NEW YORK Foreign entities
will likely find it easier to avoid duties on steel wire
products starting in mid-April, when U.S. Customs and Border
Protection begins furloughing some 60,000 employees, and
domestic wire producers stand to suffer, industry sources told
The furloughs will result in a
10-percent reduction of on-duty personnel each day, according
to Brentwood, Tenn.-based logistics firm Ozburn-Hessey
"Their enforcement activities
have been so weak that any diminishing of that number is going
to make their enforcement even weaker," Frederick P. Waite,
legal counsel at Vorys, Sater, Seymour and Pease LLP,
Washington, representing the domestic steel wire industry
before the U.S. International Trade Commission and the Commerce
The industry has successfully
filed trade cases against such imports as steel wire garment
hangers, steel nails, innerspring units and shelving, but when
the sequester hits Customs next month the industry could face
renewed pressure. Diminished staffing will make it more
difficult to stop unfairly imported downstream wire products
that avoid duty payment.
In the steel innerspring
industry alone, an estimated $40 million in duties goes
uncollected each year, Leggett & Platt Inc. government
policy and legal affairs strategist Amy DeArmond told
This means that many thousands
of tons of material come into the country undetected, partially
due to Customs personnel shortages. The sequester would
exacerbate the problem. "Theyre going to stretch their
work force too thin, and I think (enforcement) will suffer as a
result," DeArmond said.
Importers might route products
through other countries, adding finishing touches or removing
labels, or importers might simply drop products and leave
without paying the duties, sources said.
"You get dumping orders, and
thenparticularly with China to an extent Ive not
seen anywhere elseyou get attempts to evade those dumping
orders either by falsely claiming its from a third
country or by incorrectly classifying the product at the time
of entry," Waite said.
"How do you compete? The Chinese
cheat," a wire fabricator in the Midwest charged. "Theyre
the 800-pound gorilla in the living room."
Businesses all along the supply
chain, from the biggest mills to the manufacturers of niche
wire products, have been hurt by downstream imports. When the
downstream products are produced overseas, wire fabricators
lose their customer base and go out of business, and domestic
wire rod suppliers in turn lose their customers.
"I have fewer customers every
year," the Midwest wire fabricator said. "Many of them close
down because they cant compete with Chinese goods."
While its difficult to
track exactly what products are imported and where business is
going, wire fabricators said they have lost customers who make
a wide range of products that require wire, from refrigerators
to nail guns.
While there are holes in the
data, duties certainly improve business for U.S. industries,
even when theyre being circumvented. After a trade case
was successfully filed on steel wire garment hangers in 2007 to
2008, average monthly imports of hangers fell to 158.9 million
units in 2010 from 221.5 million.
Budget cuts will cause delays
and staffing shortages, a spokeswoman for Customs and Border
Customs "will continue to make
every effort to minimize the sequesters impact on public
safety and national security, but expects that planned furlough
of employees ... will increase wait times at ports of entry ...
and reduce staffing between land ports of entry," the
spokeswoman told AMM via e-mail, declining to comment
further on the effect the furloughs might have on duty
Importers also said that if the
sequester makes it harder for Customs and Border Protection to
track downstream wire products, the whole industry will
"It does none of us any good to
have our customers take the pain," a steel trader said of
unfair imports. "I want healthy customers. I want these guys
knocking it out of the park. Thats what we all need."