Brass, Other Copper Alloy Mills and Fabricators Split on Tariff Issue

Dale Taylor, CEO of Olin Brass, a company with 1,100 employees, told the panel that his company is at an economic disadvantage because brass exporters from the European Union don't pay value-added taxes, and that inclusion of various brass and copper alloys is particularly appropriate because aircraft manufacturing uses copper wire harnesses and aircraft electronic components also rely on the metals. He said that America's brass industry is operating at less than 60 percent capacity, and returning EU imports to historic levels would lead to 68 percent utilization.

Nancy Rosenthal, owner of Rotax Metals in East New York, responded that Olin Brass no longer produces several dimensions her customers want, and for them to bring those products back would not only take time, but the automotive customers who need these metals have intensive certification and qualification processes, which also take time. "Many of our products are used in projects that are estimated months if not years in advance," she said, and a substantial increase in material costs would lead to stopped projects and layoffs. "Imposition of this tariff would put businesses like mine and my customers out of business."

Rosenthal said it's ironic that Olin would benefit most from these tariffs, because it was recently purchased by Wieland, a German company.

Many of the domestic companies that testified are owned by German companies. Jeffrey Nystrom, president of Aurubis Buffalo, a division of a German firm, said that although his company has 95 domestic production, if the price of copper doubles, customers will switch to alternatives. "The shrinking of the industry outweighs any short-term benefit we might have with higher prices," he said.

Mark Boyce, president of Kemper AIP metals, a division of a German company, argued that if the intent of the Office of the U.S. Trade Representative is to counteract German subsidies in the case of large aircraft, "this action does not achieve this goal" because Wieland's profits would rise due to pricing power at Olin. He said that the market for the metals targeted in this tariff action is four times the size of the U.S. market, which is why so many bronze and brass products are only made in Germany, not domestically. In response to a question by the panel, he said the difference is the auto industry in Germany uses phosphor bronze, which is on the list, while the U.S. automakers use a different kind of alloy that includes zinc.

Michael Jemison, president of Heyco Metal, an Ohio rerolling mill, said that the only sources besides the EU for the copper strip, copper nickel, nickel silver strip and other alloys is China, which already has a 25 percent tariff from its Section 301 case. Moreover, he said, Wieland won't sell to him from its Olin mill, because his company is a direct competitor.

He acknowledged that German competitors to U.S. brass mills bought them up and closed them, and that Europe never gave the same market access to U.S. brass that the U.S. did to German brass -- the EU tariff is twice as high as the U.S. tariff. "You might ask why I do not support the tariff remedy," he said, and the experience of his company supporting an antidumping case in 1985 is why. There was transshipment, misclassification, and alloy substitution away from the tariffed products. He said the decimation of the domestic brass industry is mostly because buyers switched to cheaper materials and because companies that had been making cell phones and connectors in North America moved the manufacturing of those products wholesale to China around 2000. Before those shifts, the demand for one alloy on the list was 600 million pounds. Now it's 31 million, he said.

Brian O'Shaughnessy, chairman of Revere Copper Products, said his 123-person company would benefit from the tariffs -- though other products need to be added as well, to avoid circumvention. O'Shaughnessy complained that German manufacturers benefit from the weak euro, which is brought down by less-vibrant economies in the 28-country alliance.

O'Shaughnessy complained that brass should have had its own Section 232 action, since these tariffs might go away quickly if an agreement is reached on aircraft subsidies.

Although brass tariffs drew the most objectors, cheese, wine, olive and pork tariffs also drew more than a dozen witnesses, both pro and con. Michael Silveira, chairman of the Olive Growers Council of California, said more bulk olive categories need to be added to the list, because Spanish producers are getting around 35 percent antidumping and countervailing duties by exporting provisionally prepared olives, and a Spanish firm has bought a U.S. processor, which then terminated contracts with California growers.

Peter Vitaliano, vice president of the National Milk Producers Federation, said the trade group supports tariffs on European cheese, but acknowledged during the Q&A that the tariffs aren't "something that’s going to have a significant impact on the U.S. dairy farmers' economic situation." Imports of dairy products in the U.S. are the equivalent of just 3 percent of domestic production, he said.

Three companies, a trade group that represents specialty food shops and a trade group that represents cheese importers all asked USTR to remove cheeses from the list. They said food doesn't belong on a retaliation list related to an industrial dispute. Ron Tanner, vice president of government relations for Di Bruno Brothers, a five-shop chain in the Philadelphia area, said: "Don’t sacrifice small businesses in this dispute between two giant aerospace companies." He said the cheeses on the first list were bad, but the additional food products on the second list would be even more harmful. About 65 percent of what Di Bruno sells is imported.