We have some big news at Auburn Manufacturing – we learned on February 15, 2017 that our petition to the U.S. International Trade Commission (USITC) about unfair trade practices on imported amorphous silica fabric was successful. This victory comes after numerous trips to Washington, DC, many hours with our lawyers, and even more hours trying to unravel foreign trade practices and their impact on our industry and to our company. Bottom line: we know this is the right decision for our business and for the silica fabric industry, but we believe it is good for all American manufacturers and also for you, our customers. Here’s our story.
Auburn Manufacturing is a small business based in rural Maine. We have a fantastic, hard-working team, and our customers consistently tell us that our AMI-SIL fabric is of the highest quality. We manufacture to U.S. military standard, which enables us to be a principal supplier of amorphous silica fabric to the U.S. Navy.
Several years ago, we started losing sales to competitors offering fabric at lower prices. Okay, we thought, how much are we getting beat by? We knew it couldn’t be much because we control the entire process of making AMI-SIL – from yarn to finished fabric to supplying directly to our customers. We know the exact costs of raw materials, machinery, labor, and overhead. We didn’t see a lot of wiggle room on price.
We were shocked to find that competitors were selling amorphous silica fabric for up to 60 percent less than us. We set about trying to figure out what was driving this market shift, and with every passing day we lost more business. We eventually had to lay off employees and knew that we could not continue operating our business in this environment. Getting to the root cause of this issue became critical for us.
Paid to Sell for Less
After much research, we found that major distributors were selling imported Chinese fabric without Country of Origin labeling and other tricks to make it look like it was made in the U.S. Still, how could they sell it so cheap? Yes, American labor costs are higher, but the real costs in making amorphous silica fabrics are in the raw materials, machinery, and proper plant design. How could these Chinese manufacturers sell their fabric for less than half of our prices even after all of the logistical costs and markups in the distribution channel?
It turns out that the Chinese government provides its manufacturers with subsidies on silica fabric made for export to the United States and on inputs used to produce silica fabric. As a matter of fact, Chinese manufacturers are eligible for more than 20 subsidies on everything from buying yarn (34%), to income tax breaks on R&D (25%), to providing fiberglass cloth (34%). It was no wonder that they could sell their fabrics for so much less than we could – they were being paid to sell it for less.
Fight or Flight
We had two choices: accept this and recognize that we would soon have to shut our doors, or fight. We decided to fight. In January 2016, we petitioned the US Department of Commerce (Commerce) and the USITC to investigate the unfair pricing of Chinese producers and the unfair subsidies received by Chinese producers, and to impose antidumping and countervailing duties to offset those unfair trade practices. We asked our Congressional delegation for their support, and we asked everyone in our company to buckle down.
We learned that we were one of the first small businesses to come before the USITC, and we’re not surprised because this process is time consuming, complicated, and expensive. But we fought because we think this is the right thing to do. We are protecting our own business and jobs, certainly, but we also are protecting American jobs and American businesses that face unfair trade practices. And we are protecting you, our customers.
The Chinese fabrics may or may not have met the military standard that we adhere to, but the reality is there is no way to be sure. Chinese manufacturers have relaxed standards on a variety of products, ranging from toothpaste to pet food sold in the U.S. Imagine sending your industrial workers into a potential fire hazard with sub-standard safety equipment. We know you need fabrics that are designed for safety, and our stringent manufacturing standards don’t take that for granted. We don’t believe our Chinese competitors feel the same way.
Case Closed, Duties Levied
We are proud to report that our research and hard work have paid off: Commerce and the USITC recognized that these fabrics were priced unfairly, and that this practice harmed U.S. manufacturers. They agreed to level the playing field by imposing significant duties ranging from 200% to 300% depending on the Chinese producer. (See the box on Anti-Dumping and Countervailing Duties).
We extend our thanks to the Congressional delegation from Maine – Senators Susan Collins and Angus King, and Representatives Chellie Pingree and Bruce Poliquin – for their help and support. And we thank the USITC and Commerce for recognizing that, even though Auburn Manufacturing is a small company, the unfair trade practices of Chinese producers significantly injured us.
And we thank you, our customers, for your ongoing support. You work in challenging industrial environments with real risk for injury, and you deserve the best safety equipment available. We are proud to serve you, and hope to be your partner for a long time to come.
Our business is already bouncing back. We have already added a few positions and are seeing a positive uptick in revenue. We have confidence in our financial future so that we are able to provide the high-quality amorphous silica fabric that you rely upon to keep your workers safe.
If you have more questions about this case, our products, or just want to say hi, just reach out. We’ll be happy to share tips on ensuring the safety of your amorphous silica fabric.
|What are Anti-Dumping Duties and Countervailing Duties?The U.S. antidumping law imposes special tariffs to counteract imports that are sold in the United States at less than a fair value. The U.S. countervailing duty law imposes special tariffs to counteract imports sold in the United States that benefit from unfair foreign government subsidies. For these tariffs to be imposed, the U.S. government must determine not only that dumping and subsidization is occurring, but also that there is “material injury” (or threat thereof) by reason of the dumped and/or subsidized imports. In our case, Chinese imports are subject to antidumping and countervailing duties ranging from 200% to 300%, depending on the Chinese producer.|