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Nail Maker News Issue No. 19

In this issue:

  • A decision on the trade injury cases involving nails from India, Oman, Sri Lanka, Thailand and Turkey is expected at the end of September.

  • A veteran nails executive says that previous U.S. government actions created “improvements [that were] short-lived, as importers moved their business to the next countries in line willing to offer nails at dumped and subsidized prices.”

  • Missouri’s Governor and an influential member of Congress write letters to the ITC Chairman, warning that the nails industry’s survival is at stake.

  • The long-running legal fight over applying Section 232 tariffs to nails moves closer to oral argument in the Federal Circuit Court of Appeals.

  • Mid Continent has been donating millions of nails to help communities ravaged by tornadoes. Now, it is helping to boost security for Texas schools in the wake of the Uvalde tragedy.

Trade Commission Holds Hearing on Allegations of Trade Injury Caused by Nail Imports From 5 Countries

The U.S. International Trade Commission (ITC) is moving toward a decision by the end of September on trade injury claims involving imports of steel nails from India, Oman, Sri Lanka, Thailand, and Turkey.

Importers account for nearly nine out of ten nails sold in the United States, and their shipments have surged in recent years, putting the remaining U.S. nail manufacturers and their workforce in serious jeopardy.

In 2018, imports from the five countries under investigation totaled 193,000 short tons; in 2021, shipments had soared to 281,000 short tons. In the first quarter of 2022, shipments were 74,000 tons, compared with 65,000 in the same period last year.

The case began on Dec. 30, 2021, when Mid Continent Steel & Wire, the nation’s largest nail manufacturer, filed petitions with the Commerce Department and the ITC charging “that an industry in the United States is materially injured and threatened with material injury by reason of subsidized imports of certain steel nails… and less-than-fair-value (‘LTFV’) imports of steel nails.”

In February, the ITC issued a preliminary report stating that “there is a reasonable indication that a U.S. industry is materially injured or threatened with material injury by reason of imports of steel nails” from the five countries.

The full investigation into whether to apply anti-dumping and countervailing duties (AD/CVD) began on May 31, and on Aug. 4, the ITC issued a 318-page pre-hearing report. A public hearing was held on Aug. 17. Over the next month, the commission will decide whether the U.S. nails industry has been materially injured or is threatened with material injury by the imports under investigation.

This isn’t the first time that foreign nail makers have been accused. In a 2014 case, the ITC ruled Taiwan, Oman, Korea, Malaysia and Vietnam had materially injured the U.S. nail industry.

Burgeoning Sales of Nails From Foreign Sources

The ITC’s pre-hearing report in the current case notes that the nine U.S. nail manufacturers sold 133,000 short tons of their product domestically in 2021, with a value of $289 million. The five countries targeted in the petition sold about twice as many nails, and, along with importing nations that aren’t part of case, accounting for about six times as much nail revenue in the U.S. as all the U.S. companies combined.

Citing U.S. import statistics, the report shows that Oman increased its nail revenues in the U.S. from $98 million in 2019 to $133 million in 2021 and from $29 million in the first quarter of 2021 to $43 million in the same period in 2022.

Thailand increased sales from $48 million in 2019 to $82 million in 2021; for the first quarter this year, sales nearly doubled over the year before, from $14 million to $26 million. Overall, in the first quarter, the five countries in increased sales by more than 70%, compared with a year earlier, from $74 million to $128 million. Quantities shipped also rose significantly, though not as sharply as revenues.

The report surveyed purchasers who said, by a margin of 10-1, that prices offered by companies in the five countries were lower than those offered by U.S. companies – despite greater transportation costs.

Of eight U.S. nail producers, six reported losing sales to imports from the five countries, six reported reducing prices, and three reported rolling back announced price increases to compete. Of the U.S. purchasers responding to the Commission’s questionnaire, 28 indicated that they purchased imports from the five foreign countries instead of domestic nails, and 22 indicated that those imports were priced lower than domestic nails.

Domestic production of nails increased from 2019 to 2020 but then declined in each period after, falling by 3.2 percent from 2020 to 2021 and by 5.4 percent between early 2021 and the same period in 2022. These production declines occurred as demand for steel nails increased with a boom in construction, the primary user of nails. As a result, the domestic nails industry has significant installed capacity that remains unused.

