Manufacturing Companies

Interlocking gears

September 23, 2013

Glenn Hamer

High tariffs put manufacturing in the rough

Arizona has a rich golf history. We have hundreds of outstanding courses throughout the state, ranging from affordable municipal courses to Golf Digest five-star offerings. We’re host to top-flight tournaments like the Accenture Match Play Championship at Dove Mountain and the Waste Management Phoenix Open, the PGA tour’s best attended event. Our state universities’ golf programs have produced superstars like Phil Mickelson and Annika Sorrenstam. It is estimated that the golf industry contributes nearly $3.5 billion to Arizona’s economy annually.

But perhaps one Arizona company has contributed more than any other to golf in this state, an impact felt around the world and throughout the sport. By creating the tools of the golf trade, Karsten Manufacturing Corp., the producer of PING golf equipment, has transformed the game by creating custom-fit, technologically advanced clubs used by golfers ranging from PGA tour champs to weekend duffers. A look at Golf Digest’s Hot List is like browsing through the company’s product catalog.

By all measures, Karsten Manufacturing is an American success story, reaching the pinnacle of its industry and sustaining nearly a thousand U.S. jobs today. For over 50 years the company has weathered the ups and downs that come with growing a business in this country, navigating a tax and regulatory environment that has seen many of Karsten’s competitors head overseas. But keeping the company’s manufacturing operations here in Arizona is becoming increasingly difficult due to import tariffs that, when combined with higher taxes, stiffer regulations and rising health care costs, make it difficult to compete in a global business.

Congress in years past has attempted to relieve U.S. manufacturers of these tariffs by passing numerous Miscellaneous Tariff Bills (MTBs), which remove or significantly reduce tariffs on items that are generally unavailable from U.S. suppliers.

In 2006, President Bush signed an MTB that eliminated import duties on incomplete golf bags that would be assembled in this country. Prior to passage of the MTB, the golf bag tariff was at 7 percent. The MTB signed by President Obama in 2010 took the tariff on incomplete bags with dividers to 1.5 percent. These more favorable tariffs allowed PING to move its golf carry bag production to the U.S. from Mexico. Even while the golf industry as a whole was struggling during the Great Recession, PING trained dozens of workers to begin bag production at the company’s Arizona facility.

But the last MTB expired at the end of 2012. Manufacturers like PING are again forced to pay higher tariffs on materials central to the assembly process, causing costs to spike and putting American jobs at risk. Unbelievably, golf equipment manufacturers like PING are now faced with higher tariff rates on golf club heads than tariff rates to import an entire completed golf club. These tariffs effectively penalize and create a competitive disadvantage for those companies who wish to keep production in the U.S.

Passage of a new MTB isn’t some special deal for PING or the golf industry. Rather, it is leveling the playing field for U.S. companies who wish to retain U.S. jobs and manufacture here rather than abroad. Manufacturers across the entire economy are faced with rising costs on goods not readily available here at home. The MTB process is a bipartisan and transparent one, designed to ensure that one manufacturer doesn’t use the process to gain an unfair advantage on a competitor. The hundreds of tariffs up for review in the MTB cannot exceed a budget impact of over $500,000 each.

It’s time for Congress to pass a new MTB. The U.S. Job Creation and Manufacturing Competitiveness Act of 2013 (H.R. 2708) is sitting in the House Ways and Means Committee awaiting action.

In a dysfunctional Washington, U.S. manufacturers aren’t holding their breath any time soon in expectation of major reforms to our country’s tax code and regulatory system. But Congress can pass straightforward pro-growth legislation without partisan rancor. Enacting a new MTB is something we can do now to help companies like Karsten keep good jobs here in the U.S.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry. The Arizona Chamber of Commerce and Industry is committed to advancing Arizona’s competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans.