Red Lion tire company pursues international trade case

The shiny, rust-free glimmer slaps Troy Kline dead in the face as he paces the gritty floors of his 120,000-square-foot tire factory in Red Lion.

The CEO at Maine Industrial Tire shakes his head, watching the $100,000 tire mill sit idle - but not for the reason you might think.

It's not the decline in U.S. manufacturing, an epidemic that recently claimed nearby Yorktowne Cabinetry's decades-old site across Redco Avenue.

It's not lagging demand for the company's inventory, either.

In fact, Maine Industrial Tire's 50 employees can't keep up with contracts from big names like John Deere, Bobcat, and Caterpillar, clamoring for the company's solid rubber products used on forklifts and construction equipment.

For most manufacturers, it's the stuff of dreams.

For Kline and the company's Chairman Bryan Ganz, it's just a long story - one colored by a 5-year-old court battle with the U.S. government over an international trade regulation designed to stop foreign firms from undercutting American manufacturers.

They say it's left them waiting on $1.5 million - money granted by a 2010 court decision.

That's money to hire about 40 more employees in Red Lion - money to invest in company infrastructure.

"The issue is," Kline said, "how many more customers are we going to lose because we can't keep up with demand?"

The saga begins in 2007.

At the time, Maine Industrial's forerunner GPX International Tires employed 2,600 people at manufacturing operations in Red Lion, Maine, Canada, Europe and - as fate would have it - China.

That year, Titan Tire Corp., the United Steel Workers International and Bridgestone Americas Inc. filed suit against GPX, accusing the Massachusetts-based company of "dumping" and "countervailing" from their Chinese factory.

Dumping occurs when a company exports goods to a country for less than fair market value, typically to gain an initial foothold in a marketplace.

In the United States, companies engaging in these practices pay customs duties designed to level the playing field between domestic and foreign producers.

Ganz said the suit, filed with the international trade commission, wasn't taken seriously initially.

"My head would snap off if I tried to sell something below cost," he said. "We did not need to take additional market share. We weren't a start-up company."

In late 2007, the U.S. Department of Commerce began charging GPX customs duties for dumping and countervailing. These fees amounted to 44 percent of the cost of each off-the-road tire.

For example, if a tire cost $100, GPX paid the U.S. government $44 before the item could touch U.S. soil.

Duties aside, that same tire would only garner about $25 in profits for the company, Ganz said.

GPX sued the Department of Commerce in 2008, accusing the imposition of both duties as "double-counting," he added. "At the time, there was tremendous anti-China sentiment - a tremendous push in Congress to restrict trade with China."

Daniel Porter, attorney at Curtis, Mallet-Prevost, Colt & Mosle in Washington, D.C., represented GPX in the case.

"As you have increased globalization, you're going to see this more and more," he said. "What's a bit unusual is that this manufacturer had its own Chinese production facility. In many cases, a Chinese exporter will send to a U.S. manufacturer and have no affiliation."

GPX asked a judge to suspend the duties until the case could be heard in court. The request was denied, and GPX filed for bankruptcy in October 2009, citing the continued hefty customs costs for its demise.

The blow was devastating for Ganz, whose grandfather started GPX in 1922. He teamed up with Kline and other investors to buy a small piece of the company out of bankruptcy - along with the rights to pursue a lawsuit against the Department of Commerce.