 

based on products in development right now. But beginning next 

year, we will hire fewer engineers and spend less money on research and development, and in the long term, that will affect our 

ability to develop new products and grow our business. 

Chairman TIPTON. Thank you. A week ago today, the Pueblo 

Chieftain, the largest newspaper in southern Colorado, ran an article stating that manufacturing is leading Pueblo’s recovery. This 

article actually pointed out that consumer spending in the fivecounty region anchored by Pueblo outpaced the rest of the state. 

I’d like to submit this article for the record. 

[The information follows on page 63.] 

Chairman TIPTON. I believe that we could all agree that manufacturing is important for the future of our economic prosperity. As 

a result, I wanted to just ask the panel: What do you believe to be 

the single biggest obstacle facing the manufacturing industry today 

when it comes to exporting? 

Mr. ROBERTSON. You’re talking small business? 

Chairman TIPTON. Right. 


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Mr. ROBERTSON. I think the fellows on the last panel said it. 

From my perspective, it is credit risk and it is actually currency 

risk. You make a transaction and six months later you might ship 

a product. To take that currency risk could be a big issue. I’m sure 

there are lots of other issues, but when you have a product that 

is pretty set like ours is, it really gets down to credit and currency 

risk. 

Mr. CRITZ. Currency risk meaning? 

Mr. ROBERTSON. The U.S. dollar strengthens or weakens relative 

to the other currency in the timeframe that you had actually taken 

the order versus the time you ship the order. You can be on the 

wrong side of that currency movement, and it can be painful. 

Chairman TIPTON. Instability in the currency. 

Mr. MCELHATTAN. From my perspective, a couple of things. 

Number one is just having the orientation around exporting, being 

of the mindset that we see that as a significant opportunity. From 

my very limited perspective within my company, this was one of 

the areas, the export control, that leans heavy against that. 

If you’re in that dual use category, you’re taking a big step when 

you sell to the other side for exporting. So I think the attitude of 

the enforcement bodies, et cetera, around that is going to influence 

it one way or another. We took advantage of a lot of the programs 

early on as we began to export to find partners. But I would agree. 

I think that the credit risk is one of the significant ones as well. 

Mr. GROLL. I think the issues that were brought up by the first 

panel, a lot of them are important, but for us, it was pointed out: 

The time to work on it is critical. We’re a small company. We have 

15 employees. Our major export markets are Germany, Canada 

and Japan. Canada is easy. We can get in the car and drive up 

there. 

But it is expensive and very time consuming to figure out who 

in Germany is the right partner for us to be working with. It is 

going to take somebody getting on a plane and going over there 

and identifying them and building those relationships that will let 

us really start to penetrate that market. 

Mr. TIPTON. Thank you. I would like to open this up to all of you. 

Mr. Robertson, some of the comments that you made in regards 

to dealing with China and other areas, could you perhaps provide 

a cost estimate on how unfair trade practices are affecting your 

business? What’s the cost estimate? How is that hurting your business? 

Mr. ROBERTSON. In our case, we buy from the steel mills and 

convert the product into usable product for people that make end 

products. And the problem is that so many of these customers are 

no longer in business. I mean, that’s really the issue. I mean, it 

really is the fact that the market has shrunken over the last 10 to 

12 years due to what I believe is really unfair competition from 

China. 

Chairman TIPTON. Do you have any idea in terms of—and it may be proprietary; I don’t know—but we could have had $100 million 

more in sales had we had a fair and level playing field to be able 

to work out of? 

Mr. ROBERTSON. That would be a difficult number. It’s a huge 

number. 


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Chairman TIPTON. It is a big number? 

Mr. McElhatten. 

Mr. MCELHATTAN. I don’t have a figure. We have tried to fight 

against that by adding services. We invest in services that we surround our products. I wouldn’t be able to quantify that. 

