Fiscal Year 2012 Annual Report to Congress on the Trade Adjustment Assistance for Firms Program

AGENCY:

Economic Development Administration, Department of Commerce.

ACTION:

Notice .

Pursuant to 255A of chapter 3 of title II of the Trade Act of 1974, as amended (19 U.S.C. 2341 et seq.), the Economic Development Administration (EDA) publishes the Fiscal Year 2012 Annual Report to Congress on the Trade Adjustment Assistance for Firms program.

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Key Findings

In September 2012, the U.S. Government Accountability Office (GAO) reported to Congress that the effect of participation by import-impacted U.S. firms in the Trade Adjustment Assistance for Firms (TAAF) program was an increase in firm sales ranging from 5 to 6 percent on average,” and that “the effect of the program on productivity was about a 4 percent increase.” GAO also noted in the report that manufacturing firms, specifically, associate the TAAF program with increased sales and productivity.

Meanwhile, this report—EDA's Annual Report to Congress on the TAAF program—finds that, two years after completing the program in FY 2010, participating firms experienced an average employment increase of 13.2 percent, an average sales increase of 26.8 percent, and an average productivity increase of 11.9 percent. For the sake of comparing TAAF-assisted firms to non-assisted similar firms, the Department of Labor's Bureau of Labor Statistics (BLS) reported that, in FY 2012, the manufacturing industry as a whole experienced an average employment increase of only 3.5 percent and an average productivity increase of 4.1 percent from FY 2010. .

Therefore, both GAO and EDA find that the TAAF program has a significant positive impact in helping import-impacted U.S. firms compete in the global marketplace. Additionally, all firms that completed the TAAF program in FY 2010 were in operation at the end of FY 2012, indicating strong survival rates for TAAF-assisted firms.

Furthermore, on May 11, 2012, the Department of Commerce Office of Inspector General (OIG) presented EDA with a copy of their letter to the House and Senate Committees on Appropriations reporting their findings related to an examination of the TAAC administrative costs. As part of their review, OIG obtained expenditure data from a sample of three TAACs—Western, New England, and New York State—focusing on the use of Federal funds provided by EDA. The OIG reported that it “did not determine that the level of administrative costs of the three TAACs to be unreasonable.” Therefore, not only does the TAAF program produce results—it does so at reasonable costs.

Background

This annual report is submitted in accordance with Section 255A of chapter 3 of title II of the Trade Act of 1974, as amended (19 U.S.C. 2341 et seq.) (commonly referred to as the Trade Act). Section 255A of the Trade Act directs the Secretary of Commerce to submit an annual report on the Trade Adjustment Assistance for Firms (TAAF) program to Congress no later than December 15, 2012 and each year thereafter. The TAAF program is authorized by chapters 3 and 5 of title II of the Trade Act.

Administered by the U.S. Department of Commerce's Economic Development Administration (EDA), the goal of the TAAF program is to help economically distressed U.S. businesses develop strategies to compete in the global economy. Through a partnership with a national network of 11 EDA-funded Trade Adjustment Assistance Centers (TAACs), the program provides cost-sharing technical assistance to help eligible businesses create and implement targeted business recovery plans (referred to as “Adjustment Proposals” or “APs”) aimed at boosting global competitiveness, increasing sales and retaining and creating jobs. The TAACs, which are either independent or university-affiliated entities, provide support to import-impacted firms in a public-private collaborative framework. The TAAF program provides a portion of the assistance while participating firms contribute a matching share to create and implement their recovery plans.

EDA's partnership with the TAAC network across the country allows firms to receive customized assistance from highly qualified experts who are knowledgeable about the needs, challenges and opportunities facing the industries in their region. The most common types of assistance provided in FY 2012 were marketing/sales improvement and production/engineering projects, which comprised over half of all projects supported throughout the year.

In January 2011, as authorization of the Trade Adjustment Assistance (TAA) programs at the U.S. Department of Labor (DOL), U.S. Department of Agriculture (USDA) and EDA was about to expire, Congress passed the Omnibus Trade Act of 2010 (Pub. L. 111-344). This Act extended the TAAF program through February 12, 2012, but allowed some provisions—such as eligibility for service firms and expanded time periods for qualifying firm eligibility—provided under the Trade and Globalization Adjustment Assistance Act of 2009 (TGAAA) to expire on February 13, 2011. The TAAF program remained authorized in FY 2011 and continued to operate at FY 2010 spending levels of $15.8 million under a full-year continuing resolution, which prevented interruption of program operations.

On October 21, 2011, the President signed into law the Trade Adjustment Assistance Extension Act of 2011 (Pub. L. 112-40). This Act retroactively extended the provisions of the TAA programs that were enacted as part of the TGAAA.

The expiration of the TGAAA provisions did, however, limit the number of firms entering the program as TAACs were unable to assist service firms or use extended “look-back periods” to certify firms. In addition, uncertainty regarding the TAAF program's future caused TAACs to focus on existing clients instead of recruiting new firms.

As part of its overall commitment to performance evaluation and continuous improvement, EDA assesses the performance of the TAAF program both in terms of “inputs” (e.g., types of firms assisted, petition, and AP submissions) and “outputs” (changes in sales, employment levels, and productivity of client firms).

In terms of inputs, the TAAF program effectively targeted small and medium-sized firms in FY 2012. TAACs provided technical assistance to 341 firms in preparing petitions, 206 firms in preparing APs, and 935 firms in implementing projects within their APs. Meanwhile, EDA certified 79 petitions and approved 102 APs.

EDA successfully met both the 40-day processing deadline (to make a final determination for petitions accepted for filing) and the 60-day processing deadline for approval of APs, as required in the TGAAA. In FY 2012, the average processing time for petitions was 29 business days, and the average processing time for APs was 21 business days.

In order to assess the effectiveness of the TAAF program in terms of outputs, EDA assesses the extent to which client firms increased their sales, employment levels, and productivity following the implementation of TAAF-supported projects (program completion). To measure these outputs, EDA compares average sales, average employment and average productivity of all firms completing the program in a particular year (the most recent “base year”) to these same measures for the same firms one and two years following program completion. The base year used for this report is FY 2010, as this allows EDA to compare these measures looking back both one and two years from the date of this report.

