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I recently posted about Stanley Black & Decker’s acquisition of Waterloo, a USA-based tool box manufacturer.
In 2017, Waterloo petitioned the US International Trade Commission (ITC) to investigate the pricing of tool storage products imported from China and Vietnam.
Waterloo, Metal Box International, and Stanley Black & Decker were in favor of imposing antidumping and countervailing duty orders, while Geelong, Jenger, Hom-Steel, HMC Holdings, Harbor Freight, and Sears argued in opposition to it.
Skipping to the end, the USITC has determined that tool boxes imported from China and Vietnam were benefiting from unfair subsidies and sales at less than fair value.
Very many manufacturers are on the ITC’s list as having been determined to have convervailable subsidy rates, most listed as 14.39% or 95.96%.
From what I could tell, countervailing duties, or tariffs imposted on affected imported tool storage products, will potentially affect the pricing of tool boxes from Kobalt, Husky, and many other brands.
I am very concerned that pricing will go up on consumer tool boxes.
Here is the news release, which says:
The United States International Trade Commission (USITC) today determined that a U.S. industry is materially injured by reason of imports of tool chests and cabinets from China that the U.S. Department of Commerce (Commerce) has determined are subsidized by the government of China.
Chairman Rhonda K. Schmidtlein, Vice Chairman David S. Johanson, and Commissioners Irving A. Williamson and Meredith M. Broadbent voted in the affirmative.
As a result of the USITC’s affirmative determinations, Commerce will issue a countervailing duty order on imports of this product from China.
The Commission’s public report Tool Chests and Cabinets from China. (Investigation No. 701-TA-575 (Final), USITC Publication 4753, January 2018) will contain the views of the Commission and information developed during the investigation.
The scope of the investigation and determination excludes certain product categories, such as “service carts,” and “industrial” tool boxes that are either over 60″ in width or having each of the following characteristics:
- A body made of steel that is 0.047″ or more in thickness
- Body depth exceeding 21″
- Unit weight that exceeds pre-determined weight to width ratios
The ITC witness testimonies criticized the differentiation between “retail” and “industrial” products, and I would agree that there is no clearly defined boundary, especially not as specified in this manner.
Workbenches, supported by legs and with no drawers, one drawer, or two side by side drawers are also excluded.
What will this USITC determination mean for tool storage product selection, innovation, and pricing?
I have more reading to do, more questions to ask, and more thinking to do. I really wish I could read Waterloo’s filing and Home Depot’s preliminary statements, neither of which I could find online yet. I feel that they could help give greater context to some of what is said in the hearing transcripts and the ITC’s report.
Here’s the latest ITC report. I found some parts to be interesting summaries. Much seem to be summarizing statements made during the hearing. You can find the hearing transcript here.
Petitioner claims that the decline in Sears’ tool chest sales does not explain the difficulties faced by the U.S. producers since they were “actively trying to sell to multiple buyers during the period.” In addition, it asserts that Sears’ sales of tool chests fell more than sales of other products because other retailers had lower priced imported tool chests and cabinets.21 Petitioner calculates that Sears’ purchases ***. In addition, petitioner claims that the reduction in Sears’ sales of tool chests and cabinets was at least in part due to the lower price for similar products offered by retailers that import tool chests and cabinets, consumer purchases are driven by price, and Waterloo has had to cut its prices to Sears on average *** between 2014 and 2016 because of this competition.
It was argued in the hearing that Waterloo tied their business to Sears’, and thus suffered as Sears declined.
Respondents claim that the decline in purchases by Sears is directly related to the decline in Waterloo’s production because Sears purchased the majority of the tool chests and cabinets that Waterloo produced. They assert that Waterloo has a history of “foregoing opportunities to partner with other customers.” In addition, they allege that Waterloo failed to bid on certain lines for Sears, which caused Sears purchase these lines elsewhere. Respondents also stated that innovation is a key factor in sales of tool chests and cabinets, and Waterloo’s failure to innovate drove declining sales. Sears reports that its purchases of imports were not driven by price but by Waterloo’s unwillingness to provide the product specifications that it wanted.
Later, there’s a comment about Waterloo’s response to this:
Petitioner Waterloo testified that the focus on Sears is misplaced and pointed to a list of firms to which it has sold or tried to sell tool chests and cabinets. Waterloo also stated that the firm has the ability to offer the same accessories as the imported products, but cannot match the prices of the imported products.
There was discussion in the hearing that Waterloo didn’t bid on certain product lines, and that they were unable or unwilling to produce stainless steel products, leading otherwise potential purchasers, such as Craftsman and Sears, to look elsewhere.
Here are brands and retailers, listed by the ITC as being US importers of tool boxes. Data about their import percentages were redacted.
- Costco
- CSPS Industries
- Excel
- Exteme Tools
- Global Industrial
- GreatNeck
- Harbor Freight
- HMC Holdings
- Home Depot
- LG Sourcing [Lowes]
- Matco
- Menard
- Milwaukee Tool
- Quality Craft
- Sears
- Seville Classics
- SPG international [Part of Geelong]
- Stanley Black & Decker
- Steelman
- Walmart
- Waterloo
I don’t yet fully understand how the ITC determined that imported products benefited from unfair subsidies that “materially injured” Waterloo or other domestic manufacturers.