Mr. GROLL. It would be tough to quantify, but I know that when 

we are out competing for business domestically, we are fighting 

against products that are knock-off Chinese products that are 

brought into the U.S., and they are inexpensive compared to the 

domestically made products. We can fight against that with having 

a better product, having superior features, and we are able to protect that position in the U.S. because our intellectual property position allows us to do that. 

I personally have a lot of experience in China. I lived there for 

eight years. I ran factories there. We don’t sell our product in 

China because I’m sure that as soon as we do, it will knocked off, 

and we’ll have international competitors where we will not be able 

to block them. They won’t be able to sell those products in the U.S., 

competitive product in the U.S. or other countries where we have 

patent protection, but I’m pretty sure that we would be creating a 

competitor if we began selling in China. 

Chairman TIPTON. If the medical device excise tax goes in, you 

have to any estimates in terms of how that will impact your business dollar-wise? 

Mr. GROLL. Our plan at this point is to reduce our R & D spending. That’s the only place we can. We are a small growing company. 

We are not making a profit right now. We are taking all of our 

profits and putting them back into the business to grow it primarily in the form of R & D. 

Chairman TIPTON. That will hurt your ability to be competitive 

because it’s all about innovation? 

Mr. GROLL. Our business is about innovation, developing new 

better products and protecting them with patents. We are finding 

that tax will be devastating to that. I don’t want to take the product into China because I think we would just be creating our next 

competitor. 

Chairman TIPTON. According to the U.S. Treasury, China is the number one foreign owner of U.S. debt securities totaling over $1.1 

trillion. Do you believe this limits our ability to hold China accountable for their unfair trade practices? 

Mr. ROBERTSON. No. In fact, I think that’s a bigger problem for 

China than it is for us. They’re the ones with the risk as far as 

the currency risk. To me it shouldn’t have any impact. 

Mr. MCELHATTAN. I agree. I think they are two different issues. 

Mr. GROLL. I would agree as well. I think the two ecomonies 

have become so intertwined, that both parties stands to gain and 

lose during a change in relationship. It just has to be managed. 

Mr. ROBERTSON. As I said in my testimony, I believe China to 

be an important trading partner. We just need to hold them accountable like we most of our other trading partners. 

Chairman TIPTON. In regards to market access and trade disputes, we always hear about issues of large profile companies, WalMarts, Microsoft. Do you believe that concerns of small businesses 

are being adequately addressed by federal agencies? 


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Mr. ROBERTSON. I think one of the big problems in the steel industry and other industries is that companies like Wal-Mart, people that have embraced a distribution model where they import 

products to distribute, whether it be manufacturers or retailers. 

Obviously retailers can produce anywhere they want. But, yes, to 

me that’s a big issue. 

We are trying to create jobs in America. We are trying to create 

a competitive landscape, a competitive playing field for America so 

we can grow our industry and grow our jobs. That to me is the centerpiece of what we ought to be considering. 

Mr. MCELHATTAN. Let me understand the question. Could you 

repeat the question, please? 

Chairman TIPTON. We seem to pay a lot of attention when we 

have Microsoft, when we have Wal-Mart in terms of international 

issues when it comes to trade. Is the federal government paying 

enough attention to the small businesses. The number one employer in this country happens to be small business. When we are 

talking about our ability to export and being able to grow those 

markets, is enough focus coming out of the feds to be able to address that, or is it being focused primarily on the big guys? 

Mr. MCELHATTAN. I don’t think it is. I think that is according to 

the earlier panel is a great indication of that. We have had great 

services from district export councils and small business. That’s the 

perspective that I see that through, is there are a lot of supporting 

agencies encouraging us. We are in a funny time right now where 

in our growth, we have gone from being a smaller company and are 

kind of moving into being a larger company. But as we have grown, 

we have felt adequate support from that. 

We have different issues now with export controls, but the encouragement to export, I think we have seen great services. 

Mr. GROLL. I would agree. I think the services that are available 

are adequate. The issues that government is dealing with are the 

ones that are issues with other countries. An example for us is we 

just set up exports to Brazil. It took us almost a year to get approved to go in to get our product approved in Brazil. Then it faces 

a 70 percent import duty which makes it really expensive in the 

market there. They’re trying to protect their domestic market. 