Firms that completed the TAAF program in FY 2010 report that, at completion, average sales were $10.1 million, average employment was 53 and average sales per employee (productivity) was $191,328. One year after completing the program (FY 2011), these same firms reported that average sales increased by 11.4 percent, average employment increased by 13.2 percent, and average productivity decreased by 1.6 percent. For the sake of comparison to the universe of U.S. manufacturers, the U.S. Bureau of Labor Statistics (BLS) reports that, in FY 2011, the national manufacturing industry in aggregate experienced an average employment increase of only 1.9 percent.

Two years after completing the program (FY 2012), these same firms reported that average sales increased by 26.8 percent, average employment increased by 13.2 percent, and average productivity increased by 11.9 percent. Meanwhile, BLS reported that the manufacturing industry in FY 2012 experienced an average employment increase of 3.5 percent and average productivity increase of 4.1 percent from FY 2010. Therefore, firms assisted by the TAAF program performed more successfully than the manufacturing industry as a whole. Additionally, all firms that completed the TAAF program in FY 2010 were in operation as of the end of FY 2012, indicating strong survival rates for TAAF-assisted firms. It should be noted that TAAF clients are operating in the same economic environment as other firms, but are also attempting to adjust to import pressures that may not impact other firms as severely, making the success of TAAF-assisted firms even more notable.

Table of Contents

Introduction

Program Description

Results/Findings

Data for This Report

(1) The number of firms that inquired about the program.

(2) The number of petitions filed under section 251.

(3) The number of petitions certified and denied by the Secretary.

(4) The average time for processing petitions after the petitions are filed.

(5) The number of petitions filed and firms certified for each Congressional District in the United States.

(6) Of the number of petitions filed, the number of firms that entered the program and received benefits.

(7) The number of firms that received assistance in preparing their petitions.

(8) The number of firms that received assistance developing business recovery plans.

(9) The number of business recovery plans approved and denied by the Secretary.

(10) Average duration of benefits received under the program nationally and in each region served by an intermediary organization (the TAAC) referred to in section 253(b)(1) of the Trade Act.

(11) Sales, employment, and productivity at each firm participating in the TAAF program at the time of certification.

(12) Sales, employment, and productivity at each firm upon completion of the program and each year for the two-year period following completion.

(13) The number of firms in operation as of the date of this report and the number of firms that ceased operations after completing the program in each year during the two-year period following completion of the program.

(14) The financial assistance received by each firm participating in the program.

(15) The financial contribution made by each firm participating in the program.

(16) The types of technical assistance included in the business recovery plans of firms participating in the program.

(17) The number of firms leaving the program before completing the project or projects in their business recovery plans and the reason the project or projects were not completed.

(18) The total amount expended by all intermediary organizations referred to in Section 253(b)(1)and by each organization to administer the program.

(19) The total amount expended by intermediary organizations to provide technical assistance to firms under the program nationally and in each region served by such an organization.

Conclusion

Supplement—TAAF Program Benefits to Manufacturing Firms

Introduction

This report is provided in compliance with Section 255A of chapter 3 of title II of the Trade Act. Section 255A of the Trade Act directs the Secretary of Commerce to provide an annual report on the Trade Adjustment Assistance for Firms (TAAF) program by the 15th of December. Section 255 of the Trade Act states:

IN GENERAL.—Not later than December 15, 2012, and annually thereafter, the Secretary shall prepare a report containing data regarding the trade adjustment assistance for firms program under this chapter for the preceding fiscal year. The data shall include the following:

This report will provide findings and results classified by intermediary organization, state, and national totals, to the extent that the data are available on the following 19 measures:

1. The number of firms that inquired about the program.

2. The number of petitions filed under section 251.

3. The number of petitions certified and denied by the Secretary.

4. The average time for processing petitions after the petitions are filed.

5. The number of petitions filed and firms certified for each Congressional district of the United States.

6. Of the number of petitions filed, the number of firms that entered the program and received benefits.

7. The number of firms that received assistance in preparing their petitions.

8. The number of firms that received assistance developing business recovery plans.

9. The number of business recovery plans approved and denied by the Secretary.

10. The average duration of benefits received under the program nationally and in each region served by an intermediary organization referred to in section 253(b)(1) of the Trade Act.

11. Sales, employment, and productivity at each firm participating in the TAAF program at the time of certification.

12. Sales, employment, and productivity at each firm upon completion of the program and each year for the two-year period following completion.

13. The number of firms in operation as the date of the report and the number of firms that ceased operations after completing the program and in each year during the two-year period following completion of the program.

14. The financial assistance received by each firm participating in the program.

15. The financial contribution made by each firm participating in the program.

16. The types of technical assistance included in the business recovery plans of firms participating in the program.

17. The number of firms leaving the program before completing the project or projects in their business recovery plans and the reason the project was not completed.

18. The total amount expended by all intermediary organizations referred to in Section 253(b)(1) and by each organization to administer the program.

19. The total amount expended by intermediary organizations to provide technical assistance to firms under the program nationally and in each region served by such an organization.

Program Description

The TAAF program is authorized by chapters 3 and 5 of title II of the Trade Act. The responsibility for administering the TAAF program is delegated to EDA by the Secretary of Commerce. The TAAF program provides technical assistance to manufacturers and service firms affected by import competition in order to help them develop and implement projects to regain global competitiveness, increase profitability and create jobs.

The mission of the TAAF program is to help U.S. firms regain competitiveness in the global economy. Import-impacted U.S. manufacturing, production and service firms can receive matching funds for projects that expand markets, strengthen operations and increase competitiveness through the TAAF program. The program provides assistance to support the development of business recovery plans (commonly referred to as “Adjustment Proposals or “APs”), under Section 252 of the Trade Act, and matching funds to implement projects outlined in the APs.

The TAAF program supports a national network of 11 independent non-profit or university-affiliated TAACs to help U.S. manufacturing, production, and service firms in all 50 States, the District of Columbia and the Commonwealth of Puerto Rico. Firms work with the TAACs to apply for certification of eligibility for TAAF assistance, and prepare and implement strategies to guide their economic recovery.

The TAAF program is one of four distinct programs authorized under the Trade Act. The other TAA programs are TAA for Workers and TAA for Community Colleges, which are both administered by DOL, and TAA for Farmers, which is administered by USDA.

