Originally published on the Money & More cover of the York Daily Record/Sunday News on Sunday, February 26, 2012.
By LAUREN BOYER
Daily Record/Sunday News
The shiny, rust-free glimmer slaps Troy Kline dead in the face as he paces the gritty floors of his 120,000-square-foot tire factory in Red Lion.
The CEO at Maine Industrial Tire shakes his head, watching the $100,000 tire mill sit idle – but not for the reason you might think.
It’s not the decline in U.S. manufacturing, an epidemic that recently claimed nearby Yorktowne Cabinetry’s decades-old site across Redco Avenue.
It’s not lagging demand for the company’s inventory, either.
In fact, Maine Industrial Tire’s 50 employees can’t keep up with contracts from big names like John Deere, Bobcat, and Caterpillar, clamoring for the company’s solid rubber products used on forklifts and construction equipment.
For most manufacturers, it’s the stuff of dreams.
For Kline and the company’s Chairman Bryan Ganz, it’s just a long story – one colored by a 5-year-old court battle with the U.S. government over an international trade regulation designed to stop foreign firms from undercutting American manufacturers.
They say it’s left them waiting on $1.5 million – money granted by a 2010 court decision.
That’s money to hire about 40 more employees in Red Lion – money to invest in company infrastructure.
“The issue is,” Kline said, “how many more customers are we going to lose because we can’t keep up with demand?”
The saga begins in 2007.
At the time, Maine Industrial’s forerunner GPX International Tires employed 2,600 people at manufacturing operations in Red Lion, Maine, Canada, Europe and – as fate would have it – China.
That year, Titan Tire Corp., the United Steel Workers International and Bridgestone Americas Inc. filed suit against GPX, accusing the Massachusetts-based company of “dumping” and “countervailing” from their Chinese factory.
Dumping occurs when a company exports goods to a country for less than fair market value, typically to gain an initial foothold in a marketplace.
Countervailing occurs when an industry in one country receives subsidies, allowing those products to be sold at a lower cost in another nation.
In the United States, companies engaging in these practices pay customs duties designed to level the playing field between domestic and foreign producers.
Ganz said the suit, filed with the international trade commission, wasn’t taken seriously initially.
“My head would snap off if I tried to sell something below cost,” he said. “We did not need to take additional market share. We weren’t a start-up company.”
In late 2007, the U.S. Department of Commerce began charging GPX customs duties for dumping and countervailing. These fees amounted to 44 percent of the cost of each off-the-road tire.
For example, if a tire cost $100, GPX paid the U.S. government $44 before the item could touch U.S. soil.
Duties aside, that same tire would only garner about $25 in profits for the company, Ganz said.
GPX sued the Department of Commerce in 2008, accusing the imposition of both duties as “double-counting,” he added. “At the time, there was tremendous anti-China sentiment – a tremendous push in Congress to restrict trade with China.”
Daniel Porter, attorney at Curtis, Mallet-Prevost, Colt & Mosle in Washington, D.C., represented GPX in the case.
“As you have increased globalization, you’re going to see this more and more,” he said. “What’s a bit unusual is that this manufacturer had its own Chinese production facility. In many cases, a Chinese exporter will send to a U.S. manufacturer and have no affiliation.”
GPX asked a judge to suspend the duties until the case could be heard in court. The request was denied, and GPX filed for bankruptcy in October 2009, citing the continued hefty customs costs for its demise.
The blow was devastating for Ganz, whose grandfather started GPX in 1922. He teamed up with Kline and other investors to buy a small piece of the company out of bankruptcy – along with the rights to pursue a lawsuit against the Department of Commerce.
The business – which no longer makes the products subject to the customs duties – became Maine Industrial Tire.
In August 2009, Chief Judge Jane Restani of the U.S. Court of International Trade ruled that the Department of Commerce erred in charging GPX the countervailing duties.
She re-affirmed her decision a year later, following the department’s appeal.
On Dec. 19, 2011, the Federal Circuit once again upheld Restani’s decision, entitling Maine Industrial Tire to $1.5 million in refunded customs duties.
But it didn’t quite happen that way, Ganz said.
The money is pending, tangled in the wheels of the justice system after the Department of Commerce appealed the decision to the U.S. Supreme Court.
Meanwhile, Ganz and his colleagues are tired – no pun intended.
They worry Congress might retroactively change the international trade law via an expedited process called “unanimous consent” – a move that might interfere with their settlement.
“We’re at the mercy of the government. At both ends,” Kline said. “Whether it’s the Supreme Court or the senators.”
U.S. Sen. Bob Casey and U.S. Rep. Todd Platts could not be reached for comment.
In the meantime, Kline said his company doesn’t have the money to dump into the company and new molds for updated product lines.
Molds range in price from $7,000 to $30,000 each, he said.
The factory produces about four tons per day of inventory. Capacity permits three times that amount for the site, which has had to eliminate military contracts with Lockheed Martin, Kline said.
And that machine – the one that sits idle – could employ six people alone.
For now, it’s just a waiting game.
“We have the technology to do so much more,” Kline said. “We just don’t have the funds to do it.”