The Great Wail Of “China”

Importing of products and components from overseas locations is on the rise in the material handling industry.

Toxic toys. Tainted toothpaste. Poisonous pet food. Welcome to the latest realities of the 21st-century global economy.

The proliferation of imported roducts has become as much a fact of life in the material handling industry as it has in virtually any other. According to the U.S. Commerce Department, in 2006 the United States imported $2.2 trillion worth of products from more than 150 countries while exporting $1.4 trillion worth. Census Bureau data indicate that in 2006, the United States imported more than $8.8 billion in material handling equipment, up from $4.6 billion in 2001.

The five biggest exporters of material handling equipment to the United States today are China, Canada, Germany, Mexico and Japan. The value of all of those nations’ material handling equipment exports to the U.S. have increased in recent years, but none so dramatically as China, from which the United States now imports more than four times more equipment today than it did in 2001—from $616 million in 2001 to $2.5 billion today. And that doesn’t even take into account products that are assembled in the United States but for which components are sourced overseas. Given recent high-profile recalls of Chinese-manufactured toys, pet food and other products, is there cause for alarm?

The MHEDA Journal surveyed distributors to find out if they or their customers felt any concerns about the safety of products in this industry that are sourced from overseas. For the most part, the answer is no. Distributors understand the economic realities that drive American manufacturers to source components from overseas or, in some cases, to move manufacturing offshore entirely, and an established, positive relationship with a manufacturer generally will not be compromised by the location of that supplier’s manufacturing facilities. Distributors also don’t hesitate to do business with a foreign manufacturer that they trust to provide a safe, quality product.

In fact, Bastian Material Handling (Indianapolis, IN) maintains an office in Bangalore, India. Most of its products are sourced in the United States, but President Bill Bastian is beginning to experiment with Chinese sourcing. “The key is performing quality assurance. We went to China when we purchased some items and watched the manufacturing process. They did some test runs of the product in China before it was shipped,” he says. “Then you make sure that it works when you install it at the job site. Standard quality assurance steps take care of that.”

Most distributors haven’t taken the step of setting up shop overseas, though. The key is the level of confidence a distributor has in his or her suppliers’ commitment to quality and safety. When that is present, the product’s country of origin becomes less relevant, although many distributors and end-users, if given the option, still prefer to buy American. But when quality is compromised, all bets are off.

End-Users Learn to Accept
“We do have customers who want to know where the product we provide is coming from, because some want to specifically support the American economy,” says Alicia Nyborg, president of SuperTech (Fayetteville, GA). However, as more and more well-regarded American companies begin manufacturing overseas, for the most part customers are adjusting. “As long as we feel like it’s a reputable company, we’ll stand behind the product. That gives a level of comfort to the customer.”

Even so, brand loyalty only counts for so much with some end-users. “Some customers are more willing to buy a unit at the cheaper price and replace it twice rather than buying the more expensive one on the front end,” says Colleen Wright, vice president of finance and administration at Quality Forklift Sales & Service (Shakopee, MN). “There has to be a balance between cost and quality, but people seem to have reduced their expectations of excellence.”

However, John Williams, president of ConveyorMan (Memphis, TN) cautions against lumping all foreign-made goods, even the cheap ones, into a low-quality category. “You just have to take each product on an individual basis. You can’t assume that everything coming out of China, for example, is all good or all bad. Consider who you’re working with each time and deal with it that way.”

A Question of Quality
Dunn/Powers Caster Corp. (Phoenix, AZ) President Dan Powers is firm on his decision to purchase only from domestic manufacturers. “We continue to be true to our domestic manufacturers, even though we do know that some of them are having products made overseas,” he says. “The products that we know are imports aren’t offered at the same price as our domestic products. The customer is getting what he pays for, because the quality is not the same.”

Dan Seago, vice president, North American Material Handling (Dallas, TX), concurs. “Less than 0.5% of all the things we sell are produced in China because the engineering standards aren’t in place to guarantee us a quality product. Chinese manufacturers source from so many different places that there is no control; you don’t have that traceability and accountability in products that are produced in China.”