Program Initiative

As noted above, the TAAF program provides technical assistance to help firms develop and implement business recovery plans, or APs. Projects identified in the AP are designed to improve a firm's competitive position. Specifically, under the TAAF program, funds are applied toward helping firms access consultants, engineers, designers or industry experts to implement business improvement projects. These projects may cover a range of functional areas to improve a firm's market position and increase its overall competitiveness, including engineering, information technology, management, market development, marketing, new product development, quality improvement and sales. Funds are not provided directly to firms; instead, EDA funds TAACs and TAACs use funds to pay a cost-shared proportion of the cost to secure specialized business consultants.

There are three main phases to receiving technical assistance under the TAAF program: (1) petitioning for certification, (2) recovery planning and (3) AP implementation.

Phase I—Petitioning for Certification

The first step to receiving assistance is the submission of a petition to EDA to be certified as a trade-impacted firm. A petition is comprised of Form ED-840P, titled “Petition by a Firm for Certification of Eligibility to Apply for Trade Adjustment Assistance,” and required supporting documentation. Generally, certification specialists in the TAACs work with the firm at no cost to complete and submit a petition to EDA.

Upon receipt of the petition, EDA performs an analysis of the petition and supporting documents to determine if the petition is complete and may be accepted. EDA is required to make a final determination on the petition within 40 days of accepting a petition.

To certify a firm as eligible to apply for adjustment assistance, the Secretary must determine that the following three conditions are met:

1. A significant number or proportion of the workers in the firm have been or are threatened to be totally or partially separated;

2. Sales and/or production of the firm have decreased absolutely, or sales and/or production of an article or service that accounted for at least 25 percent of total production or sales of the firm during the 12, 24, or 36 months preceding the most recent 12-, 24-, or 36-month period for which data are available have decreased absolutely; and

3. Increased imports of articles like or directly competitive with articles produced or services provided by the firm have “contributed importantly” to both the layoffs and the decline in sales and/or production.

Phase II—Recovery Planning

Certified firms then work with TAAC staff to develop a customized AP for submission to EDA for approval. Once an AP has been submitted, EDA is required to make a final determination within 60 days.

Phase III—AP Implementation

The firm works with consultants to implement projects in an approved AP. As projects are implemented and if the firm is satisfied with the work, the firm will first pay their match to the consultant, and then send a notice to the TAAC stating that they are satisfied with the work and that they have paid their matching share. The TAAC will then pay the Federal matching share. Firms have up to five years from the date of an AP's approval to implement the approved business recovery strategy contained therein, unless they receive approval for an extension. Generally, firms complete the implementation of their respective APs over a two-year period.

In general, the TAACs provide an array of services to assist import-impacted firms throughout this process, including:

• Assisting firms in preparing their petitions for TAAF. Firms are not charged for any assistance related to the preparation of a petition.
• Once a petition has been approved, TAACs work closely with a firm's management to identify the firm's strengths and weaknesses and develop a customized business strategy (AP) designed to foster competitiveness. The program pays up to 75% of the cost of developing an AP and the firm must pay the rest. EDA must approve all APs to ensure they conform to statutory and regulatory requirements.
• After an AP has been approved, company management and TAAC staff jointly identify consultants with the specific expertise required to assist the firm in implementing their competitiveness strategy.
• Under the TAAF program, EDA shares the cost of implementing tasks under an approved AP to support competitiveness. For an AP in which proposed tasks total $30,000 or less, EDA provides up to 75 percent of the cost and the firm is responsible for the balance. For an AP in which proposed tasks total over $30,000, EDA pays 50 percent of the total cost and the firm pays the remaining 50 percent. In order to most efficiently and effectively utilize limited program funds, EDA limits its share of technical assistance to a certified firm to no more than $75,000. After a competitive procurement process, the TAAC and the firm generally contract with private consultants to implement the AP.

Results/Findings

Data for This Report

The data used in this report were collected from the TAACs as part of their reporting requirements, petitions for certification, and the APs submitted by the TAACs on behalf of firms. Eligibility Reviewers at EDA recorded data from these sources into a central database. The data presented in this report has been verified by the TAACs. Results for average processing times were derived by EDA. Data in this report reflect data as of the end of FY 2012. Therefore, data in this Annual Report may differ from previously published data that were based on different periods.

(1) The Number of Firms That Inquired About the Program

In FY 2012, the TAACs received 1,849 inquiries about the program.

Exhibit 4: Inquiries about the TAAF program by TAAC

(2) The number of petitions filed under section 251

(3) The number of petitions certified and denied by the Secretary

(4) The average time for processing petitions after the petitions are filed

As part of its overall commitment to performance evaluation and continuous improvement, EDA assesses the performance of the TAAF program both in terms of “inputs” (e.g., types of firms assisted, petition, and AP submissions) and “outputs” (changes in sales, employment levels, and productivity of client firms).

In terms of inputs, the TAAF program effectively targeted small and medium-sized firms in FY 2012. EDA received 85 petitions, of which 83 were filed (accepted for investigation) under section 251 of the Trade Act, down by 46 petitions, a 36 percent decrease, compared to the number of petitions filed in FY 2011. EDA certified 79 petitions, down by 70 petitions, a 47 percent decrease compared to the number of certifications in FY 2011. Petitions are certified on a rolling basis throughout the year. Petitions certified in FY 2012 may be the result of those received or filed (accepted) in FY 2011, while petitions received or filed (accepted) in FY 2012 may not result in certification in FY 2012.

EDA met the 40-day processing deadline (to make a final determination for petitions accepted for filing) in FY 2012. In fact, the average processing time for petitions was 29 business days.

The majority of petitions certified under the TAAF program were submitted by firms in the manufacturing industry. Firms in technical services, transportation, and wholesale trade rounded out the remaining industries .

In FY 2012, 6 percent of firms certified for TAAF were identified by the TAACs as service sector firms. This is an increase over FY 2011, where 2 percent of firms certified were identified by the TAACs as service sector firms. As a result the Trade Adjustment Assistance Extension Act of 2011 (Pub. L. 112-40), which retroactively extended the provisions of the TAA programs that were enacted as part of the TGAAA, demand from service firms is likely to continue to increase.

(5) The number of petitions filed and firms certified for each Congressional District in the United States

(6) Of the number of petitions filed, the number of firms that entered the program and received benefits

In FY 2012, 83 petitions were accepted (filed) for certification, of which 79 were certified. Of the 79 firms certified in FY 2012, 57 firms submitted and were approved for an AP in the same fiscal year .

