Chinese Pencil Anti-Dumping Duties Revisted

Bloomberg.com published an article on June 27th covering the pencil industry titled "New Jersey Pencil Maker Cedes No. 2's to China". While the title refers specifically to General Pencil Company and quotes it's owner and CEO Jim Weissenborn, the article has a broader focus on U.S. Anti-Dumping as it applies to the pencil industry as a whole. Anti-dumping duties and the Chinese pencil industry is a topic I've commented on in past posts over the years: Pencil Anti Dumping Duties: Primer and Pencil Anti Dumping Duties: Changes in the Air.

The article was prompted by the June 13th decision by the U.S. Trade Commission to extend for another 5 years the countervailing anti-dumping duties against Chinese pencils. In addition to Weissenborn it includes includes quotes from other industry representatives in support of the duties as well as several economists who claim that such duties do little to protect U.S. producers as production just gets shifted to other low cost countries. The article provides several statistics regarding the U.S. Pencil industry gleaned from the associated filings demonstrating that despite the duties (which have been in place about 15-20 years now) imports of Chinese pencils to the US have increased five fold since 1996 with statements that US producers accounted for just 14% of US pencil sales in 2008.

I agree generally with the statistical trends and the views of the economists that the long term impacts of anti-dumping duties don't necessarily protect U.S. Producers from the challenges of global competition. ONe can always nit-pic specific figures and percentages. The fact is in the end you still have to compete on your own innovation, manufacturing and/or purchasing efficiency and ultimately find your proper niche in the market. A point Jim Weissenborn speaks to well in the article with respect to General's market focus.

However, one aspect that is not addressed in the authors argument is that a large portion of the Chinese pencils coming into the US are in fact not paying significant anti-dumping duties relative to the China wide rate of 114%. This is because there is a process of reviewing and applying for producer specific anti-dumping duty rate adjustments with the Commerce Department. As a result the largest Chinese exporters to the U.S. are only subject to anti-dumping duty rates in the range of 1-5%, not 114%. This rate adjustment review process is an expensive and complicated legal and accounting process that makes sense for only the largest suppliers. This itself introduces further inefficiencies and opportunities for gaming the system to avoid duties, including shipping pencils from other suppliers via the favored duties of these larger entities a challenging issue to police. Eliminating such special rate reduction applications might make the system simpler in total. However, it still does not address the fact that such a change would likely spur an increased wave of trans-shipment of Chinese pencils to the US via other countries, an illegal practice, though challenging to police and administer.

Regardless of such inefficiencies in the system many Pencil industry insiders believe the duties are warranted given the "hidden subsidies" received by Chinese producers. One example is the VAT rebates received from the Chinese government on finished pencils exported from China. These are not applicable to slats and other components exported, thus favoring finished production in China itself. Another form of subsidy has been domestic wood costs that has been artificially low due to over harvesting over many years. In fact we are now seeing that China is experiencing dramatic increases in wood costs for all sorts of industries as the Government is curtailing harvest levels on it's forests through out the country. This is currently driving a cycle of inflationary price increases in raw material, slats and ultimate Chinese pencil prices. A subject I'll be addressing in a future post sometime in the next month, but the point here is that Chinese wood supply has been at relative lower costs than other substitute woods for our industry many years and would have been higher if forests were managed more effectively on a sustained. Fortunately the Chinese now seem to be working to correct this, though this has not dimmed their appetite for wood.

In the end the anti-dumping duties have assisted the US industry from being totally decimated by Chinese imports, even though many US Producers have had to become involved in Chinese production or imported pencil supply themselves to competitively serve some share of their US sales. Small private family owned producers such as General's and Musgrave mentioned in the Bloomberg article remain in existence today in part through the benefit of such protective duties, but just as importantly through their own dedication and commitment to producing and marketing quality products. offering superior customer service and valuing the traditions and knowledge developed through several generations involvement in the industry and the contributions to the communities in which they live. Strictly economic arguments on the subject of the good and evil of protective duties to society rarely address these social benefits.

Another First Flight, but not a Blackwing.

While we were in the midst of launching the first flight of our new Blackwing 602 these past few weeks, my wife and I have been watching over the first flight of another set of birds in our own backyard.

About 4 weeks back a pair of Robins chose to build their nest on a somewhat precarious perch of our floating pool chlorinator that was sitting in a basket just out side our kitchen window. This was about eye level right on our back deck under protection of our covered porch. On May 27th we discovered the nest with two eggs as shown here.




I took the next photo on June 6th as mom incubated her eggs. We had some really cold and rainy days from end of May through the first weekend in June so I think Mom was happy to have the cover of our back porch, though my wife began worrying about the dinner party we were hosting on June 13th for the CalCedar Board of Directors as we planned to dine on the deck that evening. Even after hatching mom sat on the nest early on during the evenings to keep the chicks warm.

All along we thought we had just two eggs, but in the end we found there were four chicks that hatched. This photo was taken on June 6th which was the first day we noticed the chicks had hatched.




Two days later on June 8th. A bit bigger and more active.





On June 10th, I was able to get several nice shots of feeding activity. It was only at this point we actually realized that both parents were tending the nest and feeding both birds. With return trips to the nest every few minutes from each parent to feed a diet of works and bugs. It also became clear the chicks were not likely to fledge prior to our dinner party on the 13th. We devised a plan to shield the nest from the party by hanging an old curtain in front of the nest. The parents needed to adjust thier landing approach to come in from the side and that took a few tries, but worked. The party came off without a hitch and the parents even kept feeding the chicks with our dinner guests seated just 5-10 feet away on the other side of the drape. After the dinner we removed the drape to improve access and so it would not hinder the chicks when they fledged.

