Chris Pratt is the Operations General Manager at Mid-Continent Steel and Wire in Poplar Bluff, Missouri. On January 24 he was in Washington, D.C., where he spoke on a GBD panel. The topic was the link between the 232 or national security tariffs on steel and aluminum that are still being applied to imports from Mexico and Canada and the future of the new NAFTA agreement, USMCA. The USMCA, more fully, the United States-Mexico-Canada Agreement, was signed by all three countries on November 30, 2018, but it is a long way from being implemented by any of them.
Mid-Continent Steel and Wire could be an avatar for NAFTA/USMCA. The company makes nails. Indeed, it's the largest manufacturer of nails in the United States, and its very existence is an embodiment of cross-border trade and investment. Located in the small town of Poplar Bluff, Missouri, a town that calls itself "the Gateway to the Ozarks," Mid-Continent is owned by Daecero S.A. de C.V., a Mexican company, which bought Mid-Continent in 2012 - not to tear it down and move everything to Mexico but to build it up. As Mr. Pratt explained, Daecero invested "huge amounts of money" in Mid-Continent, doubling the size of the company and the number of its employees.
On the trade side, steel is the company's principal raw material, and most of it comes from Mexico, though the company also buys steel from U.S. suppliers. But Mexican steel is critical to the success of Mid-Continent, which is why the company's world turned upside down last June, when the U.S. began collecting a 25 percent tariff on steel products from Mexico and Canada.
The Challenge of Imports. Where raw materials are concerned, trade is the life blood of the company. It is also where most of the competition is coming from. As Mr. Pratt explained, his company makes roughly half of the nails produced in the United States, but imports account for roughly 80 percent of U.S. nail consumption. Foreign producers were the winners when the 232 tariffs on steel from Mexico forced Mid-Continent to raise its prices. Mr. Pratt put it this way:
And overnight we lost 60 percent of our sales. Sixty percent of the orders that were on the books were gone within a matter of 14 days. ....[And] who is winning the battle in nails? Imports. Nails coming from countries like India, Turkey, Malaysia, China, Indonesia, places like that that are not subject to that tariff.
The Grim Employment Picture. The dramatic drop in sales meant that the company had to let some of its employees go. And then others left on their own. So the company that a year ago had employed 500 people is now down to under 300. Mr. Pratt:
You know, not only are we losing customers, but every day you lose employees. You don't find nail manufacturing employees anywhere close to Poplar Bluff, Missouri, because they don't exist. So, replacing those people that have been with us for many, many years that left us out of fear for their jobs, from watching me in the media, from seeing what they read in the newspapers, and things of that nature, those people are, like, irreplaceable. It takes years to train a nail operator.
Exclusions, the Bureaucratic Nightmare. On paper there is a safety valve built into the 232 tariffs. Companies can apply to the Commerce Department to have certain imports excluded from the tariffs on steel and aluminum. The Commerce Department has explained in a notice about the process what imports can be excluded. It begins:
A product exclusion will be granted if the article is not produced in the United States: (1) in sufficient and reasonably available amount; (2) satisfactory quality; or (3) there is a specific national security consideration warranting an exclusion.
Having been encouraged by Commerce
Secretary Ross, Missouri
Senator Josh Hawley, and others to "Hang in there," Mid-Continent has filed applications for exclusions on 24 products. In the Q and A session on January 24,
John Murphy of the U.S. Chamber Commerce asked Mr. Pratt to describe that process. Here is some of what he said.
CHRIS PRATT:
You know the exclusion process built into this 232 tariff is to relieve industries such as ours of the problem that the tariff imposed on us. And just the sheer effort that it takes to file and fill out the paperwork and documentation for one exclusion is just ... it's unreal. ... And we did that for 24 different raw material items that are very key to our operation.
Anticipated exclusions [were said] to be 4,000 to 5,000 filings. [We watched that rise to] 15,000, 18,000, 25,000, 30,000. They just keep piling up, and you hear they don't have staff to take care of them.
[At first the company was told that, if there were any objections to any of their filings, they would lose on that petition. Then they were told that Commerce was instituting a rebuttal procedure and to be ready to file rebuttals if necessary. There were objections and Mid-Continent filed their rebuttals.]
So, when it came, we were ready. We filed. We've heard nothing. Our exclusions are somewhere lost in the 40-50 thousand that are there now. And we feel as a company that we're no closer today to getting those exclusions granted than we were June 18, even though we, as a company, have done everything that our Administration has asked us to do. ... We've been encouraged to keep our company open, and we've done that. And it's a painful process. And the painful process just keeps going and going and going. It's like the Energizer Bunny. Where's it going to end?