(7) The number of firms that received assistance in preparing their petitions

In FY 2012, 341 firms received assistance in preparing petitions. Firms may receive assistance in all phases of preparing petitions more than once in a single year. Petition assistance rendered may not result in the submission of a petition in the fiscal year.

Exhibit 16: Petition Assistance Activity: FY 2012

(8) The number of firms that received assistance developing business recovery plans

In FY 2012, 206 firms received assistance in developing APs and 935 firms received assistance in implementing projects in these plans. Firms may receive assistance in developing and implementing APs more than once in a single year. AP assistance rendered may not result in the submission or implementation of an AP in the current fiscal year.

(9) The number of business recovery plans approved and denied by the Secretary

In FY 2012, EDA approved 102 APs, down by 81 compared to FY 2011, a 44 percent decrease over this period . EDA successfully met the 60-day processing deadline for approval of APs. The average processing time for APs was 21 business days .

Exhibit 21: APs Approved by TAAC/State: FY 2012

(10) Average duration of benefits received under the program nationally and in each region served by an intermediary organization (the TAAC) referred to in section 253(b)(1) of the Trade Act

In FY 2012, 145 firms exited the TAAF program after being approved for an AP. Nationally, firms receive on average 57 months of benefits under the TAAF program. When calculating the average duration of benefits regionally, firms received on average 55 months of benefits under the TAAF program.

(11) Sales, employment, and productivity at each firm participating in the TAAF program at the time of certification

In FY 2012, 889 active firms participated in the TAAF program. A firm that has been certified for TAAF, and/or has an approved AP, has not completed all projects in their AP, and is still engaged in the TAAF program is considered “active.” For the purposes of this report, productivity is defined as net sales per employee. Since the certified firms are in various industries, which have a variety of ways to measure productivity, sales per employee is utilized as a standardized measure for assessing productivity across all firms assisted.

(12) Sales, employment, and productivity at each firm upon completion of the program and each year for the two-year period following completion

(13) The number of firms in operation as of the date of this report and the number of firms that ceased operations after completing the program in each year during the two-year period following completion of the program

In order to assess the effectiveness of the TAAF program in terms of outputs, EDA assesses the extent to which client firms increased their sales, employment levels, and productivity following the implementation of TAAF-supported projects (program completion). To measure these outputs, EDA compares average sales, average employment and average productivity of all firms completing the program in a particular year (the most recent “base year”) to these same measures for the same firms one and two years following program completion. The base year used for this report is FY 2010, as this allows EDA to compare these measures looking back both one and two years from the date of this report.

Firms that completed the TAAF program in FY 2010 reported that, at completion, average sales were $10.1 million, average employment was 53 and average sales per employee (productivity) was $191,328. One year after completing the program (FY 2011), these same firms reported that average sales increased by 11.4 percent, average employment increased by 13.2 percent, and average productivity decreased by 1.6 percent. For the sake of comparison to the universe of U.S. manufacturers, BLS reported that, in FY 2011, the national manufacturing industry in aggregate experienced an average employment increase of only 1.9 percent.

Two years after completing the program (FY 2012), these same firms reported that average sales increased by 26.8 percent, average employment increased by 13.2 percent, and average productivity increased by 11.9 percent. Meanwhile, BLS reported that the manufacturing industry in FY 2012 experienced an average employment increase of 3.5 percent and an average productivity increase of 4.1 percent from FY 2010. Therefore, firms assisted by the TAAF program performed more successfully than the manufacturing industry as a whole. Additionally, all firms that completed the TAAF program in FY 2010 were in operation as of the end of FY 2012, indicating strong “survival rates” for TAAF-assisted firms. It should be noted that TAAF clients are operating in the same economic environment as other firms, but are also attempting to adjust to import pressures that may not impact other firms as severely, making the success of TAAF-assisted firms even more notable.

For the purposes of this report, data are reported only for firms where all data were available. Since the certified firms are in various industries, which have a variety of ways to measure productivity, sales per employee was chosen as the productivity measure. This measure is used because it can be generally applied to all certified firms.

(14) The financial assistance received by each firm participating in the program

(15) The financial contribution made by each firm participating in the program

In FY 2012, firms received $9.8 million in technical assistance provided by the TAACs to prepare petitions and to develop and implement APs (often through business consultants and other experts). Firms participating in the program contributed $6.3 million towards the development and implementation of APs. Funds are not provided directly to firms; instead, EDA funds the TAACs and TAACs pay a proportion of the cost to secure specialized business consultants.

(16) The types of technical assistance included in the business recovery plans of firms participating in the program

In FY 2012, firms proposed various types of projects in their APs. Marketing/sales projects are geared toward increasing revenue, whereas production/manufacturing projects tend to be geared toward cutting costs. Support system projects can provide a competitive advantage by either cutting costs or creating new sales channels. Management and financial projects are designed to improve management's decision making ability and business control. Over half of all firms proposed to implement a marketing/sales project or production/engineering project in their APs. Sample projects are listed below in Exhibit 28.

(17) The number of firms leaving the program before completing the project or projects in their business recovery plans and the reason the project or projects were not completed

In FY 2012, of the 145 firms that left the TAAF program, 84 completed the program, 34 did not complete approved projects in the time allotted, and the remaining 27 firms left for the reasons listed below in Exhibit 30.

(18) The total amount expended by all intermediary organizations referred to in Section 253(b)(1) and by each organization to administer the program

On May 11, 2012, the Department of Commerce Office of Inspector General (OIG) presented EDA with a copy of their letter to the House and Senate Committees on Appropriations reporting their findings related to an examination of the TAAC administrative costs. As part of their review, OIG obtained expenditure data from a sample of three TAACs—Western, New England, and New York State—focusing on the use of Federal funds provided by EDA. The OIG reported that it “did not determine that the level of administrative costs of the three TAACs to be unreasonable.”

Indirect Costs, referred to as facilities and administrative (F&A) costs, include space rent and utilities, telephone, postage, printing, and other administrative costs. University-affiliated TAACs have indirect cost rate (ICR) agreements that cannot exceed the current rate negotiated with their cognizant Federal agency (non EDA/DOC). These costs are captured on the indirect cost line item on the Application for Federal Assistance, SF-424 (Form SF-424). Non-profit TAACs do not have ICR agreements; instead, they categorize similar expenditures in their “Other” line item of their Form SF-424.

