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.