I don’t know that there’s much that we can do as an individual 

company to deal with that, but in general, some type of free trade 

agreement or some type of agreement to have them reduce their 

import duties would be very helpful to us. 

Chairman TIPTON. Did you want to speak to that? 

Mr. ROBERTSON. Just one other point. If you look at the National 

Association of Manufacturers or even the chamber of commerce, 

when you talk about small business versus large business, they get 

into some of these issues that are very prominent on Capitol Hill, 

and there’s a big divide. I wonder sometimes who gets the most 

support when some of these issues are really decided. 

I think it’s important that this has been kind of a revelation for 

this morning frankly about some of the things I’m hearing. I’m impressed. 

Mr. MCELHATTAN. Can I add one thing to that? 

Chairman TIPTON. Yes, sir. 


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Mr. MCELHATTAN. One of the things Dave brought up was approvals. We see that consistently. Brazil is a great example where 

the product approvals, what that product is stamped with, we see 

that being used in many ways as a barrier to entry to a U.S. manufacturer and something to increase our costs and makes us less 

competitive as we have to have 14 approvals when we do a new 

product launch. 

Chairman TIPTON. I actually made a note of that in terms of 

product review, how that ultimately affects some of your costs 

which impacts your ability to be competitive as well simply. It all 

add up into dollars. I have a few more questions, but I would like 

to yield Ranking Member Critz. 

Mr. CRITZ. Thank you, Mr. Chairman. 

One quick note. We did pass in Small Business Committee, a 

provision that every free trade agreement now has to do a report 

on what its impact is going to be on small businesses, so that at 

least we have some sort of documentation that allows us to review 

what’s going on. We are trying to push that. 

Mr. McElhatten, I’m trying to get my arms around what you 

were talking about. Because of national security, when you provide 

a product or you have a product, you now have to navigate the 

complex and time-consuming processes to get approvals because of 

national security. 

Do you believe there could be a more balance approach between 

security and commercial interests to implement these export controls? 

Mr. MCELHATTAN. I do. 

Mr. CRITZ. So you know, the three earlier panelists are still here. 

You have the Ex-Im Bank, the Department of Commerce and the 

Pennsylvania Exporting Assistance Program. These are people that 

help implement a lot of things that we are talking about. We are 

all looking for ideas. 

Mr. MCELHATTAN. I guess from the perspective of a general philosophy around embargo, countries that are embargoed and where 

we can’t sell products to, I think there is room for improvement in 

U.S. policy in that. I’m not going to speak to that so much. I think 

from a more tactical level, there could be less of a burden placed 

on manufacturers and specifically around dual use. 

I think that reevaluating what products could be dual use, it appeared that when these were first put in place, there was a much 

broader scope around that. I think trimming that down, if that list 

is able to become smaller as a more practical determination of what 

is considered dual use, I would make the argument all day long 

that our products should not be in that category. With fewer products in that category, you’re going to have less administration costs 

and overhead around maintaining those classifications. At that 

level I think there is room for improvement around that level. 

Then the spirit of enforcement I think. We have seen from our 

perspective there be a harsher, and this is very subjective, but just 

a harsher attitude towards businesses with regard to making sure 

that export controls are maintained. Can I give an example just 

real quick? 

Mr. CRITZ. Sure, absolutely. 


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Mr. MCELHATTAN. Where that can be at odds where it feels as 

a company grows, we have a strong commercial presence in China. 

China has just moved from being our number five largest country 

that we are doing business in to number four. It’s a large market 

opportunity for us. We have about 220 employees in China on the 

sales side. Services in the field, we have a small manufacturing operation there. 

China is leading the efforts in rebuilding the Sudan. That’s an 

embargoed country for us with tremendous export controls. When 

we put enforcement into our team in China and say ‘‘You cannot 

ship there’’ and very harsh attitudes around that, our employees 

there, who are part of our family, are not able to participate in 

something that is very national, to them they are very proud that 

they are rebuilding this country, and the U.S. is more punitive towards it, just shut it off. So that’s where the rough happens. 