(19) The total amount expended by intermediary organizations to provide technical assistance to firms under the program nationally and in each region served by such an organization

In FY 2012, TAACs expended $10.7 million in technical assistance provided to the firms in outreach to firms, to prepare petitions, and to develop and implement APs (often through business consultants and other experts). Funds are not provided directly to firms; instead, EDA funds the TAACs and TAACs pay a cost-shared proportion of the cost to secure specialized business consultants.

Exhibit 32: Summary of Expenditures—Technical Assistance to Firms by TAAC: FY 2012

Conclusion

Through TAAF program, EDA effectively assisted many small and medium-sized firms in becoming more competitive and successful in the global economy. EDA considers the most significant finding in this report to be that following completion of assistance from EDA's TAAF program, firms reported that, on average, sales increased by 26.8 percent, employment increased by 13.2 percent, and productivity increased by 11.9 percent.

The TAAF program effectively assisted small and medium-sized firms in FY 2012. TAACs provided technical assistance to 341 firms in preparing petitions, 206 firms in preparing APs, and 935 firms in implementing projects for an approved AP. Meanwhile, EDA certified 79 petitions and approved 102 APs. As of the end of FY 2012 (September 30, 2012), there are 889 active firms participating in the TAAF program.

EDA successfully met both the 40-day processing deadline (to make a final determination for petitions accepted for filing) and the 60-day processing deadline for approval of APs, as required in the TGAAA. In FY 2012, the average processing time for petitions was 29 business days, and the average processing time for APs was 21 business days.

Firms that completed the TAAF program in FY 2010 report that average sales were $10.1 million, average employment was 53, and average sales per employee (productivity) was $191,328. One year after completing the program (FY 2011), these same firms reported that average sales increased by 11.4 percent, average employment increased by 13.2 percent, and average productivity decreased by 1.6 percent. For the sake of comparison to the universe of U.S. manufacturers, the U.S. Bureau of Labor Statistics (BLS) reported that, in FY 2011, the national manufacturing industry in aggregate experienced an average employment increase of only 1.9 percent meaning that firms who complete the program are more successful than firms generally.

Two years after completing the program (FY 2012), these same firms reported that average sales increased by 26.8 percent, average employment increased by 13.2 percent, and average productivity increased by 11.9 percent. Meanwhile, BLS reported that the manufacturing industry in FY 2012 experienced an average employment increase of 3.5 percent and average productivity increase of 4.1 percent from FY 2010. Therefore, firms assisted by the TAAF program performed more successfully than the manufacturing industry as a whole. Additionally, all firms that completed the TAAF program in FY 2010 were in operation as of the end of FY 2012, indicating strong “survival rates” for TAAF-assisted firms. It should be noted that TAAF clients are operating in the same economic environment as other firms, but are also attempting to adjust to import pressures that may not impact other firms as severely, making the success of TAAF-assisted firms even more notable.

On May 11, 2012, the Department of Commerce Office of Inspector General (OIG) presented EDA with a copy of their letter to the House and Senate Committees on Appropriations reporting their findings related to an examination of the TAAC administrative costs . As part of their review, OIG obtained expenditure data from a sample of three TAACs—Western, New England, and New York State—focusing on the use of Federal funds provided by EDA. The OIG reported that it “did not determine that the level of administrative costs of the three TAACs to be unreasonable.”

On September 13, 2012, the U.S. Government Accountability Office (GAO) published the report, Trade Adjustment Assistance: Commerce Program Has Helped Manufacturing and Services Firms, but Measures, Data, and Funding Formula Could Improve (GAO-12-930). The GAO report documented the results of their independent analysis, which included strong evidence demonstrating the effectiveness of the TAAF program. GAO's key finding was that for firms receiving assistance between FY 2008 and FY 2011, “the effect of participation in the program was an increase in firm sales ranging from 5 to 6 percent on average,” and that “the effect of the program on productivity was about a 4 percent increase.” As part of this study, GAO contacted 163 firms who had been involved with the TAAF program, and received responses from 117. As noted in the report, nearly all of the responding firms reported they were generally or very satisfied with the program. Manufacturing firms, specifically, reported that the program was associated with increased sales and productivity. Notably, an impressive 73 percent of the firms reported the program helped them with profitability, 71 percent said it helped them retain employees, and 57 percent reported that the program helped them hire new employees.

EDA is currently implementing a performance measurement improvement process for all its programs, including TAAF, which began in late 2011 and consists of two phases: planning and development, and implementation. The one-year planning and development stage is expected to be completed in FY 2013. The first phase includes the following activities: researching and identifying improved metrics and indicators, testing the metrics and indicators across the full portfolio of EDA investments, and developing a work plan for implementing measures that are adopted. To assist with this effort, EDA has partnered with the University of North Carolina and George Washington University to develop draft performance measures utilizing state-of-the-art performance measurement and program evaluation techniques.

The subsequent implementation phase of the performance measurement improvement process will include the following activities: obtaining Office of Management and Budget approval of data collection forms, developing a database to store collected data, updating programmatic guidance and regulations, and examining the allocation formula used to distribute program funds to the TAACs in collaboration with both TAACs and Congressional stakeholders. The entire process is expected to be completed by the end of 2014.

The performance measurement improvement process will help EDA be even a stronger partner to its clients and grantees. Through more effective program management and performance assessment, EDA will be in a better position to achieve the desired results for each of its programs.

Supplement

TAAF Program Benefits to Manufacturing Firms

On September 13, 2012, the U.S. Government Accountability Office (GAO) published the report, Trade Adjustment Assistance: Commerce Program Has Helped Manufacturing and Services Firms, but Measures, Data, and Funding Formula Could Improve (GAO-12-930). The GAO report documented the results of their independent analysis, which included strong evidence demonstrating the effectiveness of the TAAF program. GAO's key finding was that for firms receiving assistance between FY 2008 and FY 2011, “the effect of participation in the program was an increase in firm sales ranging from 5 to 6 percent on average,” and that “the effect of the program on productivity was about a 4 percent increase.” As part of this study, GAO contacted 163 firms who had been involved with the TAAF program, and received responses from 117. As noted in the report, nearly all of the responding firms reported they were generally or very satisfied with the program. Manufacturing firms, specifically, reported that the program was associated with increased sales and productivity. Notably, an impressive 73 percent of the firms reported the program helped them with profitability, 71 percent said it helped them retain employees, and 57 percent reported that the program helped them hire new employees.

