Testimony of Lester Trilla
President and CEO
Trilla Steel Drum Corporation

Before the Trade Subcommittee of the House Ways & Means Committee

March 26, 2003

Mr. Chairman and Members of the Subcommittee, thank you for the honor of appearing before you today to discuss the impact of the Steel 201 tariffs on my business and my workers, as well as the industry in which we participate. My name is Lester Trilla. I am the President and CEO of Trilla Steel Drum Corporation, which is located in Chicago, Illinois. We are a leading manufacturer of new steel drums used in the filling and transportation of a variety of products, including hazardous materials. Trilla is a family-owned, family run business - three generations of the Trilla family have built the company from a $500 investment in a drafty garage on the Southwest Side into a major Midwest supplier of more than one million 55-gallon steel drums annually to a diverse client base.

The Steel 201 safeguards have had significant negative consequences for our company. The steel tariffs have increased our steel costs, and, by limiting us to domestic steel that does not work as well on our machinery, have increased our production costs due to quality issues.

Cold-rolled steel is the major raw material used in our drums, and the increase in the price of steel last year resulting from the additional tariffs on imported steel caused our steel costs to go up 70-80 percent last year. Prices have moderated in recent months, but not nearly enough to restore our competitive position. Moreover, we cannot get a steel product exclusion for the steel we need.

Because of steel supply difficulties, we have been forced to increase the price of our drums over 20 percent. Some of our best and oldest customers could not accept this increase, and have moved to our foreign competitors, who have much lower steel costs. As a result, we have lost 30 percent of our longstanding customers. We are particularly saddened that the major beneficiaries of our lost business are steel drum makers in foreign countries. The drums are cheaper abroad because foreign drum producers do not have as high raw material costs as we do. We hear credible reports that foreign cold-rolled steel prices are lower than the ones we see by a substantial margin, more than 20 percent.

Other customers have avoided the price increases by switching from steel drums altogether and now use non-steel containers like plastics and IBCs ("intermediate bulk containers"). The companies that have made this switch have had to change their logistics facilities, and will never come back to steel drums or Trilla or any drum manufacturer in the United States. This loss of business has been seriously damaging to us - not only because we are a small business, that cannot absorb these losses, but also because we take pride in the relationships that we have built over the years with our customers - many of these lost customers have used Trilla steel drums for thirty years and more.

Meanwhile, the tariffs have effectively cut off our previous sources of imported steel and forced us to switch to domestic steel. Unfortunately, the domestic steel Trilla has to buy is of a significantly lower quality than what we had been getting from foreign mills. The quality of our steel feedstock is very important to us because our drums are used to carry very hazardous, dangerous, flammable products and they are subject to very stringent quality standards. Without getting into the technical details of drum production, I can say that Trilla's scrap rate has doubled since we had to move completely to domestic material - we get some deliveries where we just can't use the steel because it doesn't weld or clean properly. In addition, for the first time, we have had problems with coating our steel products. In the past year, we have had almost $100,000 in claims from customers for failed coatings that are directly related to the problems we have had with the cleanliness and quality of the steel. Before last May, Trilla never had a failure of its coatings,

Mr. Chairman, all of this is to say that the steel tariffs imposed by the President have had the effect of making Trilla significantly less competitive. Steel costs in the U.S. skyrocketed last year, causing me to lose business from customers that I will never get back. Now, even though the prices have moderated somewhat, the poor quality of the steel that I have to use from domestic mills have caused other problems with the customers I have been able to keep and have created additional costs for Trilla. I appreciate that the safeguards were supposed to help the U.S. steelmakers, but I don't understand why steel consumers like me have to suffer.

Thank you for this opportunity to present my views.