From what I do understand, the USITC considered the arguments made but also looked at cost and pricing data to make their determination.
“Commerce will issue a countervailing duty order on imports of this product from China.”
What will this mean for us, end users?
Personally, I own Waterloo-made Craftsman tool boxes, and I like them a lot. I don’t believe they were made here.
In recent years, new tool boxes emerged, from Milwaukee Tool, Husky, and Kobalt, with features and qualities that set them apart and above Waterloo’s offerings.
There were new features and options: Soft-closing drawers, built-in power strips, raised work surfaces, reversible work tops, easier to use casters, vertical drawers, locking personal item drawers with hinged work surfaces, pegboard backs, magnetic backs, lids supported by gas struts… and the list goes on.
Most of these new imported tool boxes and workbenches are at $500+ price points.
I can “get” Waterloo’s petition for the investigation, but at the same time, I don’t.
Waterloo made an SBD Lenox tool box for Lowes this past holiday season, and it was competitively priced. There were some public and private reports of quality concerns, but none of the Lowes near me ever had one on display for me to check out.
They recently ventured to build something new, Sears’ Craftsman Pro Series Smart-Lock tool boxes. Here’s Ben’s review, and here’s his follow-up review. The tool box looked great on paper, but multiple things went wrong in the design’s execution. We never got to the bottom of things, but ultimately Waterloo did show improvements in how they manufactured that particular unit.
I considered that Sears was rushing Waterloo to produce the units in time for the holiday shopping season.
Sears offered somewhat relevant testimony in the hearings:
When I say cited examples, I mean not only in the past, but ongoing, right now as we sit here today, where Waterloo is not able to deliver the product we want on the time that’s required. And these are reasonable time frames, but they’re simply not able to, or not willing to, I can’t — I don’t want to speak for them. But they are not delivering. So that ties our hands in terms of bringing the products that Sears wants to bring to market.
It depends in a sense how you’re using the term “innovation”. Waterloo is capable of putting features into a unit. That’s not the issue. The issue is, can they put together the size we want with the features we want in the time frame that we want? And that is where they fall short in our experience.
IF, and that’s a big if, this was referring to the Craftsman Pro series products, I could understand the difficulty – this was a new and very large size of tool storage product that Waterloo was making for Sears. If they were unable to scale their current production equipment, it might have required the creation of new production lines. Or perhaps they scaled things up but encountered other difficulties.
There was also a new Craftsman 41″ tool storage combo in late 2016, which had features and accessories similar to those found in recent popular tool storage products by Husky and Milwaukee Tool.
When I went to see if my local store had one on display, I didn’t see it, but I did find a few USA-made tool storage products. I was not impressed, but the products looked decent. They were large 41″ and 52″ USA-made chest and rolling cabinet combos, on display in red but also available in black. There were some competitive features, too.
Looking at my smarphone photos of those products, the 41″ combo was $800, and the 52″ was $900. While not amazingly good, the pricing seemed somewhat fair. Competitors’ pricing was lower, though.
Something similar and seemingly a little larger, a CAT 52″ tool storage combo, was on sale for $999 last holiday season, which seemed roughly competitive.
Would Waterloo have won more business from tool brands and retailers if imported tool box pricing was higher? I don’t know, but it looks like the USITC will be leveling the playing field.
Things get even more complex now. Is Waterloo even an OEM anymore, now that SBD has acquired them? Or will SBD aim to get their own Waterloo-made self-branded tool storage products into stores, with Lenox, Craftsman, and maybe even Dewalt labels?
The USITC is responsible for protecting US businesses against unfair disadvantages. I support that. But I’m still concerned about what this determination will mean, regarding products we buy. By “we,” I mean, you, me, and everyone else who might be in the market for new tool storage products.
Will potentially rising prices on imported tool boxes result in more innovation and the creation of more US-based tool storage factories? There are a few USA-based companies, not just Waterloo, who can step up and expand their businesses.
The imported tool boxes that could be affected could range from low-end to high-end, spanning entry level products and higher-level ones with great quality and appealing features.
As mentioned above, I need to read more and ask more questions about this matter.
The hard part is that there’s no clear side to take. Assuming that the USITC’s findings were accurate, nobody will argue that protecting US industry is a bad thing. It is good, and something I am all in favor of. But it looks like the results might be higher prices on more popular styles and brands of tool boxes, and that just sucks.
Part of me is thinking “Yay, Waterloo and US industry!” and the other part “boo, this isn’t good for us.”
If not higher retail pricing on imported tool boxes, how will the many US importers of tool boxes made in China adjust to any counterveiling duties imposed on such products?
We have seen incredibly good values in the tool storage market in recent years. I suppose, if the subsidy determination is true, we now know why. Perhaps counterveiling duties will simply normalize prices to where they should be. But if that’s the case, will brands and retailers seek to compromise on tool box features, storage capacity, or quality, and offer lesser products at the same prices that have been so appealing?
Can you make better sense of the situation than I can?
What’s to come?
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