Examples of TAAF Assistance

Great Lakes Trade Adjustment Assistance Center (GLTAAC)

This Michigan firm manufactures self-adhesive strip and sheet products for the automotive industry. The firm lost 38 percent of its sales in 2009 as demand disappeared and customers frantically switched to low cost foreign suppliers. It entered the TAAF program in 2010. The firm needed to improve its productivity and streamline its business processes. To accomplish this, replacing the firm's antiquated Enterprise Resource Planning (ERP) system was paramount. After much research, the firm licensed a new system and used TAAF assistance to train the workforce in its use. The new ERP went live in January 2011, and the impact was immediate. Not only has it cut hardware costs and annual fees by 50 percent, it has also greatly reduced data input and handling time. The firm has been able to go virtually paperless, as documents are seamlessly handled and hardcopies are rarely required. Further, the new system is connected to its automotive forecasting service so that high-level sales forecasts are made automatically as customers release their model plans. Results of this ERP implementation have been truly transformative for the firm, resulting in “fabulous” performance, according to the firm's CFO. As a result of this project and much hard work by the firm, it has been able to rehire many of the workers that were laid off in 2009. Though not yet fully recovered, the firm has now increased employment by 40 percent since entering the TAAF program. The firm currently employs about 90 workers and generates over $20 million in sales. The firm just started another worker training project via the program.

An Ohio packaging firm was hit hard by rising import competition from China and other East Asian countries. Its customers were increasingly looking to cut costs by sourcing their packaging from abroad. This forced serious production cuts at the firm, which ultimately necessitated employee layoffs. The firm entered the TAAF program in early 2008. Its Adjustment Plan was approved in June of that year and included a wide range of needed improvements. The firm's first projects included a detailed evaluation and restructuring of its sales team, as well as the development of much needed marketing materials. Improvements to its costing and quoting system were next, followed by a revamping of its Web site. The firm's most recent TAAF project, completed in June 2012, was part of a major lean manufacturing initiative. Following classroom training financed in part by the State of Ohio, the TAAF program helped provide on-site employee training and hands-on coaching to jumpstart the firm's productivity improvement efforts. This “last mile” project—the customized on-site lean training—had a huge impact on the overall success of the effort. The firm has made great progress to date—sales have rebounded significantly (up 50 percent from their low), and productivity is much improved. However, considerable work remains to be done. The firm is about to begin a project that will dramatically strengthen its finance function. By the time this firm completes the program, it will be positioned to thrive, not just survive.

Mid-America Trade Adjustment Assistance Center (MamTAAC)

A Missouri fabric-based products manufacturer has been receiving technical assistance funded by the TAAF program since December 2010. The first project included a comprehensive review of their pay scale compared with market salaries and wages. The intent of this project included addressing personnel issues and forming a strong cohesive team to bring the business out of the recession. The next project involved employee training in the use of their Computer Aided Design software, which supported high investment equipment that enabled them to keep work in-house and support additional employees to be added. A portion of the TAAF assistance enabled the firm to implement an International Organization for Standardization (ISO) compliant quality system and to subsequently become certified to ISO 9001:2008. The ISO certification has enabled the firm to increase sales to a major defense contractor by over 50 percent. This sales increase and business from new market segments have necessitated increasing employees by 15 percent. With the help of MamTAAC and TAAF-funded technical assistance, the firm has been able to build a manufacturing organization that can continue to effectively compete and grow.

A Missouri wood products manufacturer has been enrolled in the program since 2004. In 2004, the firm had 16 employees and average revenue of $3 million and faced fierce competition with Chinese imports. TAAF funding allowed the firm to upgrade its management information systems, upgrade their ERP system, and purchase a production module to help with manufacturing data capture and tracking. Later, with technical assistance from MamTAAC, the firm leveraged TAAF program funds to provide human resources, employee, and executive training, which in addition to educating the firm's leadership on sound business practices, allowed the owner to take actual business problems that were especially related to growth to a group of business owner peers for feedback. Today the firm has 36 employees with 6 more slated to be added in 2012, and revenues are projected to be above $8 million. The firm expects that by 2015, revenue will increase to $14 million and employment to 60.

MidAtlantic Trade Adjustment Assistance Center (MATAAC)

A Pennsylvania maker of pressure control devices for the fluid power and chemical industries was in its third year of declining sales, profits, and employment when awarded TAAF-funded technical assistance in 2008. Sales had fallen by 37 percent, profits had declined 67 percent and 8 percent of the employees were laid off as a direct result of imports. The company implemented projects in strategic planning, lean manufacturing, marketing communications, and six sigma. Since program entry, sales have improved by more than 20 percent, jobs have grown by 12 percent, earnings have increased 42 percent, productivity has increased 7.5 percent, and return on human capital has grown 26.9 percent. As a direct consequence of this success, a world leader in the American fluid power industry acquired the firm in October 2012.

A Pennsylvania manufacturer of industrial wear products for the construction and material handling industries had suffered a 25 percent drop in sales, an 83 percent reduction in earnings, an 81 percent decline in productivity and 13 percent of its employees had been separated—all over a 24-month period. A flood of imports impacted virtually all of the company's products. Management recognized that its product line had been commoditized and that it could no longer compete on price alone. With projects addressing new product development, e-commerce and systems technology, the firm began to add value through superior design, cost mastery, and marketing. The firm was awarded TAAF-funded technical assistance in 2011. Since program entry, sales have grown by more than 50 percent, earnings have improved five-fold, productivity has increased more than 12 percent, jobs have grown 36 percent, and the return on the firm's human capital has more than tripled.

Midwest Trade Adjustment Assistance Center (MWTAAC)

A Wisconsin manufacturer of custom solenoids was experiencing tough competition from Asian importers in the automotive, recreational vehicle, motorcycle, and industrial application markets. Several key customers moved their purchases to overseas providers with cheaper prices, resulting in a 21 percent decline in sales, forcing the firm to lay off workers. The firm was certified for TAAF in June 2010. The firm was able to enhance marketing tools with two projects in late 2010 that helped attract new domestic and international customers. In addition, the firm was able to cost-share export development assistance early in 2012, including research and marketing material translation. As a result of assistance from MWTAAC and TAAF-funded technical assistance, the manufacturer's exports have grown dramatically and both sales and employment have increased over 90 percent in less than two years.

