Point: When It Comes to Imported Cast Iron, It's Buyer Beware

By Joe Christiansen, IGGC Inc.

Joe Christiansen is vice president and general manager of Interstate General Government Contractors (IGGC), Inc., a mechanical contracting firm based in Savanah, GA. He is also president of Geothermal Energy Management and a general partner of the Port Development Group.

A few months ago, President George Bush enacted sweeping tariffs and quotas on a number of imported steel products, sending ripples throughout the manufacturing and construction sectors. Domestic steel makers had sought the action as a means of battling subsidized imports that were being "dumped" in the U.S. at prices far below their cost.

Faced with many of the same challenges as the steel makers, the cast iron soil pipe industry has followed the tariff issue closely. Both industries provide important manufacturing jobs for U.S. workers. Both industries have an impact on construction. Both industries are being hurt by unfair trade practices.

In fact, in a 5-0 vote on April 8, the U.S. International Trade Commission ruled that there is a "reasonable indication" that nonmalleable cast iron fittings made in China are being sold at "less than fair value" in the United States. This finding is significant, particularly because as a new member of the World Trade Organization, China is now subject to the same anti-dumping rules as other member countries. The implication is clear. Without fair, rules-based trade, "free" trade cannot exist.

Unlike many of the old-line steel producers, domestic cast iron foundries have been investing in technology and automation. By plowing capital back into their processes and improving production techniques, today's foundries have become modern, efficient, low-cost producers.

In contrast, despite assertions to the contrary, many foreign foundries remain state-owned or enjoy huge government subsidies. They don't have to worry about the high cost of capital, making it difficult for private domestic foundries to compete. And depending on the country of origin, environmental and safety regulations can be lax, or in some cases, non-existent, along with the high costs associated with meeting those regulations. While American manufacturers can compete with anyone in the world on a level playing field, the unfair advantages enjoyed by subsidized foreign foundries, particularly Chinese foundries, cross the boundary of fairness.

There are larger issues at stake here as well. In many industries--steel, cast iron and textiles, to name a few--the United States is swiftly losing its domestic manufacturing capabilities. In fact, there are only three domestic cast iron soil pipe foundries left in the United States. Free trade purists say measures like the steel tariff drive up the cost of goods and hurt the economy. But there are broader economic and national security concerns to losing manufacturing jobs and having to rely on imported goods to sustain us. Maintaining a strong manufacturing sector will help to keep our economy and military strong. When this is understood, "Buy American" becomes more than just a slogan.

The cost of goods and materials is a legitimate concern when it comes to plumbing contractors--after all, who doesn't want to pay the lowest prices? Specifically, Chinese cast iron pipe and fittings are often available at a price that seems too good to pass up. Pipe is pipe, right? So why not buy the cheap stuff and save a few bucks?

If "Buy American" is not enough of an incentive, then perhaps issues like consistency of quality, reliability and availability are. Before you put your reputation on the line with imported cast iron, consider the following.

Manufacturing high quality cast iron is a difficult and demanding process. Cooling rates, wall thickness, alloy content and chemical composition all dramatically impact the strength, quality and integrity of the iron. In order to make uniform, high quality castings, Carbon Equivalent (CE), graphite and silicon must be controlled, and a constant, optimum pouring temperature maintained.

With domestic foundries, you can be sure of the quality. For example, Charlotte Pipe and Foundry, based in Charlotte, NC, monitors and controls the chemical properties and temperature of its iron on an hourly basis to be sure it meets stringent standards for quality. Charlotte also measures weight, thickness and laying length for dimensional accuracy to ensure that inside and outside diameters conform to all code specifications. Finally, water testing is done on every piece of cast iron pipe before it rolls off the line.

In addition, as a service to the engineering and contracting community, the Cast Iron Soil Pipe Institute (CISPI) inspectors perform quality control and conformance tests on inventories of all member U.S. foundries three times a year. These inspections help ensure that domestic pipe and fitting systems will perform as required by U.S. plumbing codes and product standards.

On the other hand, imports are sometimes marked with ASTM or CISPI standard numbers. But it is often unclear if the products have been manufactured to ASTM or CISPI standards. In addition, some imports carry the trademarks of long defunct or nonexistent domestic foundries--markings that have the capacity to mislead, because they imply that the material was made in the U.S. A few importers have even been caught copying trademarks of operating domestic foundries--a blatant violation of trademark and unfair competition laws, including the Trademark Counterfeiting Act.

Because it's difficult to track the ownership of many foreign foundries, customers may not be able to ascertain for sure where the material was made or if it meets the quality requirements of the standards. Without reliable and accurate data concerning the raw materials and casting methods used to produce the material, those specifying the pipe and fittings are left to guess whether the products being used will perform as expected.