Yesterday morning before work on June 16th I noticed the nest was now empty and chicks all gone. There was quite a mess below the nest on our deck at this point and a trail leading off our deck to the back yard. A few minutes later I noticed one of the parents on our lawn still with a fresh batch of worms and with it was one of the chicks. I was able to snap a few nice shots of parent and chick perched on this rock beside our pool. While taking these last two shots I noticed something in the pool and when I approached I found that one of the chicks had fallen in and drowned.

When I went to grab the pool skim net to remove the dead chick my Labrador retriever, Sky, approached the chick standing on the boulder which became frightened and fell into the pool itself. Fortunately, I was able to scoop up the chick as it struggled in the water and save it. It ran off under a Blue Spruce tree next too the pool. Sky had been pretty good during this whole period and had been buzzed a few times by the parents, but never really showed any interest in the birds or the nest until she saw this chick. I only hope she was not the cause of the earlier drowning when she had been out earlier in the morning. Later I saw the chick running through the lawn with one of the parents. I was leaving town yesterday morning and my son arrived to house/dog sit. I never saw either of the other two chicks and my son reports today he has not seen the parents or chicks again either. I am hopeful all three of the other chicks have made it.

Ode to Blackwing

This post is in celebration of the launch of the new Palomino Blackwing 602 we release for sale at midnight tonight and as a fun way to share my own poetic creativity this month given our contest themes. Thus I've written my own "Ode to Blackwing" shared here below. Not a great literary effort, but I had fun writing it anyway. A more detailed account of this pencil's history can be found here or here. Anyway I hope it will inspire you to check out and participate in our Drawing and Writing Contests this month to win free Palomino Blackwing and Palomino Blackwing 602 pencils.


Ode to Blackwing
Written by Charles "WoodChuck" Berolzheimer

There once was a pencil, it was really the thing.
Went by the name of Eberhard-Faber Blackwing
Produced a graphite line so smooth and clean
No pencil could rival it’s metallic lacquer sheen.

It felt like butter as it slid across the page
had an extendable flat eraser, though that tended to age.
They called it the 602, said it wrote with half the pressure, twice the speed
Some really thought this pencil fit their special need.

Was favored by writers, musicians, artists and more.
From whom creative juices would never cease to pour
Steinbeck, Thomas Wolfe and the poet MacLeish
Their creative energies were really unleashed.

Musical numbers from Overton, Sondheim and Riddle
To them other pencils were just second fiddle.
Animations galore from Chuck Jones and his ilk,
with flowing lines that went down smooth as silk.

The old Faber factory sold to one, then another
That special graphite formula maybe lost forever
When the corporation saw no profit in fixin’ a machine
The Blackwing days were bound to get a little lean

The Boston Athenaeum, it’s scholars and librarian
Bought up the old stock and started a hoardin’
Selling Blackwings by the pencil for 20, 30, 40 bucks a pop!
And a legend began to grow, the 602 was headed over the top

Then along came the Palomino with it’s deep, rich graphite feel
The bloggers all said that for a buck a pencil that’s quite a deal
The mighty orange pony kept a trotting slow and steady
Building up a stable of riders until the time was a ready

And one by one the old Blackwing fans kept asking
Won’t you please bring back that extending eraser thing
Our 602s are getting scarce and even more costly
To be used only when the muses strike us hotly

So Woodchuck toiled and tinkered, thinking how can it be done?
There’s just not enough volume, it’ll cost a ton.
But he finally got the nerve up to take the big risk
Ordered the eraser tooling and prayed business would be brisk

He designed the new pencils to be dark, soft and smooth
With a black lacquer finish he thought would really groove
He worried some small gold flecks were a bit too profuse
So sought feedback from bloggers, and all hell broke loose.

Where’s that gray, metallic finish? What about my pink eraser?
No 602? And why did you drop that slogan, Half the Pressure?
Yes, it’s super smooth and darker than the Eberhard Faber
But boy we sharpen so often, it really takes some labor.

Still they came, they bought and the Palomino Blackwing was born
Better than an iPad? asked the Globe as they tooted the horn
So Pegasus came down on Mt. Helicon from the heavens
Thus creating the spring, where gathered the muses, seven

So writers, artists, musicians and pencil fans
Were pleased to have Blackwings back in their hands
Their pencil creativity unleashed once again
Putting pencil to paper, smooth as gel pen

But, upon Woodchuck his mind still did nag
That he did not yet have success in the bag
So back to the drawing board to work on version two
To refine this pencil for those he wished still to woo.

A new formulation of graphite so firm and smooth
It lasts one-third longer and that is the truth
Back came the slogan Half the Pressure, Twice the Speed
As his customer’s notions he wished to heed

A shiny new finish to match the old Faber
With polished brilliance of a brand new sabre
So sure to cure those long and weary blues
Of those who mourn Eberhard-Faber 602s

I’ve got the Blackwing Blues.
Sick of paying 30 bucks for my 602’s.
Can’t Draw! Can’t Write!
But everything’s gonna be alright
Cause the Palomino’s comin' out tonight!