A Minnesota manufacturer of commercial and residential air filtration systems received TAAF-funded technical assistance between 2008 and 2011 for export-related quality certifications, testing and marketing material translation. In addition, TAAF program technical assistance provided Management Information System (MIS) enhancement and training which has allowed the company to manage the expansion and control costs. In the most recent year, the manufacturer has identified $77,659 of new export sales directly attributable solely to TAAF assistance.

New England Trade Adjustment Assistance Center (NETAAC)

A Connecticut metal finishing firm, the largest full-service metal finisher in the Northeast, experienced a significant decline in sales due to increased foreign competition and a shrinking domestic market. In 2010, the firm was certified for TAAF and with the assistance of NETAAC, prepared an AP to fund projects such as leadership training, a new Web site, upgraded marketing materials, establish lean manufacturing, and NADCAP, a critical certification that could potentially open many new markets for the firm. After merging with another local Connecticut firm, they are now able to service a much larger market providing full-service metal finishing services. As a result of TAAF-funded technical assistance, the firm has become stronger and more competitive, increasing sales by 20 percent and adding 20 more jobs.

A Rhode Island full-service contract manufacturer serving a diverse group of customers including electronic manufacturers of medical instrumentation, military electronics, oceanographic instruments, and commercial products was adversely affected by a combination of growing foreign market competition and the global recession. In 2010, the firm was certified for TAAF and, with the assistance of NETAAC, prepared a business recovery plan (AP) to fund projects such as development of a strategic business plan, marketing and sales plan, MIS upgrades, and process improvement program. Within one year of TAAF-funded technical assistance, the firm has realized a 10 percent increase in employment and a 15 percent increase in sales. After successful realization of Lean Manufacturing and sales and marketing projects, the firm was able to capture new orders, increased the need for continuous improvement, and was able to lower cost of production by further streamlining their processes. The firm is now focusing on re-shoring efforts and committed to bringing jobs back to America.

New York State Trade Adjustment Assistance Center (NYSTAAC)

A New York manufacturer of precision optical fabrication machines and systems was suffering from the adverse effects of foreign competition from Germany. The combination of the foreign competition, coupled with the recent downturn in the economy, significantly reduced the firm's sales revenues. The firm needed to react to the continual loss of market share to foreign competition and did not have a formal strategic-based sales and marketing plan in place nor did it have the internal expertise to develop one. In order to effectively recover from the adverse effects of foreign competition, the firm sought technical assistance from NYSTAAC. At the time of TAAF certification, the firm had 35 full-time employees and annual sales of approximately $6 million. In order to stop the decline in sales and employment levels, the firm with assistance from NYSTAAC and TAAF-funded technical assistance, developed a business recovery plan (AP) that included a formal sales and marketing plan. In following the plan, the firm was able to achieve 85 percent growth in sales revenue to an annual rate of $12 million. This in turn has resulted in the firm adding 17 new employees since the implementation of the plan. An additional major outcome of the planning process was the recent expansion of the firm's manufacturing facility to accommodate new business.

A New York manufacturer of clipboards sought technical assistance from NYSTAAC to develop a business recovery plan (AP) to address inefficiencies with an outdated Management Information System (MIS) and production software, which when improved, would reduce deficits and increase productivity, resulting in higher output and increased sales. Since the firm was certified for TAAF in 2008, their sales have increased approximately $3.4 million and they have been able to maintain the same employment level.

Northwest Trade Adjustment Assistance Center (NWTAAC)

A Montana manufacturer of high performance laser diode and fiber optic control, test and measurement products used in research laboratories, telecommunication, and photonic production facilities received TAAF certification in 2005 based on a 74 percent increase in imports of these devices from China and Japan. Implementation of TAAF-funded projects such as extensive CE product testing, lean manufacturing and training, and sales market analysis and development over a 5 year period have resulted in firm product expansion into European markets, and increased penetration into China, Japan, and Korea. As a result of NWTAAC assistance and TAAF-funded technical assistance, as of the end of 2011, employment has stabilized and sales have increased 48 percent since certification, with export sales now comprising 50 percent of total sales, a 22 percent increase since entering the program.

An Idaho light duty manufacturer of sheet metal and plastic ventilation and roofing components was certified for TAAF in 2010 based on a 20 percent decline in sales resulting from increased imports from China, Canada, and Mexico. TAAF-funded technical assistance projects thus far have included Web site redesign and a two‐phased search engine optimization project. As a result of these projects the firm has gone from zero exports and internet orders to over 300 new orders per month to customers all over the U.S. and Canada with about 75 percent of the orders coming from repeat customers. This increase in sales of $400,000 from two years ago provides better profit margins with 10-to-15 percent of the sales going to Canada. The firm has also increased employment by about 2.5 full time employees and is about to add another just for parcel packaging for the internet orders. As an added benefit, this new nationwide customer base gives this firm a better idea of what people want, and these sales are much more profitable than their wholesale business.

Rocky Mountain Trade Adjustment Assistance Center (RMTAAC)

Faced with intense foreign competition and an increasingly competitive market, a Utah manufacturer of plastic folding tables and chairs contacted RMTAAC in 2010 for assistance to improve the firm's competitive position. RMTAAC conducted a thorough business assessment and competitive analysis to identify strategic areas for improvement to build a more solid foundation for future growth. The firm was awarded technical assistance through the TAAF program to target cost reductions in its manufacturing processes. The firm has been able to utilize TAAF-funded technical assistance to shift its efforts to a firm-wide lean manufacturing initiative. The firm implemented lean manufacturing to reduce wasteful or non-value added activities in the manufacturing process. The firm has seen a 25 percent reduction in inventory carrying costs since applying lean manufacturing principles. In addition, the firm's sales are up 27 percent since entering the TAAF program two years ago.

