By Katherine Reynolds Lewis
c.2008 Newhouse News Service
Photo by Joe Epstein
In Westfield, N.J., Suho Chae urges customers to return used hangers to his dry cleaning shop. He's paying $50 for a box of 500 pants hangers, up from $24 six months ago. "Every time I order a new supply," Chae said, "the price goes up."
In Leeds, Ala., M&B Hangers, the only major hanger maker left in the U.S., has doubled its work force and still can't keep up with demand.
And in Monticello, Wis., a hanger factory once shuttered because of cheap foreign competition has reopened an about-face worthy of Alice in Wonderland.
Welcome to the latest chapter in the trade tug of war with China: the wire hanger. The twists and turns of this humble piece of steel illustrate how disputes between trade officials thousands of miles apart can ripple through the global economy all the way to your closet.
The tale goes back almost a decade, when Chinese manufacturers started undercutting U.S. producers with cheaper hangers. M&B joined others in charging that China was unfairly subsidizing its own producers and dumping hangers on the U.S. market.
"If we play off a level playing field, our workers can be competitive with anybody," said Milton Magnus, M&B's president. "When you throw in all the government subsidies and rebates, it's impossible."
In 2003, President Bush rejected M&B's initial case. Chinese imports ballooned from 774 million hangers in 2004, to 1 billion in 2005, to 1.8 billion in 2006, and 2.7 billion in 2007, worth $68.5 million, according to the International Trade Commission. Last September, the ITC found domestic producers were unfairly injured, and in March the Commerce Department instructed customs officials to start collecting duties.
That set off a furor in the hanger world. Dry cleaners and uniform providers the primary users of wire hangers started stocking up. Wholesale hanger suppliers, most of which got their hangers from China, boosted prices as the duty made costs soar.
A duty, or tariff, is a tax imposed on imports or exports of a certain product. While the importers or exporters pay the tax, they may pass along the cost by increasing the price of the product to wholesalers and/or consumers.
The tariff on Chinese hangers averages 46 percent across several different hanger types, said Mary Scalco, a senior vice president with the Drycleaning and Laundry Institute, an industry trade group. Complicating matters, the price of steel has doubled in eight months.
"Because there's been so much disruption to the market, there's really been a shortage of hangers at any price, until people sort this out," said Jeff Neeley, a partner at Greenberg Traurig in Washington, who represents hanger importers Laidlaw Corp. and United Wire Hanger Co. "That's a big problem."
The ITC and Commerce Department must still finalize their decisions. The commission has scheduled a July 31 hearing and September vote. Commerce is supposed to announce a final determination Aug. 8. If either agency changes course, the tariff won't be imposed, and any money collected from importers will be returned, Commerce spokeswoman Brittany Eck said.
Relief, if it comes, will be too late for many.
Cleaners Hanger Co., based in Palm Harbor, Fla., liquidated its assets in 2003. United Wire Co. ended U.S. production. The two companies had joined M&B in the trade case, Magnus said.
M&B was "on the verge of closing before we filed this suit," Magnus said. Now, with the tariff on Chinese hangers driving demand for hangers made in the U.S., "we've doubled our employment in the past six months and our usage of American goods and steel, paint, boxes, etc. has also doubled. We see that trend continuing."
He's not alone. Shanti Industries Inc., a hanger maker in Foothill Ranch, Calif., reopened the Monticello, Wis., plant last fall. It is about to start a second daily shift there and at its California factory, said Darmesh Patel, its president, and has opened a factory in Mayfield, Ky., to make hangers and garment industry chemicals. It purchased the Wisconsin facility and the equipment for the Kentucky plant from Laidlaw, formerly the largest U.S. hanger maker.
"Everyone thought I was crazy," Patel said. "They said: `He's never going to make it, everyone's moving to China.' I took the gamble. I never knew a year after I bought the equipment this tariff would go into effect."
But Neeley, who represents several Chinese hanger makers as well as importers, warns that the improved climate for U.S. producers is likely to be short-lived.
"This is just an industry, unfortunately, that the U.S. simply is not competitive on a global scale," he said. "If the Chinese are forced out of the market, the industry will simply go to one of 20 other countries."
In the meantime, dry cleaners face dramatically higher costs.
"These Chinese tariffs are killing everyone," said Derek Samble, division manager at Belmont Laundry in Springfield, Mass., which paid 5 or 6 cents per hanger 18 months ago, 9 cents six months ago, and now pays between 13 and 15 cents. The company uses 6,000 to 7,000 hangers a week for dry cleaning, and 15,000 a week in its uniform rental business, Samble said.
Many have adopted Chae's strategy: enlisting customers to recycle.
Mark DiChiara, owner of Monarch Cleaners in Birmingham, Ala., gives customers a box designed to hold about 60 hangers compactly. Roughly a quarter of the hangers he uses are customer returns; at the current price of $40 for a box of 500, he saves $10 per case.
"Some of our customers who come in every week, they're probably giving me back the same hanger 20 times over the course of a year," DiChiara said. "With the recycling we're more than making up for the tariff."
This article was originally published by Newhouse News Service on Wednesday, July 9, 2008.