The Tribune

• Manufacturer urges ‘care’ on tariff cut plan

• Door duty removal caused 80% sales crash

• Staff to double on Jamaica export by year-end

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian manufacturer, poised to double its workforce following a $1m expansion, yesterday urged the Government not to “pull the rug out from under us” with hasty tariff cuts that remove what little protection exists for local industries.

Andrew Rogers, Bahamas Aluminum Manufacturing’s president, told Tribune Business the Davis administration needs to “be careful” and remember the needs of local manufacturers after it asked the private sector to submit proposals for potential tariff cuts that could be included in the 2022-2023 Budget in a bid to curb the impact of soaring inflation on Bahamian consumers.

He argued that ill-advised slashes in the past had removed his ability, and that of other Bahamian manufacturers, to compete with foreign rivals who enjoy lower production costs and greater economies of scale, while undermining plans to invest in new product lines and expand workforces.

Acknowledging that some shudder at the thought of “protectionist tariffs”, Mr Rogers asserted that members of the Bahamas Light Industries Development Council collectively employ up to 20,000 Bahamians, with himself and other window/door manufacturers responsible for 200 staff collectively. With unemployment still relatively high following COVID-19’s devastation, he added that The Bahamas could ill-afford any job losses stemming from flawed tariff cuts.

Disclosing that Bahamas Aluminum Manufacturing has been operating for close to 25 years, he told this newspaper: “We manufacture three types of impact and non-impact windows, French doors and hurricane shutters. There used to be 45 percent import duty for all of these products. Today there is no duty on doors, 5 percent on a number of types of windows and 25 percent on shutters.

“With no duty on doors, we saw our sales plummet by 80 percent of what we used to have when it was at 45 percent. It seems like every year they keep chipping away with these duties, and every time they do, it affects our sales with that product drastically. One of our main window product lines is an awning window where there is a 25 percent duty still in place. If you remove that I can assure you we will go out of business.

“The ironic thing is that we just invested $1m, building an ultra-modern manufacturing facility and are about to add 10-12 staff to our payroll. With this awning window, we have been in communications with possible distributors in Jamaica and are looking forward to export our first container of these windows before the end of this year - a first for our country.”

Mr Rogers spoke out after Tribune Business revealed earlier this week that Senator Michael Halkitis, minister of economic affairs, in a meeting last week with the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) and its ease of doing business committee requested that the private sector supply a list of potential tariff cuts for the Government’s consideration as a way to ease inflationary pressures.

While not objecting to this, he argued that the Davis administration will have to be selective in its approach and ensure it does not undermine manufacturers by removing the last import protection they have left. Widespread, and deep, tariff cuts are highly unlikely, though, given the Government’s fiscal pressures and desperate need for revenue.

“We do need some help, some protection,” the Bahamas Aluminum Manufacturing chief said, asserting that without this it was impossible to compete with US, Canadian and other rivals who enjoy greater economies of scale as a result of much larger domestic consumer markets, as well as lower energy costs and other factors of production.

“They can mass produce. Their equipment, even though we have good equipment, their’s is more superior, more modern. There’s stuff we could do, but we don’t have the demand,” Mr Rogers added. “But we’re doing well. We’re actually about to expand the staff. We wanted to get in and sort it out first.

“We’re introducing a new line of horizontal sliding windows, which is a big demand product. It’s low-cost. It’s the cheapest window in the market. We’re looking into that, and getting the tools in right now.” Bahamas Aluminum Manufacturing completed the $1m investment in its new facility some eight months ago and, having moved in, is now poised to double staff numbers to 24 by launching its planned expansion.

“We needed the room to expand,” Mr Rogers explained. “I have confidence in the workforce of this country, I have the confidence that we can manufacture these products. The expansion is all ready. We’re ready to hire the people now. We just need any help we can get from the Government. There are any number of ways to help, but most important is to give us a little protection. That’s all we want. Every year they nip a bit off here, a bit off there.

“I’m probably going to be going down to Jamaica in the next two to three months to look at this personally and try to set up distribution. I have had three distributors show interest in our product. They like our product, and like the price of our product. 

“Shipping to Jamaica will not necessarily become an issue, but we have to ship through the US. You have a leg from Nassau to Miami, and to compete with people from Florida I have one expense they don’t have. This makes our expenses a bit higher because of the freight costs. It’s looking good, though, and by the end of the year we should be looking at our first shipment.”

Describing the company as “a true manufacturer”, which imports all its raw materials and crafts them into a finished product in The Bahamas, Mr Rogers said: “What’s important to get across to the Government is they have the information right at their finger tips. They only have to request it from the two ministries, and have to look at those [tariff] lists very carefully before they make a decision.”

Recalling how the elimination of duty on doors some four to five years ago “took it right out from under us, as there’s no way to compete”, Mr Rogers recalled: “It’s really tough. I was going to go into the sliding door business, but there’s no protection. With no duty, it does not encourage me to go into any other type of door

“We were considering sliding doors, but we only make French ones. With no duty on doors, it gives me no margin to make any money out of it. You’ve got to make a profit.” Two laws are in place to assist and protect Bahamian manufacturers. One is the Tariff Act overseen by the Ministry of Finance, while the Light Industries Encouragement Act is monitored by the Ministry of Economic Affairs.

“The Government is always promoting that Bahamians should invest in their own country then, without any thought or consideration, they just eliminate all the duties on the products that you sell,” Mr Rogers said. “There are a total of five window and door manufacturers in our country. Between all of these companies we employ over 200 staff.

“Both of these divisions of Government do an excellent job working with local industries, supporting and implementing the necessary list of raw materials for that company to import duty-free. This gives the local manufacture a margin to manufacture and sell their products competitively. When you remove any duty and, in some cases, all the duty, it makes it impossible to compete with power houses such as the US, Canada, China, Europe etc.

“Then you throw in product dumping, which all of these countries are famous for, especially China, and it makes it difficult to compete, even if the duty was 100 percent. When they dump products, the objective is to reduce the selling price to put the local competitors out of business. To do this they start by reducing the quality of the product substantially, reducing the cost,” he added.

“The local consumer in most cases is not aware of the poor quality and is driven by the low prices, subsequently buying an inferior product. Once they succeed and there is no more local completion, the sky is then the limit for them to put their prices back up, above and beyond where they were when there were local manufacturers supplying these products, and who gets ripped off? The local consumer, our fellow Bahamians.”

Mr Rogers told Tribune Business he was not suggesting that the Government increase tariffs, “not with the cost of living and there being no end in sight to what’s going on”, but merely that it has “to be really careful not to remove or reduce certain tariffs for certain products manufactured in our country”.

“I propose to the Government that before any such products are considered to have any duty rates reduced, that they request a list of all the locally-manufactured products that are registered and protected under both the Tariff Act and the Light Industries Encouragement Act,” he added. “This list of products should then be taken into serious consideration with no further duty reductions.

“In fact, I think the Government needs to review a number of products that have had the duty reduced and, in some cases, removed, doors being a good example, and there are many others in other fields and seriously consider re-implementing some of these protective duties with the objective of advancing local manufacturing, which will only help to reduce some of the unemployment in our country.”

Praising the likes of Arawak Homes and other local businesses for supporting Bahamas Aluminum Manufacturing’s products, Mr Rogers said that it was shipping awning windows to distributors on major Family Islands every week.