If you are concerned about the quality of the material you are buying, ask for the corresponding testing data that includes the date of manufacture and the maker's (not the importer's) name and address. Only then can you be sure of the chemical composition and quality. Some testing of imported material is done here in the United States. But, according to ASTM A888 (Standard Specification for Hubless Cast Iron Soil Pipe and Fittings), testing and inspection must be conducted before shipment. If not, there can be no way to address a quality issue after the fact, particularly since many imported materials lack the proper markings to allow a customer to identify who manufactured the products in the first place.

There is another factor to consider as well. A recent review of the OSHA Hazardous Communications-required Material Safety Data Sheets (MSDS) distributed by an importer of Chinese pipe products revealed the startling presence of asbestos fibers in the coating of imported pipe and fittings.

Engineers at AB&I Foundry in Oakland, CA, a domestic foundry that was testing Chinese imports, were shocked to see asbestos reported in the MSDS data and could not explain why it would be used in the production of cast iron DWV. Severe health problems and life threatening diseases have been linked to exposure to asbestos, and it is prohibited in almost all types of construction. A wholesaler or contractor that used pipe or fittings with asbestos coatings, wittingly or unwittingly, could face huge legal costs and financial penalties.

According to AB&I, the MSDS data published by this Southern California importer of cast iron DWV states that this asbestos is completely encapsulated by asphalt. "But what happens when the pipe is cut in the field using an abrasive saw?" asks AB&I's Kip Wixson. "Is the obvious dusting that occurs during cutting exposing plumbers and others to dangerous air-borne asbestos?"

Few would want to expose themselves to the liability of dealing with hazardous material. "The courts are clogged with liability cases involving workers and others who were exposed to asbestos and got sick," says Wixson. It's not just manufacturing companies that are being sued. According to the March 2002 issue of Fortune magazine, boilermaker Babcock & Wilcox was merely a purchaser of asbestos products, but went bankrupt anyway due to asbestos litigation. Fortune reports that asbestos filings against some defendants have nearly tripled in the last three years. And if asbestos isn't enough, arsenic also has been detected in samples of imported cast iron soil pipe. And finally, a purchaser needs to be sure his suppliers check for radiation in the scrap they process, as there have been several instances where tainted materials have led to costly product recalls.

So you can see, producing high quality cast iron is no easy task. It's critical that you know the manufacturer of the materials you buy and that you can validate their claims concerning quality, reliability and compliance to manufacturing standards.

If you are considering buying imported cast iron, ask yourself a few tough questions first. Will your importer back the quality of your material? Will he stand behind you if a problem should occur? Are you willing to take that chance? Once harm to your reputation is done, earning back that trust can be a challenging prospect.

Counterpoint: Imported Cast Iron Pipe Meets Same Quality Standards As U.S. Pipe

Paula Bowe is vice president of marketing for Josam Company and Affiliates. She has been with Josam for 17 years. She can be reached at Richmond Foundry, Inc., 2501 S. Front Street, Philadelphia, PA 19148, ph. (215) 339-5370, fax (800) 962-3312.

The article by Mr. Christiansen of IGGC Inc. purports to compare the current plight of the United States steel industry to the cast iron soil pipe industry. The comparison is wholly inappropriate and not based upon fact. First and foremost, steel is used in a variety of essential industries, of which the construction industry is but a small segment.

The problem within the steel industry is simply a matter of supply and demand. Most countries recognize for national security and economic reasons that they must maintain a domestic steel industry. However, the world produces excess steel, and the only way for most countries to sustain their domestic industry is through extensive use of subsidies and trade barriers. In the past decade, the U.S. steel industry has invested more than $50 billion in new plants, resulting in the development of new equipment and technology. In short, these new mills have replaced the old mills, and U.S. steel mills are now universally recognized as highly modern and competitive, compared to the antiquated facilities which plagued the industry in the past. The abundance of steel creates its own problems when the global economy becomes distressed and excess producers are tempted to dump steel to dispose of surplus product. This is more likely the main reason, politically motivated or not, why President George Bush enacted tariffs on a number of steel imports.

Dumping normally involves a foreign company that enjoys high prices and profits at home as a result of high trade barriers against imports. The company uses those profits to sell at much lower prices in foreign markets to build market share and suppress the profitability of competitors with open markets.(1) In my experience as an importer of cast iron soil pipe and fittings, I do not find this particular situation to be the case in our industry. The initial governmental reaction to complaints of unfair trade in the steel industry make it increasingly likely that anti-dumping laws and their close cousins, countervailing duties (which act against subsidized imports), will become the primary policy tools for responding to the current tide of imports.(1) It is apparent that the producers of domestic cast iron soil pipe are jumping on this bandwagon and trumpeting the same old tired arguments of "protectionism" vs. "free trade."