U.S. nail producers’ market share peaked at 15.5% in 2020, fell to 13% in full-year 2021 and to only 11.1% in early 2022.

Veteran Nails Executives See a Pattern Resulting in Material Injury

The ITC has to decide whether the U.S. nail industry has been materially injured or is threatened with material injury by the practices of companies in the five countries. To that end, Mid Continent submitted the affidavit of its U.S. Operations General Manager, Chris Pratt, who has been with the company for 32 years, starting as a payroll clerk right out of college.

“During my long tenure, I’ve had the opportunity to speak before the Commission several times,” said Pratt in his sworn statement. “Our first case in 2007 [was] against steel nail imports from China, followed by a case against the UAE and then most recently in 2014/2015 in the case against nail imports from Taiwan, Oman, Korea, Malaysia and Vietnam. In each of those cases, the Commission found that the U.S. industry was materially injured by unfairly traded imports.” Pratt continued:

After each set of antidumping and countervailing duty orders, we would see improved market conditions, but those improvements would be short-lived, as importers moved their business to the next countries in line willing to offer nails at dumped and subsidized prices. At times, the owners of those companies in countries that became subject to antidumping and countervailing duties would simply move their operations to another country.

“The surge in imports from the five subject countries came within a couple of years after the previous cases,” said Pratt. “As the unfairly traded subject imports competed aggressively with low pricing, Mid Continent’s operations suffered gravely. In 2018, our sales and production plunged by around 30% and our labor force was reduced by nearly 100 workers, dropping from nearly six hundred jobs.”

Today, he said, the company’s practical capacity is growing, but “import prices are falling day by day. Unless we get relief from these cases, I am afraid that history will repeat itself, with subject imports underselling U.S. nails even more aggressively, taking more market share and the U.S. nail industry fighting for survival.”

In another affidavit, Joe Faron, vice president of North American Field Sales for KYOCERA SENCO Industrial Tools and a 30-year veteran of the industry, also said that the market for nails “is changing for the worse…. Freight costs and lead times for imports are down significantly. With the projected decline in demand, we will again see aggressive undercutting by subject imports and will lose even more market share. We need your help today so that we can compete in a fair marketplace.”

Also submitting an affidavit was Remy Stachowiak, president of Tree Island Steel. He stated that his “company today is a shadow of what it used to be, with approximately 70% of our production and sales lost to unfairly traded imports over the years.” In 2018, he said, Tree Island “produced barely a third of what we were capable of delivering,” and 2019 “continued to see large portions of our nail business lost to import price pressure, with three of our top five nail customers, based on price, reducing their business with us by 49% to 70%.”

Throughout the period in question, Stachowiak said, imports kept coming in that “were often priced well below our prices, despite rising ocean container freight costs.” Demand is declining, he said, and “the market is now chasing a smaller volume pie, which translates into more aggressive pricing from importers to pursue this more limited business, resulting in lower profits again.”

He concluded by warning that importers “will be further emboldened to use lower prices to maintain and increase their volume.”

Missouri Governor and Congressman Warn ITC Chair That Survival of Nails Industry Is at Stake

Both Michael Parson, the governor of Missouri, and Rep. Jason Smith (R-MO), whose district includes Poplar Bluff, headquarters of Mid Continent Steel & Wire, have written letters to David Johanson, chairman of the ITC, on the case against India, Oman, Sri Lanka, Thailand and Turkey.

On Aug. 5, Parson urged the Commission “to ensure that dumped and subsidized imports” form the five countries “do not further harm the U.S. industry.” The Governor noted that Mid Continent is the “second-largest employer in Butler County” and that, “in these challenging times,” his state “cannot afford to lose these good-paying jobs.” He added, “With a difficult economic outlook, the U.S. industry faces even more imminent harm as demand for nails is expected to decrease.”

In his Aug. 23 letter, Rep. Smith, who is the top Republican on the Budget Committee and a member of the powerful Ways & Means Committee, pointed out to Johanson that “over the last 15 years, dumped and subsidized imports of steel nails have significantly cut into the U.S. market…. I urge the Commission to carefully review all information regarding this case…. Unless there is relief, unfairly traded imports will continue to flood the market, threatening the U.S. industry’s ability to survive.”

