Today, U.S. Senator Sherrod Brown (D-OH) called on the Department of Commerce to consider the effects on domestic titanium producers as they review applications for foreign-trade zone (FTZ) benefits. In his letter, Brown requested that the Foreign-Trade Zones Board carefully considers the impact of a foreign company's application for FTZ benefits, which could have detrimental effects on domestic titanium producers and forgers.
"The Department of Commerce must put American workers, Ohio jobs, and our national defense first," said Brown. "It's time to address unfair advantages for foreign titanium producers that come at the expense of our domestic industry and the jobs it supports."
Foreign Trade Zones were created by Congress to support domestic manufacturing. However, allowing international corporations to import production materials to the United States duty-free would place domestic industries at a disadvantage. Granting full FTZ benefits could also create a precedent for future applications, with the potential to effectively eliminate standard import duties.
The decision to fully grant this application could also place the national defense industry at risk. Companies like Allegheny Technologies Incorporated (ATI) and Titanium Metals Corporation ("TIMET") employ thousands of Americans and produce titanium used in advanced aircraft that are crucial to national security. Approval of this type of application would give foreign titanium producers a competitive advantage over our domestic industry.
Brown's letter with U.S. Senators Rob Portman (R-OH) and Bob Casey (D-PA) can be read in its entirety below:
The Honorable Rebecca M. Blank
Acting Secretary of Commerce
1401 Constitution Ave., NW
Washington, DC 20230
Dear Ms. Blank:
We write to express our serious concerns regarding the Foreign-Trade Zones Board's consideration of the pending application by Firth Rixson, Inc. for foreign-trade zone (FTZ) benefits. Of particular concern is the revised recommendation by the Board's staff to fully grant Firth Rixson's application for FTZ benefits. This revised recommendation appears to be contrary to both the Board's regulations and its recent precedent. If the Board were to grant Firth Rixson's application in full, we have little doubt that it would quickly lead to significant harm to domestic titanium producers and forgers.
Full approval of the application, as recommended by the Board's staff in December 2012, would enable Firth Rixson to circumvent the 15 percent normal duty that applies to imports of titanium billets. Congress provided for the creation of foreign-trade zones as a way to grow domestic industry. Full approval of the Firth Rixson application would instead create a significant disadvantage for domestic titanium producers. Such a decision would create a precedent allowing Firth Rixson and other titanium-consuming companies to avoid the long-standing duty on imported titanium through the operation of a foreign-trade zone. In its initial recommendation, which we support, the Board's staff urged a partial approval of Firth Rixson's application, only exempting from duty titanium billets that are consumed in producing forgings and then subsequently exported from the United States. This limited approval would prevent the effective elimination of the 15 percent normal duty on imported titanium billets, insulating the domestic titanium industry and its workers from economic harm.
While the revised staff recommendation provides only a limited discussion of the basis for the change in position, we understand that the reversal is based in significant part on Firth Rixson's assertion that its sourcing of foreign titanium is limited as a result of "directed buy" provisions required by its customers. According to Firth Rixson, these "directed buy" provisions will preclude a negative impact on domestic titanium producers because Firth Rixson would be unable to increase the market share of imported titanium entering the FTZ. However, it is our understanding that full approval of the application would allow U.S. purchasers of finished titanium articles to pressure U.S. titanium producers to lower their prices by proposing to take their business to Firth Rixson, which could provide them with duty-free imported titanium. Even more concerning is precedent this would establish, likely resulting in a number of follow-on applications that would effectively eliminate the 15 percent normal duty on imported titanium billets.
A decision by the Board to grant Firth Rixson's application in full could also put at risk our nation's defense industrial base. Domestic titanium producers are critical to our national defense. Full approval would create a substantial disadvantage for these producers, including Allegheny Technologies Incorporated (ATI) and Titanium Metals Corporation ("TIMET"), which employ thousands of our constituents. ATI and TIMET are significant producers of a wide range of titanium and titanium alloy products, and are important suppliers of titanium used by U.S. defense contractors to produce advanced aircraft crucial to our national security. Approval of Firth Rixson's FTZ application and other similar applications would give foreign titanium producers--such as VSMPO, Russia's state-owned titanium company--a competitive advantage over our domestic industry. We are concerned that the U.S. could cede production of this critical material to countries such as Russia and China (where the government is working hard to develop a domestic titanium industry); rendering ourselves dependent upon them for supplies of a material that is vital to our national security.
On behalf of this country's titanium producers, and with our defense industrial base in mind, we urge you to ensure that the Foreign-Trade Zones Board carefully considers the impact of Firth Rixson's application for FTZ benefits. We strongly believe that the only outcome that would be consistent with the applicable statute and regulations, as well as the Board's recent precedent in a similar application involving ThyssenKrupp Steel and Stainless USA, LLC, is a partial approval of Firth Rixson's application that would grant it FTZ benefits only with respect to titanium billets that are consumed in producing forgings that are manufactured in the FTZ, and then exported to customers outside the United States.