International Trade Committee on Nov. 1st, 2018

[Stephen Vezina]

We're about fifty-fifty in Canada and the U.S. It's the same thing. Our big thing is that our competitors are from overseas or from the U.S., so we're at a disadvantage in the Canadian market and the U.S. market because they don't have to do any price increases. We lose all over the place.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I will ask everybody. I don't think we're going to have time to ask everybody, but I will probably get a second round.

How much inventory do you have now? Is there a waiting game? Presumably you're pricing jobs for the future, for which you have to take into account these tariffs and that pricing. When the jobs come to fruition, the tariffs may be gone or anything like that.

How are you balancing all these competing factors?

[The Chair, Liberal, Mark Eyking]

We have a problem here. It's a challenge. It's a good question. Maybe you want to punt it until your next round.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Okay. Think about that. I think it's going to come back to us.

[The Chair, Liberal, Mark Eyking]

I think it's too big a question for your last 10 seconds.

We're going to move over to the Conservatives.

Mr. Carrie, you have the floor.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

Thank you to the witnesses for being here.

I'm going to agree with my colleague, Kyle, in that we do have a dire situation here.

Mr. Neumann, you were here in July, and back then we were hearing how grave it was. You mentioned the metal tubing plant, Sandvik, in Arnprior closing down. We heard that last night. They are moving to Scranton. They are consolidating down there. The concern with that huge betrayal and disappointment with the USMCA to have these 232s.... We even heard from Mr. Ross in the spring, I think. He was saying these were put on for leverage. The fact that they are still there, I think, has just surprised everyone.

We heard from Mr. Whitney. Unlike Mr. Fonseca, I heard most people come and say they were having a problem with the government aid. It's very onerous, and even the big companies are saying it's a timeline type of thing.

Mr. Stepien, I believe you said you did get remission relief. How long did that take? What was the paperwork like?

[Gary Stepien]

Our management put in 40 hours, between me, the president and the business development manager. It took 40 hours to get the application completed the way we thought they needed. There were still some follow-up meetings to clarify some things.

[Colin Carrie, Conservative, Oshawa, ON]

The top guys at the company took 40 hours. The small companies are telling us they can't really do that.

Did you have any luck getting an exemption? You mentioned—

[Gary Stepien]

Yes. We did.

One of our products is in schedule 2, which means that exemption expires December 31. Tenaris has indicated they believe they can provide us with that. I guess time will tell.

It's one thing to say you can get the product. It's another thing to say you get it at a price you used to buy it at.

[Colin Carrie, Conservative, Oshawa, ON]

I think that's one of the biggest problems coming out. Even Mr. Hammersley was saying they're hearing about companies that are losing customers, and they are looking at this whole relocation like we saw with Sandvik.

Mr. Neumann, I do want to ask your insight. There's this issue right now of 232s, but there's a long-term issue about the dumping. I guess some of the strategy, as Mr. Fonseca said, is that the Americans are looking at this as a defence issue. In other words, that's where the security argument is coming from. We all know that Canada is not a security threat to the Americans, but we're stuck with this type of a situation.

Looking at long-term solutions for the anti-dumping.... China, Turkey and these countries are putting their product into our countries, and we're not able to compete with this. What do you see in the long term as a strategy to help with that?

[Ken Neumann]

To be honest about it, and it's probably hard to say this, but Mr. Trump said something that got everybody's attention. The dumping of steel, the saturation from countries that cheat and manipulate, don't have human rights, don't treat their workers the way that...has been ongoing for years. We've had that same situation here in Canada. If you look at the amount of steel that's been dumped over the years, you see that has diminished the amount of capacity that the companies that are playing by the rules have, because we've never had the ability to basically stop it. The same thing has happened in the U.S.

What the U.S. has done is they've gone ahead and applied these tariffs around the world. But don't punish your neighbour. Don't punish your best ally. Don't punish the integrated...of the market. There are decades and decades of history there.