Does it make us less competitive? Yeah, on nips and tucks in creating an employer of choice to work for a U.S. company in Shanghai or Beijing or Xian or wherever we have offices in cities there. 

That’s more of the high level. But I think at the tactical level, it 

can be more simply applied. 

Mr. CRITZ. You have a facility in Shanghai? 

Mr. MCELHATTAN. Shanghai is our Asia-Pacific, yes. 

Mr. CRITZ. Did you have to put a facility in China to sell to 

China? 

Mr. MCELHATTAN. No. 

Mr. CRITZ. No? 

Mr. MCELHATTAN. No. We began selling in China in 1986. We 

have been in the markets there for 25 years, 26 years now. In 2000 

is when we made the large investment to put an emphasis on foreign enterprise. We had been JVs all the way up to 2000. 

Mr. CRITZ. One question for the whole panel. You heard the testimony earlier. You have the Export Assistance Center, the ExportImport Bank, and you have the Pennsylvania Exporting Assistance 

Program, part of the DCED at the state level, but it’s the international business. 

Have you worked with any of these agencies? Have you worked 

with any other agency that has helped you generate business internationally? We will go right to left here. 

Mr. ROBERTSON. No, but I think that might change. 

Mr. CRITZ. From what you heard today? 

Mr. ROBERTSON. Yes. I was very impressed. We export not a lot, 

but some through our current customer base into their plants, overseas plants where they need our product to be successful. That’s 

the extent of what we do. But we might explore that opportunity, 

that contact information. 

Mr. CRITZ. Good. 

Mr. MCELHATTAN. Probably 12 or 13 years ago, we partnered 

with—and I’m going to get this wrong—I think it was the U.S. 

Commercial Service on getting—it’s what the Pittsburgh Technology Council has downstairs, that kind of a forum where they 

can bring in trade representatives. We partnered with that. One 

specific example I remember is Venezuela. We wanted to get into 

Venezuela. We were able to identify number of potential partners 

with services like that and began to build a base of distribution as 


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we moved to get representatives there. We didn’t take advantage 

of any of the financing opportunities, but we have on the commercial relationship side. 

Mr. GROLL. We have not taken advantage of any of those services, but we are planning to. Based on what I heard this morning, 

I think there are additional opportunities we are going to investigate. 

Mr. CRITZ. We have heard testimony about currency manipulation. We have heard about countries that are open and not. Is there 

a particular trading partner that you have or a nation that’s out 

there that is creating heartburn in your industry, where you are 

trying to get into the country to do business there, but it’s been 

nearly impossible or because of their protectionist laws, or a country that is doing things that is harming your business here domestically because of an unfair competitive advantage? 

Mr. ROBERTSON. It’s clearly China, and my major concern today, 

if you read any of the economic reports coming out of China, of 

course, their growth is still pretty impressive at seven to eight percent let’s say, but when you were at 12 or 13 percent, they are certainly seeing a slowdown. They built in my case an unbelievable 

steel industry and downstream manufacturing around that. If anyone doesn’t believe that their game plan is going to be to export 

more, we are kidding ourselves. I am really concerned about if you 

think it has been rough the last ten years what we might confront 

going forward. 

Mr. MCELHATTAN. A little bit different spin. I am going to bring 

out Iran. In 2006 we made a large acquisition of a European company based in France, and they were doing a significant amount 

of business in Iran. The day we bought them, we had to go in and 

shut down, ‘‘You have to stop orders today. You cannot ship to Iran 

right now.’’ And they said, ‘‘Okay. We will.’’ We said, ‘‘No, no, no. 

You have to shut it down.’’ So suddenly these folks in Iran who had 

been betting their lives on the products this company was providing can no longer have access to them. In our business, along 

with us and the newly acquired business was hurt to the tune of 

half a million dollars of revenue per year because of U.S. policy. 

