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 AMM.
The furloughs will result in a 10-percent reduction of on-duty personnel each day, according to Brentwood, Tenn.-based logistics firm Ozburn-Hessey Logistics LLC.
"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 Department, said.
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 AMM.
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 Protection said.
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 avoidance.
Importers also said that if the sequester makes it harder for Customs and Border Protection to track downstream wire products, the whole industry will notice.
"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."