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issue: August 2003 APPLIANCE Magazine

Guest Editorial: Section 201 Steel Tariffs
Appliance Associations Urge End to Steel Tariffs

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by Joe McGuire, president, Association of Home Appliance Manufacturers (AHAM)

The appliance industry is an important contributor to the U.S. economy and enriches the lives of many consumers. Our industry manufactures products that are purchased by millions of consumers who expect them to be reasonably priced, energy efficient, and of the highest quality.

As a result, our manufacturers are constantly innovating and require superior-quality and cost-effective materials, including steel, to meet this consumer demand. The steel safeguard tariffs, imposed by President Bush last year, have placed a heavy and unnecessary burden on our industry that threatens our ability to provide this value to the consumer.

The Association of Home Appliance Manufacturers (AHAM), the Air Conditioning and Refrigeration Institute (ARI), and the Gas Appliance Manufacturers Association (GAMA) all oppose the steel safeguard tariffs imposed under Section 201 of the Tariff Act. In fact, in testimony before the U.S. International Trade Commission (ITC) last month, I advocated the immediate termination of this program. If allowed to continue, I believe that these tariffs will subject appliance makers to continued substantial cost pressures and harm U.S. jobs.

Our industry's case is compelling. Each year, AHAM, ARI, and GAMA member companies ship hundreds of millions of products and consume more than 6 million tons of steel, the majority of which is supplied by domestic steel producers. Together, our members employ nearly 500,000 U.S. workers, and we contribute more than U.S. $50 billion to the U.S. economy each year. My testimony before the ITC explained how the steel safeguard tariffs have had a direct and negative effect on our industry - appliance makers have experienced dramatic price increases for domestic steel products, changes in domestic steel supplier behavior, and difficulties in obtaining quality steel from domestic steel producers. The steel tariffs have also had a pernicious effect throughout the U.S. manufacturing sector. According to a study by the Consuming Industries Trade Action Coalition (CITAC), more than 200,000 Americans lost their jobs as a result of higher steel prices in 2002, resulting in more than $4 billion in lost wages. Such overwhelming data cannot be ignored.

Appliance makers have been hit particularly hard by these tariffs because, in large part, they are considered to be "price takers" in the marketplace. When our companies face significant increases in input costs, such as steel, they cannot pass these increases onto customers. This is the result of a highly competitive industry and an over-capacity in appliance manufacturing throughout the world. Ironically, the domestic home appliance manufacturing industry is in a similar position to the domestic steel industry with regard to intense global competition and the inability to pass costs through to the consumer.

The magnitude of the price increases has been more severe than we originally anticipated. Several of our members have seen prices for domestic steel increase from 17 percent to 30 percent from levels prior to the imposition of the tariffs. Increases from a year ago in steel prices on the spot market have also averaged more than 37 percent. Due to a highly competitive industry and an over-capacity of appliance making, these price increases were necessarily absorbed by our manufacturers and resulted in corresponding cutbacks in production.

The appliance industry has traditionally lagged behind the overall economy when it comes to increasing the prices for its products. According to the Producer Price Index, from 1972 through 2002 average prices across the U.S. economy increased 320 percent for all commodities, but only 79 percent for major appliances. Major appliance prices have increased less than those of most other goods and services due to an intensely competitive industry, higher production efficiencies, and the traditional consumer resistance to higher purchase costs. These moderate price increases for home appliance products are remarkable in light of the fact that our industry is heavily regulated and must expend significant resources in order to comply with federal energy efficiency standards.

In addition to the dramatic price increases, AHAM member companies have experienced changes in the behavior of domestic steel suppliers since the imposition of the safeguard tariffs. This has included decreased flexibility in setting delivery dates, longer lead times for deliveries, and even missed deliveries. In addition, the price increases have forced our manufacturers to change their sources of domestic steel. As a result, they have faced difficulties in ensuring access to the quality of steel that they require. This is a significant issue for our industry because quality is a hallmark; our companies require the highest quality steel product available.

I must stress, however, that our industry appreciates the plight of the domestic steel industry and supports its efforts to ensure that trade in steel is done fairly and in accordance with multilateral trade rules. The steel safeguard tariffs, however, are not an appropriate tool for that purpose. The World Trade Organization agreements provide for countries to impose anti-dumping and countervailing duties on imports from countries that subsidize their steel manufacturers' production, and producers who unfairly dump steel on the U.S. market. In fact, the domestic steel industry already benefits from numerous antidumping and countervailing duty orders currently in effect. The 201 steel safeguard remedy, however, does not take these antidumping or countervailing duty orders into account, and instead imposes additional duties on a wide range of steel products.

We do hope for a resolution of the problem facing the domestic steel industry that provides the industry with the relief that they require, while not impairing our industry. The time has come to terminate the Section 201 steel safeguard tariff. This is essential in order to preserve the health of our industry and the economy as a whole.

Read another viewpoint on the issue of Section 201 Steel Tariffs:
The Appliance Industry Will Benefit from the 201 Steel Program
by Andrew G. Sharkey, III, president and CEO of the American Iron and Steel Institute (AISI)

Make YOUR opinions known on the subject of Section 201 Steel Tariffs.

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PLEASE NOTE : Any correspondence submitted to editors_mail@appliance.com may be published, in full or in part, on our web site or in our printed publications. If you would like to send us email that is NOT intended for publication, please send to: editor@appliance.com


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