“In our business, people aren’t consuming the product, so lead paint is not as big of an issue,” says Jack Anton, president of Taylor Material Handling (Toledo, OH). “But the same quality issues are prevalent, whether it’s lead paint or welds or material strengths that are being shorted from overseas products. The stuff is cheaper for a reason, and part of it is material costs. We just have to make sure that our customers are aware of what they’re buying.”

On the other hand, FMH Material Handling Solutions (Denver, CO) President John Faulkner thinks some of the recall issues have been blown out of proportion. “I don’t think the public realizes how much product comes from overseas. Recalled products are a minuscule percentage of all the products that come in from overseas. Many excellent products come from China. They do have good quality standards and they often make good quality products.”

Peter Lauder, president of Mc-Combs-Wall (Garden Grove, CA), only sees commodity-type items coming in from overseas. “They’re not really powered units or any sort of high technology. We’ve had several customers that have bought from overseas and we have not had any problems.”

Trust and Loyalty
Independent Lift Truck of Alaska (Anchorage, AK) does sell some product manufactured overseas. President Wayne Dick usually travels to Europe and China once per quarter. “We meet with the manufacturers who we’re dealing with and make quality assurances with them. We ‘Americanize’ the machines so that everybody has the same standards as America, and they’re pretty receptive to that.”

That doesn’t always prevent problems, of course. For Wayne Smith, general manager at Forklift Enterprises (Hobbs, NM), the reason to avoid selling too many products that are manufactured overseas is a practical one. “Our biggest issue with foreign-made products has been logistics and mis-shipment of components, like a forklift that comes without its mast,” he says. “Sometimes customs is tying up shipments coming into the U.S. and delaying customer orders for weeks on end.”

We explored globalization in material handling in 2005. Read what we said then.

Wayne Dick from Independent Lift Truck of Alaska says that communication makes the problems much easier to solve. “If we get in a bad load, they make the changes we request and the next load will incorporate those changes. Just like in the United States, it’s a matter of dealing with the right manufacturers.”

The issue is summed up by Richard Vandemark, president, VanLyn (Memphis, TN). “Years ago, everything that came from overseas was classified as a low-quality product,” Vandemark says. “But that has changed. You have to evaluate your supplier the same way you would a U.S. supplier. If you don’t do that, then you’re sticking your neck out.”

The Dumping Problem For suppliers, the China question brings its own sort of challenges and responsibilities. Timothy Selhorst, president of American Spring Wire, parent company of MHEDA Member J&L Wire Cloth, has been impacted by Chinese imports for many years, though he says, “In recent years, we’ve been forced to protect our company against illegally dumped imports and have immediate concerns when we assess the circumstances with Chinese trade.” Selhorst is referring to the “dumping” that he sees occurring regularly. Dumping refers to the act of charging a lower price for a good in a foreign market than the cost to sell that product in one’s home country. The World Trade Organization condemns (but does not prohibit) dumping if it causes or threatens to cause material injury to a domestic industry in the importing country. Selhorst attributes the sudden rise in dumping to the ease with which people can access informed sources. “People have looked to save money by taking advantage of countries that manipulate their currencies or subsidize their industry, and those people have been buying material overseas at far lower prices than are offered in the United States.” One blunt method to solve such problems is to file an antidumping or countervailing duty suit with the International Trade Commission using trade attorneys in Washington. “It’s a long, expensive process,” Selhorst says, “and to win you must prove your industry as a whole is losing money as a result of a surge in dumped imports. The last thing an industry that is losing money wants is to pay an attorney for a year to win the case.” Other remedies include legislative involvement and working with trade representatives. “These things don’t change quickly, and they won’t change at all if people don’t take issue with it,” Selhorst says. “I’ve been going to Washington many times over the last 10 years, and for the first time, the right people are starting to get it.”