Update on the Legal Battle Over Apply in Steel Tariffs to Nails

The long-running litigation battle over the extension of Section 232 tariffs to nails is continuing in Federal Circuit Court of Appeals in Washington, DC. The court on July 5 took steps to set a date for oral argument by asking the parties to indicate when they have potential conflicts over the next few months.

The case involves Proclamation 9980, which President Trump issued in January 2020. The presidential order extended the 2018 tariffs on imports of steel and aluminum to “derivative articles,” including steel nails. Foreign nail makers and their U.S. distributors quickly went to court to stop the extension.

On April 5, 2021, the U.S. Court of International Trade (CIT) ruled in PrimeSource Building Products, Inc. v. United States that Proclamation 9980 was invalid because it went beyond the statutory time limits of Section 232. In other words, the President could not extend tariff coverage by fiat; instead, the Commerce Department had to go through a long process to show cause for adding derivative products, just as it had for the original steel and aluminum. The Biden Administration then appealed.

On July 13 of last year, the Federal Circuit Court of Appeals, in Transpacific Steel v. United States, a case with similarities to the PrimeSource case, reversed a CIT decision involving tariffs on Turkish steel.

According to a Congressional Research Service summary, the appeals court ruled that “Congress intended for the President to retain at least some authority to modify a tariff action even after the deadline passed.” In the Transpacific case, the modification was placing higher tariffs on Turkish steel.

On Aug. 2, 2021, the CIT found that, in light of the Transpacific decision, the government had demonstrated that it was likely to succeed in overturning the PrimeSource decision. So the CIT issued an order granting the government’s motion to stay implementation of the court’s initial judgment pending the appeal. The CIT was careful to highlight the differences between the cases, but the Aug. 2 order was significant.

The government filed its opening brief in the appeals case this January, with an amicus brief from the American Steel Nail Coalition coming a month later and briefs from Oman Fasteners, a major nails exporter in the Persian Gulf, and from PrimeSource and Huttig Building Products, both suppliers, following in April. The government replied in June. Now, the parties are getting ready for oral argument.

Meanwhile, the U.S. negotiated separate deals with Europe, Japan and the U.K. that substituted tariff rate quotas (TRQs) for the 25% Section 232 tariffs on steel and stated that neither tariffs nor TRQs would be applied to derivatives such as nails. A TRQ sets a limit on the amount of imports from a country and then applies a tariff if that limit is exceeded. Also, because of the devastation caused by the Russian invasion, the U.S. lifted Section 232 tariffs on Ukrainian steel for one year starting June 1.

Mid Continent Continues Its Donations of Nails and Fencing Materials

Mid Continent Steel & Wire, a member of the American Steel Nail Coalition, has built a reputation for its donations of millions of nails through Habitat for Humanity to help rebuild homes in U.S. communities ravaged by tornadoes. Earlier this year, the company donated $20,000 to support disaster relief efforts in Kentucky and also pledged to donate nails to the blitz housing projects planned in Bowling Green and Dawson Springs.

Now, Mid Continent has joined a growing group of donors by providing free fencing as part of new safety and security measures at the Uvalde, Texas, school district, where 21 students and teachers at Robb Elementary School were killed in an unthinkable tragedy in May.

In Uvalde, according to School Board President Luis Fernandez, “Fencing has been a priority.” He stated the security fencing is currently being installed at the Dalton Elementary School Campus. “Fencing materials have been ordered for Batesville, Benson, UDLA (Uvalde Dual Language Academy), Flores, Uvalde Junior High and UHS (Uvalde High School),” he said.

Mid Continent Steel & Wire is well known for its donations of millions of nails to help communities rebuild after tornadoes. Now, it is helping Uvalde, Texas, build security fencing, like this one at Dalton Elementary.

“Our hearts go out to our neighbors in the Uvalde community in the wake of great loss. We are here to help,” said Fernando Villanueva, Mid Continent’s CEO. “We will do whatever we can to assist the community in moving forward and making the children in these schools safer.”

Some of the other companies donating to Uvalde CISD schools include the Butt family and H-E-B, donating $10 million in cash; Las Vegas Raiders, donating $1 million in cash; Laredo Lemonade, donating proceeds from the sale of all flautas; McDonalds, donating $250,000 in cash; the Dallas Cowboys and Houston Texans, together donating $800k; and many more.

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