Quantcast

Md. company in crosshairs of steel tariffs

Independent Can’s dilemma: It can’t find domestic steel for its products and is worried that tariffs could lead to job cuts – or worse.

1a-can-huether-rick-independant-canmf050

‘What Mr. Trump is trying to do is protect one job and putting five or six jobs at risk in some fashion,’ says Rick Huether, president and CEO of Independent Can Company. (Maximilian Franz/The Daily Record)

10a-can-huether-rick-independant-canmf024

Line workers Iziah Lamons and China Smith take Swiss Miss hot chocolate tins off the assembly line at Independent Can Company. (Maximilian Franz/The Daily Record)

11a-can-huether-rick-independant-canmf034

Virginia Tompkins tests Zippo lighter fluid tins for leaks on the assembly line. (Maximilian Franz/The Daily Record)

huether-rick-independant-canmf003

5-21-18 BELCAMP, MD- Bill Jenkins, Coater operator for 25 years at Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf008

5-21-18 BELCAMP, MD- Bill Jenkins, Coater operator for 25 years at Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf012

5-21-18 BELCAMP, MD- freshly coated steel drying on a rack coming out of an oven at Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf015

5-21-18 BELCAMP, MD- Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf019

5-21-18 BELCAMP, MD- Line workers Iziah Lamons and China Smith taking Swiss Miss hot chocolate tins off the assembly line at Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf022

5-21-18 BELCAMP, MD- Line workers Iziah Lamons and China Smith taking Swiss Miss hot chocolate tins off the assembly line at Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf030

5-21-18 BELCAMP, MD-Zippo lighter fluid tins on the assembly line at Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

huether-rick-independant-canmf051

5-21-18 BELCAMP, MD- Rick Huether, President and CEO of Independent Can Company factory in Belcamp, MD for a story about steel tariffs. Photo by Maximilian Franz

“Proudly made in the USA!” Independent Can Company declares on its website.

The Belcamp can manufacturer employs hundreds of people in Maryland and prides itself on having brought manufacturing dollars back from China over the past decade.

“Our business has been to bring things back from China,” Richard Huether, the company’s president and CEO, said. He estimated the company has brought more than $5 million in business back from overseas.

But without an exclusion from steel tariffs proposed by President Donald Trump’s administration earlier this year, much of that progress could be reversed. Hundreds of jobs could be lost.

Independent Can has applied for an exclusion from the tariffs, a process that has been bewildering and painstaking for the thousands of companies that are seeking relief.

The tariffs, a tax on imports, would filter throughout the economy, affecting jobs in related industries and passing costs onto consumers, whether it’s a case of beer or a tin of popcorn.

How Independent Can came to rely on foreign steel, and the potential impact of Trump’s proposed steel and aluminum tariffs, is a story similar to those playing out in communities across America, underscoring how efforts to redress a trade grievance in one industry can reverberate in complex and unintended ways.

Like the other companies filing for exclusions from the tariffs, Independent Can has found that the president’s quest to save the American steel industry could come at a price for others.

“What Mr. Trump is trying to do is protect one job and putting five or six jobs at risk in some fashion,” Huether said.

‘If you don’t have steel …’

In March, Trump announced that he would be placing tariffs of 25 percent on steel brought into the country and 10 percent on aluminum brought into the country, except for steel from Canada and Mexico.

Nominally,  the tariffs are designed to protect national security. But Trump also said he wants to protect the steel industry from global competitors.

“We must protect our country and our workers,” Trump tweeted, March 2, the week before he announced the tariffs. “Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!”

But economists question whether the tariffs would actually bring the jobs home.

The nation is not set up to produce the same types or qualities of goods as foreign countries do, especially with a strong dollar, said Roger Kashlak, a professor of international business in the Sellinger School of Business at Loyola University Maryland.

“The populist notion is that we’re going to bring traditional manufacturing jobs home,” he said. “We cannot do that. We don’t have the cost structure. We don’t have the competitive advantage.”

When it comes to shipping the made products overseas, a strong dollar makes it difficult to sell them.

The tariffs on allies like Europe and South Korea were set to go into effect last month, but the administration granted a one-month extension through the end of May before they go into effect. The administration has not said yet whether it would extend the date tariffs go into effect or take some other action.

But these one-month extensions have already hurt businesses like Independent Can. Huether said he lost a job that would have been half domestic steel and half imported steel because he could not guarantee that the price he offers today would still be the price when the product is ready months down the line.

“We don’t know what our steel price is going to be on things that we’ve already ordered from Europe,” he said. “How do you run a business with every 30 days you have a threat of an increase?”

Line workers Iziah Lamons and China Smith take Swiss Miss hot chocolate tins off the assembly line at Independent Can Company. (Maximilian Franz/The Daily Record)

Line workers Iziah Lamons and China Smith take Swiss Miss hot chocolate tins off the assembly line at Independent Can Company. (Maximilian Franz/The Daily Record)

A family business

Independent Can Company was founded in 1929. Huether’s grandfather was a distributor of the tin-plated steel the company needed to make its cans.

In 1948, the Huether family bought the company. Richard Huether is the third generation of Huethers to work in the business. His son, Ryan, is the fourth.

Today, the company has more than 400 employees across the country, including at manufacturing plants in Maryland, Iowa and Ohio.

The company has two Maryland locations. Independent Can’s headquarters and a 400,000-square-foot manufacturing plant are in Belcamp, in Harford County. Two years ago, the company acquired an additional facility in Rosedale from Ball Corp.

Altogether, the company employs around 300 people in Maryland.

