Two bearing companies - Timken and Torrington - will be receiving huge payouts under the new Continued Dumping and Subsidy Offset Act. Just how large is illustrated by Timken's announcement today. The company revealed it will receive a check for USD $31 million. Timken's one payment represents over 15% of the total $200 million being disbursed to 900 companies.

The Continued Dumping and Subsidy Offset Act (CDSOA), was enacted on October 28, 2000. Added by Senator Robert Byrd as a rider to the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriation Act, it passed without discussion. The legislation had previously failed to gather much support due to questions about its legality under World Trade Organization and NAFTA trade rules. The Act is usually referred to as the "Byrd Amendment" or CDSOA.

The CDSOA amends Title VII of the Tariff Act of 1930, adding a new section 754. The change affects how countervailing and dumping duties are paid.

Antidumping duties are imposed on imported merchandise that the U.S. Department of Commerce finds is sold in the U.S. at less than its fair market value. Countervailing and dumping duties are imposed if the imported goods cause material injury to a domestic industry. Products subject to the duties range from flat rolled steel to garlic and mushrooms to computer chips and bearings.

Previously, all countervailing and dumping duties collected were put into the Treasury's general fund. Under the CDSOA, those duties go into a separate fund that is then paid out each fiscal year to domestic companies who prove via litigation that they were injured by foreign dumping and subsidies.

On August 3, 2001, the U.S. Customs Service published a list in the Federal Register (Vol. 66, No. 150) showing which cases and which companies were involved and entitled to collect fiscal year 2001 duties. Over 900 qualified companies submitted claims by October 2; they were reviewed and checks were cut on December 2, 2001.

On November 30, U.S. Customs announced it would be disbursing almost USD $200 million in duties to the qualifying companies.

In 21 different bearing category cases, only Torrington, The Timken Company, and MPB (Timken Super Precision) were listed as parties eligible to collect. In order to be eligible under the Act, companies had to be involved parties in the particular ITC complaint which resulted in duties. Smaller bearing companies simply could not afford the legal, financial and time involvement necessary to participate - hence, they are excluded from collecting any benefit under the Act.

Timken issued a statement today stating it would be receiving a CDSOA payment of $31 million covering government fiscal year 2001. It was not immediately clear if the total was for Timken complaints alone or also included MPB.

W.R. "Tim" Timken Jr, said, "Decade after decade, we have continued to make significant investments in research and development facilities and training our workforce to keep advancing technology and the quality of our products and services. We have done all of this even as unfairly priced imports kept on flooding U.S. markets. We believe strongly in international trade. The Treasury Department payment is a clear recognition of the vital importance of continued investments by companies such as ours in developing innovative technologies and contributing to a stronger America."

Until very recently, many trade experts believed the CDSOA was going to be repealed. Several World Trade Organization dispute resolution panels and even a NAFTA dispute resolution panel are ongoing. The WTO dispute panels have the dubious distinction of involving the most complainants ever. The U.S. has already lost several preliminary disputes in the WTO over the CDSOA being an unfair domestic subsidy, also illegal under NAFTA. The U.S. Congress was expected to bow to WTO pressure and repeal the CDSOA by October.

However, after the September 11 terrorist attacks, the WTO and NAFTA put the CDSOA dispute on the back burner, and the U.S. Congress found itself with more pressing issues and a domestic manufacturing economy in dire need of help. Experts now believe a vote over repealing CDSOA might not come until late in 2002, just before the next payouts are due to be made.

The $31 million payout represents an immense change in Timken's financial picture. For third quarter 2001, Timken had reported a loss after charges of $20 million on sales of $390.6 million.

Torrington will also be receiving a large payment, but it has not yet been revealed.