Front Line in a Trade War with China – Leeds, Alabama
An 80-worker manufacturer in Leeds is the last bastion in a U.S. industry’s trade war with China.
Milton Magnus III and son Milton IV “Mack” could have made their lives easier by importing coat hangers, but chose to fight for the rights of American businesses.
It would have been entirely possible for Leeds-based M&B Hangers to be an importer now instead of a manufacturer of steel wire garment hangers. And that might have been the easier route.
But the company’s president, Milton Magnus III, took a stand several years ago that has preserved its status as an American — and an Alabama — manufacturer. In the process, Magnus has become a leading figure in the fight against illegal imports by Chinese manufacturers of steel wire products. It has not been easy, however, and the fight is far from over.
Magnus’ grandfather started M&B Hangers with a partner in 1943, initially reconditioning used bottle caps and selling them in the soft-drink industry. The company transitioned into a garment hanger manufacturer when steel wire hangers were in strong demand among dry cleaners because of supply shortages during World War II. Now, in addition to the dry cleaner market, M&B supplies the hangers to the textile rental industry, which includes uniform and formal wear rental businesses.
M&B Hangers moved from Birmingham 15 miles east to Leeds in 1963 and continued growing into a leading steel wire hanger manufacturer. Magnus’ father served as the company’s second president, and Magnus assumed leadership in 1988.
Making steel wire garment hangers isn’t complicated, but it is an exacting process. It begins with steel-rod coils that weigh between 3,000 and 4,000 pounds. The coils are stretched by die machines that reduce the diameter of the rods to sizes required for different kinds of hangers. The wire is then straightened, cut and coated with an environmentally friendly paint.
Machines form the wire into one of almost 40 different kinds of hangers that M&B Hangers makes. A similar process is used for strut hangers, which have a cardboard tube on the bottom, and cape hangers, which are covered in paper.
M&B Hangers was among a handful of leading steel wire hanger manufacturers in the United States when imported steel hangers from China began trickling in around 2000 at prices far below those of American producers and in violation of the World Trade Organization framework.
In 2002, M&B Hangers and two other American companies filed a Section 421 Trade Case and received a favorable ruling from the U.S. International Trade Commission (USITC). But then-President George W. Bush declined to impose duties against the Chinese producers, leading to a virtual collapse of the American steel wire hanger industry.
According to the USITC, Chinese imports of steel wire hangers to the United States increased from 774 million units in 2004 to 1.8 billion in 2006, with market share increasing from 23.8 percent to 63 percent. American hanger producers saw acute decreases in sales, capacity and capacity utilization during that time. All but M&B Hangers eventually folded.
But even M&B Hangers was in a downward spiral and had closed a company plant in Virginia, putting 85 people out of work. The company was close to going out of business in July 2007 when it filed a different kind of anti-dumping case that would not require White House action. The company had no idea how it would pay hefty legal fees to file and pursue the case.
“We had to go it alone,” Magnus says. “It was a prayer for us, but we had no choice but to file the dumping case.”
After a lengthy, time-consuming process, M&B Hangers got a favorable ruling from the USITC, and in 2008 the Department of Commerce imposed duties on the Chinese imports. The company began adding back to its work force in Leeds, and it seemed a return to business as usual was in the works.
But the illegal imports persisted. Instead of shipping directly to the United States, the Chinese companies simply changed gears and began shipping hangers through Vietnam and Taiwan. That not only hurts American businesses but also cheats the U.S. government out of millions of dollars in duties that are supposed to be paid on those imports, Magnus says.
In testimony before the House Committee on Small Business in late May, Magnus said that M&B Hangers sent a private investigator to Taiwan and Vietnam to inspect new facilities that were purportedly making steel wire hangers. But the investigator found no such production facilities; he did find detailed documentation that China was sending illegal shipments through those countries to the U.S.
M&B Hangers took that information to two agencies — U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement — who commented about the thoroughness of M&B’s investigation. But still there was no enforcement of anti-dumping rules.
The company then went back through the USITC and DOC and received favorable anti-dumping rulings against Taiwan and Vietnam. But then the illegal shipments began coming from Malaysia and Laos, and the latest reports are that the imports are now coming through Sri Lanka and Cambodia, Magnus says.
Magnus is the current president of the American Wire Producers Association, a 94-company organization that represents up to 90 percent of the production of carbon, alloy and stainless steel wire and wire products in the United States. He says other industries — producers of nails, innersprings, threaded rods and wire shelving and more — are facing the same unfair trade practices as the garment hanger industry.
M&B Hangers has joined other companies to push for legislative and policy changes that would address illegal dumping activities. In his congressional testimony, Magnus noted that “Customs continues to be a black hole” when it comes to enforcing anti-dumping laws. Lack of enforcement, along with the expense of filing new cases and reviewing existing cases with federal authorities each year, is of major concern to him.
“Without meaningful relief to ongoing duty-evasion schemes, it will continue to be difficult to maintain our production in the U.S.,” he says.
The fight continues, and there really is no end in sight. “We are not seeing any signs that the Chinese will stop dumping wire and wire products — and other products,” says Kimberly Korbel, executive director of the American Wire Producers Association. “Other Chinese trade policies indicate that China has targeted the U.S. market. Milton has been a leading member of a coalition of companies soliciting the U.S. government to stop this illegal practice of transshipment. His leadership on the issue has been invaluable.”
Magnus has done what he had to do to keep M&B Hangers in Leeds. To save the Leeds operation and its 80 jobs, M&B Hangers built a facility that manufactures steel wire hangers in Mexico, and those hangers are sold both in Mexico and the U.S. “The purpose of the Mexican plant was not to replace U.S. production,” Magnus says. “It was to complement our U.S. production and help us stay in business when the onslaught of Chinese hangers began.
“We could be a family business and import all of our product from Mexico and China, but the way I view the company, we’re not importers. We’re manufacturers. We’ve got good people to do the manufacturing for us, and we’ve struggled and worked hard to keep this plant open and running.”
Through all his sparring and chess moves with the Chinese, it appears Magnus has retained a sense of humor as he joked often in a recent interview. “I graduated from Auburn in June of 1974, went to work the following Monday and got married a month later,” he says. “I tell people I’m a very boring person because I’ve lived in the same house since 1979, been married to the same woman since ’74 and had the same job that whole time.”
But he is only joking about the boring part.
“Without the efforts of Milton Magnus, there would be no steel wire hanger industry in the U.S.,” says Korbel.
Charlie Ingram is a freelance writer for Business Alabama. He lives in Birmingham.