By Meena Thiruvengadam
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)-- An attempt to protect one vanishing U.S. industry - the makers of steel wire garment hangers - is drawing opposition from dry cleaners who had switched to cheaper Chinese-made substitutes for their customers' shirts, dresses and pants.
The U.S. International Trade Commission on Thursday unanimously voted that low-price Chinese hangers have injured domestic manufacturers, clearing the way for punitive tariffs to drive up the cost of Chinese imports. Dry cleaners complain the measure is increasing their costs at a time when they can least afford it.
Dry cleaners across the country have been writing to the ITC for months, protesting a decision to impose punitive tariffs on the imports.
"U.S. dry cleaners have been devastated paying already double or more for the same hangers which only a few months ago were priced at a reasonable rate," hundreds of dry cleaners from California to New Jersey wrote in letters filed with the commission this summer.
Dry cleaners in their letters estimate their costs for hangers could increaseby $6,552 each this year, a figure they say is equivalent to about 10% of the average income of a dry cleaning business.
Still, the Department of Commerce last month issued a final rule requiring Chinese hanger exporters to pay the U.S. anti-dumping duties of up to 187% of a shipment's value should the ITC determine U.S. businesses have been harmed, as it did Thursday. The duties are meant to punish Chinese companies benefitting from government subsidies that allow them to export hangers at prices below market value.
"For better or for worse," by law, the ITC and the Department of Commerce under which it operates, "are not allowed to take into consideration the views of consumers," a high-level commerce official said in a recent interview.
The official said considering the views of consumers would make the process of assessing and imposing duties less transparent.
The anti-dumping duty is meant to protect the U.S. hanger manufacturing industry from unfair competition, however much of that sector has died since a first failed push for punitive tariffs against Chinese hanger exports six years ago.
Since Alabama-based M&B Metal Products first asked the government to impose anti-dumping duties in 2002, seven U.S. hanger makers have ceased production and hanger imports have leaped by more than 800%, largely boosted by Chinese manufacturers. China is the largest source of U.S. steel wire garment hanger imports.
Employment in the domestic hanger manufacturing sector has dwindled to just 139 in 2007, according to an ITC investigation. The figure is one-third of what it was in 2005. A handful of remaining U.S. manufacturers produce just 9% of the 3.3 billion steel wire garment hangers used in the country each year. In 2007 alone, the U.S. imported 2.7 billion hangers valued at $83.6 million from China.
About 85% of all steel wire garment hanger imports are used by the nation's estimated 30,000 dry cleaning businesses.
M&B, whose first request for punitive tariffs required presidential approval it could not garner. M&B made its second petition for tariffs in 2007 under a different law that wouldn't require presidential support.
And there are signs the U.S. tariffs - despite their unintended consequence - are reviving the U.S. hanger making sector.
"We're much busier," said M&B President Milton Magnus, whose grandfather started the company in 1943. "We've hired a lot more people, and we're buying a lot more materials."
Without the tariffs, Magnus expects he would be forced to shut down his business.
Thanks to climbing product prices, Calif.-based Shanti Industries last year was able to restart production at a previously shuttered Wisconsin plant it bought from a prior owner. The company also has plants in California and Kentucky and plans to boost production because of increased domestic demand for its products in the wake of rising import prices.
Magnus said hanger costs finally have reversed a six-year trend of declines to reach what he calls a fair price of 8-12 cents each.
He believes tariffs are adding between 1-3 cents to the cost of each Chinese hanger imported and said the brunt of the price hike dry cleaners are seeing result from rising costs for raw steel.
Following two years of increases, prices for steel remain near historically high levels despite some softening in recent months.
Prices for steel mill products rose 33% between July 2007 and July 2008, the latest figures from the Bureau of Labor Statistics Producer Price Index show.
"We're paying about 60 cents a pound for steel. Before, we were paying 25 cents," Magnus said, describing the higher prices he now pays for the carbon steel wire used to manufacture hangers.