I understand it, but that’s one, that economy. We look at energy 

ecomonies and how many U.S. companies provide technology. I 

agree with the statements Mr. Groll made earlier about technology 

and manufacturing in a country like Iran that is energy rich. 

That’s lost opportunity for U.S. manufacturers, significant lost opportunity. 

Mr. CRITZ. I’m not going to comment. 

Mr. MCELHATTAN. I understand. 

Mr. CRITZ. But I’ll let it go. 

Mr. GROLL. I think the big issue for us is China. Their lack of 

regard for intellectual property protection is a big problem. Inability to enforce any kind of patent or trademark rights in China. It’s 

very expensive and probably not something that a small manufacturer can do. Of course, with their ability to maintain their undervalued currency, they keep their products artificially cheap on top 

of the fact that they are able to manufacture them very inexpensively, they get an advantage on trading. 

Mr. CRITZ. Mr. Chairman. 


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Chairman TIPTON. I have been listening as we are talking about 

some of the complexities being able to sell overseas, some of the 

challenges, China being able to deal with them. I am curious. 

Maybe you can tell me. 

Given all of the changing foreign regulations that come out and 

the different technical barriers I know that you probably see in 

terms of trying to be able to deal with foreign countries and the 

change in tariffs, I would like to know just how you keep up with 

that. What’s the doorway that you look through to say this is how 

we keep up with it? 

Mr. ROBERTSON. We are part of an industry group, American 

Wire Producers Association. We have a caucus, wire and wire products caucus. They sort this out for us and help our members understand the playing field in that respect. 

Mr. MCELHATTAN. We tend to do it through consultants. We hire 

consultants so we have people on staff whose job it is to manage 

this. 

Mr. GROLL. As well we hire outside consultants. We do as a medical device manufacturer, we have certain regulations that involve 

periodic review of a lot of aspects of our business, including domestic and international regulations. So every six months we ask a 

question is there anything new that we should be aware of. 

Chairman TIPTON. We just heard from SBA, Commerce about the 

entire list of opportunities out there for information, and you’ve all 

sought private sector solutions it sounds like to be able to keep up 

with it, through your trade associations or consultants to be able 

to do that. Interesting. 

Well, did you have any other questions that you would like to be 

able to put forward here? 

Mr. CRITZ. No. 

Chairman TIPTON. Again, I would like to thank you gentlemen 

for taking the time. I know you would rather probably be out earning a dollar rather than in here. 

Mr. CRITZ. It is beautiful outside. They’d rather be playing golf. 

Chairman TIPTON. Looking out seeing sparkle on the river, my 

fly rod is probably beckoning somewhere. 

We do appreciate it. It is through testimony much like yours that 

we get a little bit of guidance. It’s incredibly important from the 

small business committee, and that extrapolates out into the other 

committees we have as well the real impacts on real businesses. 

For you it is not a theoretical exercise. It is real impacts, real jobs, 

real lives that are being affected by policies that may hurt or hopefully at times help coming out of Washington. 

Your impact in regard to these manufacturing issues is deeply 

appreciated. We all do share that same mission, I believe, increasing U.S. exports and ensuring that foreign competitors play by the 

same rules. We have got to make sure that we are indeed standing 

up for American industry and American jobs and American futures. 

Our committee has been working to educate more small businesses on the benefits of exporting. Glad to hear that you’re actively pursuing this, Mr. Groll. We will also be identifying ways to 

make the overall trade process simpler to understand and stronger 

as well. 


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I know in my small community, we just looked at getting dollars 

in from Texas and Arizona. That’s our outside income coming in. 

But the rollover dollars and how that impacts our community probably cannot be overstated. 

I would ask for unanimous consent that members would have 

five legislative days to be able to submit statements and supporting 

materials for the record. 

Chairman TIPTON. Without hearing objection, it is so ordered. 

This hearing is now adjourned. Thank you again for attending. 

[Whereupon, at 12:01 p.m., the Subcommittee was adjourned.] 


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