Global Fastener News

1983 FIN – Section 232 Investigation Report Recommends Reagan Administration Not Renew Trade Sanctions

March 14
00:00 2011

By Dick Callahan
FIN Editor/Publisher
March 2, 1983 FIN – It looks like the domestic fastener industry won’t be getting help from the government in its latest efforts to stem the growth of imports.

The secretary of Commerce’s report to the president in the matter of the Investigation of the Effect of Imported Articles (bolts, nuts, and large screws of iron or steel) on the National Security, pursuant to Section 232 of the Trade Expansion Act of 1962, reportedly recommends that President Reagan not renew any trade sanctions on imports.

In our last issue of FIN (February 1, 1983, page 7), we explained that the investigation, initiated by the department of Defense, was made to determine whether imports of fasteners subject to this investigation are being brought in to this country in such quantities or under such circumstances as to threaten national security. The investigation does not concern itself with the economic welfare of a company or an industry, except as the welfare may affect the national security.

The president received the report from the Commerce Secretary on February 12, 1983, and no details of that report have yet been made public (and maybe never will).
The president can either accept Commerce’s recommendations or ignore them in determining whether trade sanctions should be imposed. This determination will be reported back to the Commerce Department and the first glimpse you’ll get of it will probably be when it’s published in the Federal Register. There’s no fixed time frame, to our knowledge, within which the president must act.

Though the Commerce Department’s recommendations have not been made public, there already have been leaks to government and industry sources indicating that the domestic industry has come up losers.
One press account of what Commerce Secretary Malcolm Baldrige is supposed to have advised the president was carried in the February 21, 1983, issue of American Metal Market. According to AMM, Baldrige concluded that the general economic slump is responsible for much of the fastener industry’s decline and that most of our foreign sources are politically reliable and could make up any shortfall that occurred in both military and civilian markets in the event of an emergency.
The report also is supposed to have informed the president that while imports accounted for more than 53% of all United States industrial fastener consumption by weight by mid-82, imports are responsible for only half of the 23% in declining employment in the fastener industry over the past three years.
Additionally, the report asserts that in the event of a mobilization, domestic capacity could be increased about one third in the first year and at least that much during the next two years with the purchase of automated production equipment from machine tool builders in the U.S. and friendly foreign countries.
The experiences in World War II, the Korean War and the Vietnam War were cited as the basis of this belief.

We have not seen the Commerce report (or any of the leaked executive summaries of that report) but through the Freedom of Information Act we were able to look at most of the briefs submitted to the Department of Commerce by proponents and opponents of import restrictions.
Based on examination of these briefs it’s our guess that some of the following points (in addition to those mentioned above) made by the pro-importer groups have been responsible for the commerce Department decision to recommend that the president should not impose import sanctions.

1 – While imported standard fasteners have taken over a large portion of the domestic market, the fasteners used in military equipment, especially military aircraft, missiles and space vehicles, are mostly specials. And as of now, specials only account for a very small percentage (probably below 5%) of imported fasteners.

2 – While the fastener industry is now operating at low levels, in the case of an emergency, unused capacity could quickly be brought into play and this, together with a shift from production of civilian type fasteners to military types, could take up any shortfalls in output that occurred.

3 – Even is the country attempted to attain a position of self sufficiency in fastener requirements there would remain the problem of obtaining sufficient wire rod as the raw material for those fasteners demands for this product would far exceed the domestic supply (even if the steel mills were not the subject of an initial enemy attack which they probably would be). Both imported wire rod and imported fasteners, as a consequence, would be needed to supply the military.

4 – The imposition of import restriction as the result of the Section 232 Investigation would create a precedent inducing other industries to demand protection in the name of national security, seriously affecting the entire framework of U.S. trade agreements.

5 – The surge in imported standard fastener over recent years has actually enhanced the domestic industry’s ability to meet national emergency requirements by forcing domestic manufacturers to increase the percentage of special fasteners (those used primarily by the military) which they produce, compared with standards (which could readily be obtained from both Mexico and Canada if necessary).

6 – There is no shortage of machinery that would be needed to turn out either special or standard fasteners, or of workers to run these machines. And if necessary a pool of 5,000 workers could be trained in advance to supplement the approximately 14,000 workers involved in producing the fasteners covered by the Section 232 investigation.

7 – Any import sanction imposed would have an inflationary effect on the economy.

We don’t agree with all these arguments (and think that some of them are dead wrong) but we feel that they could have had something to do with Commerce’s decision to recommend what it did.

If the president goes along with Commerce’s recommendations, it will be the latest in a series of adverse decisions that the industry has suffered in trying to do something about imports.