A South Dakota manufacturer of industrial cleaning machinery had noted increased competition from foreign countries. Over the last decade, consolidation has been a significant trend in the industrial machinery industry. As larger multi-national conglomerates have gained scale in their operations through acquisitions, the competitive challenges continue to mount for smaller manufacturers in the industry. The firm contacted RMTAAC in 2010 for assistance with TAAF certification. Upon certification, RMTAAC worked with the firm to develop a customized business recovery plan (AP) focused on implementing strategic improvements to strengthen the firm's competitiveness in the global marketplace. Between July 2011 and December 2011, the firm developed a customized sales and marketing program. To date, the firm's sales have increased 18.8 percent from the previous year, and the quote-to-order conversion rate has increased 7 percent. As a result of TAAF-funded technical assistance, the firm's sales are at a 72-year high.

Southeastern Trade Adjustment Assistance Center (SETAAC)

After losing sales to a major customer in 2000, a Georgia manufacturing firm ended an era of selling a complete textile machine to a U.S. customer. The impact of low-cost textile imports from China and Mexico was devastating the firm's domestic customers. In 2006, as sales and employment continued to decline, the firm turned to the TAAF program for help. The SETAAC team developed a customized business recovery plan (AP) which focused on planning and implementing strategic improvements to strengthen the firm's competitiveness in the global marketplace. With TAAF-funded technical assistance, the firm received certification from the Historically Underutilized Business Zone (HUBZone) program, which helps small businesses in urban and rural communities gain access to Federal procurement opportunities. The firm also redesigned its Web site and other marketing materials in order to appeal to a broader client base. The work paid off, as the firm now provides an ammunition testing system for the Air Force. As a result of TAAF-funded technical assistance, the firm has increased employment by 37 percent and revenue by 10 percent. At the end of the first quarter of 2012, the firm was on track for a 25 percent increase in revenue over 2011.

Based in South Carolina, a producer of screens for rotary screen textile printing experienced a 22 percent loss in sales from 2008 to 2009 as a result of Chinese competitors. To address the issue of foreign competition, the firm applied for and was certified for TAAF in 2009. The SETAAC team outlined key projects to help the firm increase its competitive edge. With consultants from the South Carolina Manufacturing Extension Partnership (SCMEP), the firm was able to transition from textile-based screen engraving to digital printing of designs directly to fabric by using a new brand. Projects performed by the SCMEP included Web site redesign, organic search engine optimization, lead generation and pay-per-click advertising. This outreach lead the firm to an opportunity with a large promotional and graphic communications firm with over 750 member locations in the U.S. and Canada. Since the initiation of this project, annual sales have steadily increased by over $220,000. May 2012 saw a 50 percent sales increase, and June 2012 as the highest sales month in four years. In addition to increasing sales, the firm has also added three additional employees.

Southwest Trade Adjustment Assistance Center (SWTAAC)

A Texas manufacturer of uniforms, industrial safety, and rehabilitation equipment was certified for TAAF in 2008. The firm had experienced a 21 percent decline in sales and 31 percent decline in employment since the previous year. The foreign impact was traced to imports from China, Bangladesh, Indonesia, Mexico and the Caribbean basin countries. The firm received EDA approval of an AP focusing on technical assistance in the areas of strategic marketing, Enterprise Resource Planning (ERP) implementation, and lean manufacturing techniques. To date, the firm has worked on four marketing projects, which included photography of their products, a complete redesign of their marketing materials such as catalogs, brochures, and press packages, along with product imaging improvements and a branding strategy. Management information systems projects integrated the firm's MAS 200 SAGE accounting software to interface with their Web site projects to streamline and improve the functionality of accounting, inventory control, on-line customer ordering accessible year round (24 hours a day) with the capability to track orders by oilrig number/employee, and create automated customized reports. The firm has completed 99 percent of their projects and seen a dramatic increase in sales. They recorded sales of $20.9 million in 2011 and an employment of 30, an increase of 345 percent and 25 percent respectively since the date of certification.

A Louisiana manufacturer of Creole pralines and a variety of other pecan-based confections was adversely impacted by imports from Canada, Mexico, and Thailand. The firm was certified for TAAF in May 2009. At the time of certification, annualized sales were approximately $2.7 million, down from $3.3 million the previous year. The firm AP project plans included a support system upgrade required to make significant Management Information System (MIS) upgrades. Although they had an MIS system, it did not have the capacity to allow the firm to manage their increasingly diversifying business. Although implementation of the projects outlined in their business recovery plan is ongoing, the firm has fared better than many other firms that are recovering from the aftermath of not only Hurricane Katrina, but also the generalized impact of the recession during this period. Annual sales two years from the date of certification grew to $3.6 million—an annualized growth rate of roughly 15 percent.

Western Trade Adjustment Assistance Center (WTAAC)

A California custom packaging manufacturer serving customers in the medical, food, and electronics industries suffered injury from import competition from Asia from 2004 through 2006. Its customers increased the purchase of packaging solutions made in the Pacific Rim. A severe downturn in the static packaging industry resulted in the Pacific Rim producing the bulk share of electronic components. The firm was certified for TAAF in December of 2006. WTAAC and the firm's management developed a strategy to change the way the customers think about flexible barrier packaging and to provide new ideas to industry to use this packaging. Specifically, the goal was to develop innovative ways of using barrier packaging to enter the advertising niche, a market segment that has not previously used flexible packaging. The firm completed the implementation phase of the TAAF program in January 2010. While active in the program, the firm implemented its marketing project and two information technology projects. Since TAAF certification, sales increased 34 percent, employment increased 28 percent, profitability increased 68 percent, and productivity increased 4 percent.

A second-generation California bonding wedge manufacturer, specializing in the design and manufacture of bonding wedges for the microelectronics industry was suffering from continued shrinking market share due to increasing competition from low price Pacific Rim manufacturers from 2000 to 2002. As a result, 2002 annual sales decreased 44 percent and employment decreased 34 percent. The firm was certified for TAAF in October of 2002. WTAAC and the firm's management developed a strategy for the firm to specialize in the manufacture of high quality bonding wedges for the microelectronic industry while expanding its brand sales and diversifying its customer base. The firm successfully completed the implementation phase of the TAAF program in February 2009. While active in the program, the firm implemented two quality management system projects, three production engineering projects, four marketing and promotion projects, and one information technology project. These projects focused on significantly expanding international sales while improving manufacturing efficiency, reducing production cost and shortening cycle times. Since TAAF certification, the firm regained profitability, with sales increasing 45 percent, and productivity improving 45 percent.