The fact is if you look at aluminum, the prices of aluminum have dropped because of the oversaturation of China. A country that produces in excess of a billion tonnes and uses 700 million ain't gonna leave it in the boneyard.

What you have to have is Europe and the other countries come together and you have to deal. Don't reward bad behaviour. That's what's happening. The fact is it's coming at our expense. To have these tariffs imposed is an insult to Canadians. If you look at—

[Colin Carrie, Conservative, Oshawa, ON]

I heard that short term. I don't mean to interrupt you because what you're saying is absolutely valid. But I've heard from other stakeholders—and I don't know whether you were getting to this—who actually said that if we all got on side with what the U.S. administration is doing for North America, that might not be a bad way of addressing the dumping issue.

Once these are resolved, do you think this is a good strategy to move ahead globally if Canada can get back to where we have that preferred access that we've had for the last 25 years?

[Ken Neumann]

Maybe I'm not getting to the exact question you're asking. If the tariffs are removed and there are no quotas in place, and you have the ability for us to expand our market, I think that's all great.

If you can get everybody to play by the same rule book, and not manipulate the currency and do the dumping and you can't compete, I think that's the track you need to go on.

President Trump has taken advantage of what's happening around the world. Basically he's targeted a neighbour that he shouldn't have, and we now suffer the consequences of that.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Neumann.

Mr. Carrie, that wraps up your time.

We're going to the Liberals. Mr. Peterson, do you want to continue on where you left off?

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I did ask a question about inventory and your pricing, and how this sort of situation is affecting those processes internally for you.

Mr. Whitney, maybe you can start off?

[Ben Whitney]

We don't keep much inventory of raw material, but what we are seeing is that our suppliers are also driving down their inventories, because they don't want to have a bunch of material that they paid tariffs on when the tariffs are removed.

I used be able to get steel in two or three days, now I get it in seven or eight days, so it creates a bunch of problems in my supply chain. It's definitely a challenge on the pricing side, too, because there's a real temptation among the people who are quoting to say, “That's going to be gone soon. I'm just going to quote the prices that don't get any problems from my customers.” Then we're trying to teach those people to quote at a new rate, but it's definitely challenging. Then people spend time trying to find new suppliers to avoid me.

We really can't pass on the full cost. We're mostly absorbing it and hoping that it ends quickly.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I hear that.

Mr. Stepien.

[Gary Stepien]

In our case because of remission we're okay now, but until that occurred, we would, yes.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

It's good to hear that.

Mr. Juneau.

[Justin Juneau]

Since we're in the peak season right now for garage doors and response time is crucial in our industry, we cannot afford to carry less inventory, so we have to carry the same amount of inventory and support larger capital immobilized on the floor so we can still be a viable supplier for our customers.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you.

Mr. Vezina.

[Stephen Vezina]

This being a trucking equipment industry, just before all of this was happening, a lot of people stocked up on the inventory of tubing, in our case, or steel plate for people who build dump bodies or garbage trucks or snow removal equipment.

Naturally once everybody has gone through the stock they had, now they are paying more for their raw material for whatever they're making in the truck equipment industry. It will trickle down to the end users: to the cities, governments, private contractors that use garbage trucks, snow removal trucks and dump trucks. In the end, the end product will be more expensive so that may delay purchases from cities, provinces or departments of transport, and slow down the industry as we move forward.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Mr. Whitney, you said you couldn't take advantage of the remission because you don't have the invoice. You're not the one paying the duties and your customers obviously aren't going to give you that pricing information. Do you know, or is there a way of you knowing, if they're applying for the remissions, the ones who pay the surtaxes?

[Ben Whitney]

I don't. They can't apply for duty drawback because they don't know that the products were exported. On the remissions side, I don't know enough about the steel market to know where the steel is coming from to be able to answer that.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I'm just curious because they're obviously passing that on to you, and I would imagine, if they were getting it back, this would somehow affect their pricing. They don't want to overcharge unnecessarily in a competitive market.