Since 1975, fasteners have been the subject of four separate investigations under the escape clause provision of the countervailing duty law and one other investigation under Section 232 of the Trade Expansion Act of 1962.
While the industry came out on the short end of most of these investigations, in 1978 President Carter reluctantly proclaimed increased duties on imports of bolts, nuts and large screws for a three-year period (instead of five years recommended by the International Trade Commission).
This import relief was scheduled to expire on January 5, 1982, unless extended by the president.
On November 9, 1981. the ITC determined that import relief would not have an adverse economic effect on the domestic industry. President Reagan accepted the Commission’s recommendations and the import relief that the industry had enjoyed for three years was terminated as scheduled on January 5, 1982. ©1983/2010 Fastener Industry News.

Scroll down for a 1982 Symposium on the Section 232 Investigation

1982 FIN � Industry Symposium on Section 232 Investigation
By Dick Callahan, FIN Editor
May 17, 1982 FIN – Four panelists commented on the Reagan Administration’s Department of Commerce’s Section 232 investigation into the impact of imported fasteners on domestic fastener production and defense readiness

The speakers represented domestic manufacturers, distributors and importers: Tommy Grant, president of Grant Fastener, Inc., Houston, Texas; Andrew P. Vance, a partner of Barnes, Richardson & Colburn, a law firm representing the Industrial Fasteners Group of the American Association of Exporters and Importers; Dale Holl, president of Darling Bolt Co., Warren, Michigan; and Sid Goodwin, president of Ace Hardware Co., Camden, N.J.  The symposium was held at the National Industrial Fastener Show in Columbus, Ohio.

• Attorney Andrew Vance explained that the Section 232 investigation, which has to do with the impact of imports on national security, was initiated by the Secretary of Commerce has one year before he makes his report (in February of 1983).

Questionnaires are sent out by the Department of Commerce and these, along with written comments from interested parties, are examined. Public hearings can be held on the subject if Commerce decided to do so and then the Commerce Department (after consultation with the Secretary of Defense, the Secretary of Labor. The Industrial Preparedness Group and others) sends its report (which is printed in the Federal Register) to the president who can then put quantitative restrictions on fastener imports or not. If the president does not put on these restrictions, Congress can override this action.

• Tommy Grant, a domestic distributor said that the U.S. fastener industry had tended so far away from standard fasteners towards specials that if the Russians wanted to destroy the US fastener business it could do so by bombing Japan. “What good is it,” he asked, “if you have specials but not standards?”

• Dale Holl of Darling Bolt said that his company manufacturers both standards and specials, but that his company could not now make socket head screws as cheaply as he could buy them from Japan. And, he added, nuts are a worse situation than bolts.

• Sid Goodwin of Ace Hardware, a fastener distributor, said that manufacturers had given up on the standard fastener business – he pointed out that none of the exhibitors at Columbus were displaying any standards – and were pushing the distributors to encourage their customers to buy non-standards.

On the subject of the Commerce Department Section 232 investigation, Goodwin questioned Commerce’s dedication to their task and asked all those in the room (which had representatives of this country’s largest fastener manufacturer in attendance) who had received a questionnaire from the Commerce Department to raise their hand. Nobody did.

Goodwin then went on to point up our trade deficit with Japan, now about $20 billion, and explained what this represented in kegs of nuts and bolts (worth about $100 each). He said that the deficit represents 200 million kegs, 22 million pallets or, one million trailer loads. If you translate that to shiploads he said it would take 665 ships (containing 1500 containers/ship) to transport these nuts and bolts. If laid side by side, all these kegs he said, would make a road 44,600 miles long or twice the circumference of the earth.

Goodwin briefly described the growth of imports from when they first began to come into the U.S. (and were sold mostly through distributors) to today’s scene where some distributors are taking national contracts calling for domestic sources and are supplying them from overseas and where some manufacturers are having fasteners made overseas and head marketing them as domestically made products. He’s seen such fasteners, from overseas, he said, in nuclear submarines and other vital installations. People, he said, don’t want to be told about this situation so they don’t bother with it.

Vance, as might be expected from a representative of the importers, tried to down play the importance of the Section 232 investigation and also minimize the possibility of it resulting in any sort of remedial sanctions. He pointed out that many other investigations (he mentioned 16 since 1976) had been made of the fastener industry (the last one in 1978) and that past impositions of tariffs had not had much effect.

Part of the problem, Vance contended, is the general economy. Another part is the nature of the industry. The U.S., he said, has the capacity to make standards, and it had the employees to make them. The trouble is that the employees don’t want to stay in what is essentially a dirty and noisy work environment.

Grant responded to Vance by asking that if the problem is not a serious one and if the industry is not an important one, why have there been so many investigations?

Grant also said that he had been told that the present investigation may be the last chance for the domestic industry to get the situation squared away. If we don’t do it this time the government is going to wash its hands of the problem, he warned.

Goodwin summed up his remarks by saying that if any help is going to be forthcoming from government it will take a concerted industry-wide effort by labor, manufacturers and distributors. Trade associations, he said, going one by one to government have too small voices to be heard. There are lobbies working against us, he said, and its industry’s task to counteract them. “This show,” he said, “has become a tremendous forum for us and this forum could carry the ball into politics through our cooperation.”  ©1982/2011 Fastener Industry News

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