The statements made in Mr. Christiansen's article lead the reader to believe that many foreign foundries producing cast iron soil pipe and fittings in China enjoy huge government subsidies. This is simply not true. China has come a long way in the last decade, developing from a non-market economy where cost and price defined by market conditions had little meaning. The Chinese foundries utilized by our company are not state owned, nor do they enjoy huge government subsidies. The foundries that we deal with are cooperatively or privately owned. It has been my experience that making a profit is just as entrepreneurial with our counterparts in China as it is with my associates in the United States. Mr. Christiansen suggests that foreign foundries don't have to pay freight. If foreign foundries don't have to worry about the shipping costs to the United States, then who incurs these costs? Contrary to the assertion in his article, freight costs incurred on imports from foreign foundries are costs that substantially influence the bottom line gross profitability of an imported product. Ocean freight, incoming inland freight, duty, taxes, destination and delivery charges, pier fees, brokerage charges and outgoing freight from the importers are all fees that are added costs to imported products.

By our best educated guess, in 2001 only about 5% of the total net sales of cast iron pipe and fittings in the United States were imported. In a time span of nearly 20 years, foreign foundries have captured only about a 5-10% share of the entire U.S. market of cast iron soil pipe and fittings. We will leave it to the reader decide if "old-fashioned trade protectionism" is really the core issue and reason for Mr. Christiansen's article.

Biased journalism producing articles like Mr. Christiansen's lead to the erosion of political support for open trade, which in turn could threaten the world trade system. It is for this reason that we cannot allow such articles to be ignored without response. The other important and very detrimental effect is the message which articles like this send to our trading partners, not just in the steel industry, but also in all industries. Trade restraint of the sort proposed by Mr. Christiansen has produced retaliation by the international community and threatens future trade agreements, to the ultimate detriment of American consumers. More than 12.8 million Americans are employed in industries (autos & appliances, for example) which use imported steel, compared to 170,000 workers in the U.S. steel industry--a ratio of 57 to 1.(2) Studies have shown that quotas on steel imports and a steel surtax could cost nine jobs in steel-using industries for every single job it protects in the steel industry.(3)

Only after you wade through the first few paragraphs of fluff of the article do you get to the message which Mr. Christiansen is trying to convey by innuendo and speculation--beware of low cost Chinese cast iron available at prices that seem too good to pass up because you should be wary of the incompetence of such importers. Has the integrity of our industry gotten so bad that it is necessary for the domestic producers to warn educated and experienced professionals to be real careful before putting their reputation on the line? Give the industry a little more credit! If I were a buyer, I would be insulted! If a person is entrusted with the responsibility for making purchasing decisions for a company, that person is normally deemed qualified and does not need such warnings about the value of preserving his or her reputation.

Although safety issues are not part of the manufacturing standards for cast iron pipe and fittings, we are very conscientious of such concerns, as are our Chinese producing foundries. Although we do not understand where foundry safety issues are relevant to compliance issues, I do find the fact that this point was made to be quite ironic. On December 29, 2000, a News & Analysis @ safety online Web site headline read: "OSHA fines Texas foundry over $1 million following work-place fatality." The article was referring to one of the three remaining domestic producers of cast iron soil pipe. The article reported that OSHA has cited the foundry, "But our continued visits reveal that safety has not been a primary concern to management. More than 60% of this company's maintenance employees have been injured on the job, including two fatalities and numerous amputations."

It is important to keep in mind that we are talking about 21,000 psi cast iron used in soil pipe. Although Mr. Christiansen would like the reader to believe differently, the process to make this product is neither difficult nor demanding. The manufacturing processes cited in the article are required by the standards. In short, manufacturers which produce this product should, and must, follow these manufacturing practices. I can say with certainty that our producing foundries strictly adhere to these practices and our products do perform as expected. As an importer of cast iron soil pipe and fittings, our company backs its products by taking financial responsibility for the quality of the products we supply to our customers.

Mr. Christiansen's article is but a continuation of the flow of rhetoric from the three remaining domestic producers. Through their trade association, CISPI (Cast Iron Soil Pipe Institute), they have conducted a five-year systematic campaign to attack importers and unjustifiably frighten the U.S. consumer from purchasing foreign-made cast iron soil pipe and fittings. The domestic producers have hamstrung distributors from purchasing imports through their marketing practices and policies. They continue to bring forth unwarranted and unnecessary changes in the existing codes and standards. They repeatedly interfere with buyers and potential buyers by making unsupported disparaging comments to plumbing inspectors, engineers and building owners about the quality of imported product. Despite the many obstacles created by the domestic producers, knowledgeable consumers realize what's really going on and continue to purchase high quality product, made to the applicable standards, which perform as intended and are backed by responsible importers. The marketplace itself has always and will continue to weed out manufacturers, both domestic and foreign, which do not produce quality and compliant product. The companies that will thrive are those that supply quality and are willing to be financially responsible for the pipe and fittings they distribute.

References

1. Mastel, Greg, "The U.S. steel industry and antidumping law," (www.findarticles.com/cf_dls/m1093/3_42/54682629/print.jhtml).

2. SteelTradeFacts.info Web site (www.SteelTradeFacts.info).

3. CITAC Web site (www.citac.info/latest.ifi_article.htm).