Timken and Torrington (a division of Ingersoll-Rand, Bermuda) are the only primary bearing manufacturers set to benefit from the CDSOA; although others may be eligible, their low potential payouts are often not worth the filing effort.

Not long ago, eBearing attempted to assemble various Customs documents and estimate the 2002 payouts to Timken and Torrington, but our estimates obviously undershot the mark:

The Continued Dumping and Subsidy Offset Act (CDSOA), was passed 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, from Ohio's Senator Mike DeWine, had previously failed to gather support due to questions about its legality under World Trade Organization and NAFTA trade rules. Now the Act is usually referred to as the "Byrd Amendment" or CDSOA.

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 mushrooms to sparklers to bearings.

Essentially, the CDSOA modifies the Tariff Act of 1930 and instructs Customs to put all antidumping tariffs collected into a special account. Previously, that money had gone directly into the general Treasury. Then, each year, the money collected is to be handed out directly to the U.S. companies who successfully participated in antidumping complaints.

In 2001, approximately 900 payments, totaling $230 million, were made under the CDSOA. This year, over 1,200 payments will be made, amounting to over $329 million -- up 43%. U.S. Customs blames the delay this year on that jump in claimants and payments; normally, checks are to be written around the beginning of November.

Timken's $54 million payout this year represents a dramatic 75% increase from 2001's check for $31 million, the first year for CDSOA payouts. Last year, Timken's check accounted for 13.5% of all CDSOA money paid out; this year's share rose to 16.4%.

To put the $54 million in another perspective, Timken reported net income from continuing operations of only $15 million through the first three quarters of 2002.

Even more startling might be the payout to Torrington, which last year was $50 million. If the same Timken:Torrington ratio applies this year, Torrington could receive more than $87 million.

Timken did not indicate whether Torrington's estimated CDSOA payouts were taken into consideration when it made its acquisition plans. In any case, the potentially huge cash infusions from any future CDSOA payouts will help Timken defray the actual cost of its $840 million pricetag for Torrington.

Torrington's parent company, Ingersoll-Rand, faced a short-lived but fierce firestorm of criticism last year when it reincorporated in Bermuda to avoid U.S. taxes only a few weeks after receiving that $50 million check. Legislators went so far as to try to punish Torrington by making it and other recent Bermuda reincorporations ineligible for government contracts. Although the legislation stalled, one I-R analyst told eBearing it was probably a factor influencing Ingersoll-Rand to step up efforts to divest Torrington.

Lately, the CDSOA has come under increasing fire from U.S. trading partners and the World Trade Organization. In fact, the WTO has repeatedly ruled the U.S. must eliminate the CDSOA as an illegal subsidy for domestic manufacturers. Its most recent finding to that effect was in September, but the U.S. continues to fight back the rulings.

A Washington law firm involved in the bearing industry, and which eBearing speaks to regularly, noted the changed attitude in Washington since the WTO rulings. "The CDSOA is pure politics; no one in Washington even supported the CDSOA until the WTO ruled against it," one trade law attorney told eBearing. "Now everyone wants to be called a CDSOA supporter."

Timken's President and CEO, James Griffith, said, "We applaud Congress and the administration for their continued support of CDSOA. Maintaining a strong industrial base is critical for our country's economic health and particularly important for our national security. CDSOA is one of our nation's laws which helps to maintain a strong industrial base."

Mr. Griffith went on to say, "As a company we annually invest more than $50 million in research and development. In addition we invest in our facilities and the training of our workforce to maintain our high standards."

Theoretically, CDSOA payouts are to be used by the beneficiaries for exactly the purposes Mr. Griffith outlines. But in actuality, the Act contains no provision for tracking how those funds are spent.