Most of Independent Can’s business comes in the form of specialty decorative cans.

The company’s products include the decorative cans holding popcorn, cookies and potato chips you see popping up around Christmas. Independent Can also produces the shiny cans holding cosmetics and chewing tobacco.

These products require a specialty tin-plated steel that comes with a shiny finish. The tin-plated steel makes up about 2 percent of the global steel market.

The company’s recent growth has come through a focus on automation. It cannot beat cheap labor in places like China, but automation has made the company competitive because it requires fewer workers.

Domestic supply issues

With automation came a problem for Independent Can: Domestic steel just is not good enough for its products.

The company has tried to source its steel from the United States — even five years ago, 90 percent was sourced domestically. That number has slipped to less than 50 percent, Huether said.

Now, much of the company’s steel comes from U.S. allies, including Europe and South Korea.

Independent Can ran into two problems with domestic steel: quality and efficiency.

The automated machines that made the company more competitive also require a more specific type of steel, cut into wider 48-inch coils. When American companies produce sheets the width Independent Can needs, the edges get wavy, Huether said.

“If we get a wavy edge, we can’t print it,” he said.

Independent Can also has run into problems receiving orders on time from domestic companies.

Five years ago, the American mills filled orders 70 percent on time. That rate has slipped to about 18 percent this year, which actually is an improvement over the 12 percent rate of last year.

The European and South Korean mills that Huether has turned to for his steel deliver 90 percent on time, Huether said.

“We moved for quality and process efficiency,” he said. “They (U.S. mills) can’t even deliver to us on the dates they promise delivery … We can’t even plan our manufacturing around domestic mills.”

Begging for investment

Independent Can has tried to persuade domestic companies to invest in the infrastructure needed to provide the product they need, Huether said.

“We asked U.S. Steel to, if nothing else, give us support in our request for an exemption for 12-18 months,” he said. “You guys invest and then we’ll talk.”

U.S. Steel said it has always been willing to help customers meet their needs.

“For decades, we have served customers of all sizes with high-quality steel,” Meghan M. Cox, a company spokeswoman, said. “We stand ready to assist new and long-standing customers with our wide range of steel solutions.”

But Independent Can has found it difficult to work with U.S. Steel, the nation’s largest steel producer.

In 2015 the company “begged” U.S. Steel to invest in the infrastructure to make the types of sheets Independent Can needed, Huether said. Initially, U.S. Steel gave Independent Can a letter saying it  would invest, but six months later those investments were canceled, Huether said.

“You can’t even trust them to invest when they give you a letter saying they are going to invest.”

Virginia Tompkins tests Zippo lighter fluid tins for leaks on the assembly line. (Maximilian Franz/The Daily Record)

Virginia Tompkins tests Zippo lighter fluid tins for leaks on the assembly line. (Maximilian Franz/The Daily Record)

A ‘mysterious’ process

Companies that use foreign steel can apply for exclusions from the proposed tariffs. To do so, they must show that there is a lack of capacity or a lack of quality in the domestic market. Independent Can believes both are true in its case.

But the requirements of the exclusion applications have been burdensome and cumbersome, applicants say, especially compared to the last time the industry went through this in the early 2000s under the Bush administration.

Then, an industry group could make one application for all of the companies it represented. This time around, each company must submit a separate application for each specification, each country and each type of steel it imports.

And no one at the government has been available to talk about the exclusion application process. Companies do not know who approves or denies their application or for what reason they will be doing so.

“It’s equally mysterious and Byzantine to all parties,” said Robert Budway, president of the Can Manufacturers Institute, a trade group that includes Independent Can.

More than 5,700 applications for exclusions have been posted on the Bureau of Industry and Security website, the federal agency in the Commerce Department that is handling the process. Once the applications have been posted, the government has 90 days to respond.

Independent Can has submitted five applications to the government, but has yet to get a response.

A spokesperson for the agency did not return a request for comment.

Budway contends that the tariffs on steel and aluminum might force some companies to choose other materials – cardboard or plastic – for packaging their products.

“The government should not be in the business of picking winners and losers when it comes to packaging,” he said.

If companies continue to operate, they will be facing what is essentially a tax, whether they pay it, their consumers pay it, or their consumers’ consumers pay for it.

“There’s 26 billion steel cans made every year in the United States,” Budway said. “Even a 1 or 2 cent tax per can is equal to about $260 (million) to $500 million. That money comes from someone — from the consumer, from the customer or from the can maker.”

Jobs at risk

Huether has doubts Independent Can would continue to manufacture its products in the United States if the tariffs move forward. Instead, production could move to places with cheap labor, like China.

The manufactured products would not be subject to a tariff when they are shipped to the United States.

The decorative can segment makes up about 65 to 70 percent of Independent Can’s business. Many of the company’s 300 Maryland employees could lose their jobs if production heads overseas.

“We’re a family business,” Huether said. “We try to take care of the people that have worked for us for generations. So it doesn’t feel good if you do it.”

He imagines the company will survive, even if some of the jobs go away. But for a company that has employed some of its workforce for 50 years, offshoring production will be tough.

The worry does not appear to have crept too far into the workplace, at least not yet. Several employees approached by The Daily Record were unaware of the tariff situation.

Larsen Weisser, a mechanic at the company, said he knew a little about the tariffs, but it was not something employees were really talking about.

But that didn’t mean they weren’t thinking about it, he said.

“I think everybody in the back of their mind is worried,” Weisser said.

To purchase a reprint of this article, contact reprints@thedailyrecord.com.

Leave a Reply

Your email address will not be published. Required fields are marked *

*