Zurn, Trek, Broan-NuTone seek protection from Trump’s China tariffs

Public hearings taking place this week in Washington D.C.

Zurn's headquarters in Milwaukee

Last updated on July 2nd, 2019 at 09:08 pm

As the U.S. Trade Representative continues six days of hearings on proposed 10 to 25 percent tariffs on $200 billion of Chinese imports, a number of Wisconsin companies are seeking to have parts used in their products removed from the list of goods included in the latest tariffs.

Others, like Racine-based InSinkErator, are pushing for products to remain on the list, citing “systematic patent, copyright and trademark infringement” in Chinese production of certain products.

Nearly 350 companies and trade associations are set to testify at the hearings, which started on Monday. The USTR included more than 6,000 product categories in the latest round of proposed tariffs. An earlier round of tariffs on $34 billion worth of imports is already in effect and tariffs on an additional $16 billion in goods take effect Thursday.

Hartford-based Broan-NuTone pointed to 65 product categories and cited the potential “severe impact” on its business in asking for the opportunity to speak at the hearings. Lee Berger, Broan-NuTon general counsel, is set to be part of a panel Tuesday afternoon.

In arguing to have products removed from the tariff list, companies generally point to the potential harm to their business, their customers and consumers from increased prices. They also argue the intellectual property behind their products is not of interest to the Chinese, since intellectual property issues are a main justification by the U.S. for the new tariffs.

“Zurn’s imports are generally not regarded as high technology. Zurn has never been required to transfer any technology or other intellectual property to China as part of our investment in that country,” Scott Burnett, general manager of Zurn Industries LLC, wrote in comments submitted to the USTR.

Zurn is seeking to have cast iron drains and water control and safety control valves removed from the list. In the case of drains, the company says it sources the products from China because there is no domestic capacity or capability to make them.

“Zurn has contacted numerous foundries in the U.S. over the past several years, including this year, and there is no combination of domestic sources that could come close to meeting our needs,” Burnett wrote.

The company estimates it would take at least two years to be able to produce the products in the U.S. or another country because of the “extensive tooling and other production equipment that is required.”

In prepared testimony, Waterloo-based Trek Bicycle argued implementing 25 percent tariffs would likely lead to an additional $30 million in costs for the company.

“Trek will be forced to pass these costs on to the consumer, raising prices on adult bicycles, kid’s bicycles, components and key bicycle safety equipment like helmets,” Roger Gierhart, Trek vice president of marketing and supply chain, wrote.

Gierhart wrote that the bicycle industry is heavily dependent on Chinese manufacturing, with 93 percent of complete bicycles and 40 percent of imported components coming from the country.

“Trek is no different, and our company manufacturers significant portions of its products in China. For example, all of our company’s helmets, kid’s bikes, and our most popular models … are exclusively produced in China for the U.S. market,” Gierhart wrote.

He said Trek is concerned the increased cost of its products will have an impact on the small businesses that sell its bicycles, noting sales of complete bikes drives demand for retailers.

“If the price of complete bicycles and related products goes up, we expect to see diminished demand for these downstream goods and services that will risk the profitability of bicycle retailers,” Gierhart wrote.

Like Zurn, Trek argued it has not been required to turn over intellectual property to do business in China and its products are not connected to the issues underlying the current round of tariffs.

Just asking for products to not be included likely is not enough. In the second round of tariffs, Kohler Co. highlighted 14 product categories, including six particularly harmful ones it said would increase costs by $11 million annually. None of the products were removed from the final list.

Likewise, Brookfield-based Milwaukee Tool sought to have categories for industrial machinery used in treating materials and certain thermometers removed from the list. Ty Staviski, Milwaukee Tool chief financial officer, wrote that the tariffs could undermine the company’s job growth in the U.S. and potentially shift growth to other regions. He also said it could lead to increased costs for customers without impacting the goal of the increased tariffs.

“We believe the imposition of an additional tariff to items covered by this subheading would not be effective in eliminating or deterring what the Administration has identified as the Chinese government’s abusive tactics,” Staviski wrote. “None of our Chinese suppliers for these products are state-owned. At no time did the Chinese government use any sort of opaque or discretionary administrative approval processes, joint venture requirements, foreign equity limitations, procurements, or other mechanism to require or pressure the transfer of any of our technology or intellectual property to themselves.”

Not all companies have the same view, however. Chad Severson, president of Racine-based InSinkErator, wrote to the USTR asking for kitchen waste disposers to remain on the list of products subject to increased tariffs.

In addition to patent, copyright and trademark issues, Severson said exports into China are already subject to an 8 to 25 percent tariff while Chinese products come in to the U.S. duty-free. China’s retaliatory tariffs could take the duty as high as 45 percent.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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