In this episode of Manufacturing Matters, podcast host Winn Hardin speaks with Debra Phillips from NEMA and Tom Lawton of TESCO Metering about the impacts of tariffs on American markets. Winn’s guests share how both large and small enterprises are dealing with new complexities and supply chain management issues that started during the pandemic and continue during new tariff negotiations between global markets. They also discuss a number of efforts, including NEMA’s new Make It American program, for helping companies quantify and certify the percentage of each product that is actually manufactured in the United states, an important criterion for regulators and for U.S. government–funded projects.

Winn Hardin: [00:00:03] Hello everyone. Welcome to Manufacturing Matters, where we talk about the trends and the technology affecting the global manufacturing industry. I’m your host. I’m Winn Hardin with Tech B2B Marketing. And I really appreciate you all dropping by with us today. I know you’re going to find this show particularly interesting because we’re going to be talking about tariffs — they’re impacting the electrical power supply chain — and NEMA, which is one of the key associations in the electrical equipment manufacturing space. A new program they’re doing to help deal with the challenges that all of us are facing, both U.S. and abroad. So before we get into that, please let me welcome everyone. Welcome, Debra Phillips, president and CEO of NEMA, which for those who don’t know stands for the National Electrical Manufacturers Association. Debra, thanks for joining us.

Debra Phillips: [00:00:46] Yeah. Pleasure.

Winn Hardin: [00:00:47] Thank you. And then we have Tom Lawton, who’s the president and CEO of TESCO Metering, who is one of the recognized leaders in the electrical metering industry. Mr. Lawton, how are you, sir?

Tom Lawton: [00:00:56] Good. Thanks for having us today, Winn.

Winn Hardin: [00:00:58] Wonderful, wonderful. Before we get going, there might be at least one or two people out there who aren’t familiar with NEMA and TESCO, so why don’t we educate them real quick before we move on, so they’ll understand the context of our discussion. Debra, would you mind kicking us off and telling us a little bit about NEMA?

Debra Phillips: [00:01:13] Sure. NEMA, as you mentioned, is the National Electrical Manufacturers Association. We’re a DC-based trade association that represents the broad electrical industry — so all manufacturers that are producing equipment that generate, transmit, distribute, or end use electricity. So lighting motors, transformers, wiring cable, switchgear, and everything in between. And so we’re a trade association that represents those manufacturers here in Washington. We set standards to keep those technologies and their users safe, efficient. We advocate for policy issues — and that’s where the trade and tariff topic comes in — on behalf of those members. And we also put out market data reports in and around the electrical industry.

Winn Hardin: [00:02:07] Well, thank you so much for all the work NEMA does in the standards development in particular. I know that’s kind of the circulation system that pulls our industry together. So it’s such a critical component there. Mr. Lawton, tell us a little bit about TESCO Metering. I know you guys are beasts and do a lot of things, but what’s your particular focus there?

Tom Lawton: [00:02:26] Sure. So TESCO Metering — we supply electric utilities throughout primarily North America but also in the Far East with electric metering equipment. That is our specialty. We know a lot about your electric meter. We provide technology that goes in that meter, and we also make test equipment for that meter, for the labs, for the fields, for the national labs. We make the boxes, we make the seals that go around the meter. So we are focused very much on the electric meter. We’ve been around since 1904. We are headquartered in an old woolen mill, which you can see behind me, from the 1800s. We have a facility out in Ohio as well. We are very proud to be represented by NEMA. Debra and her team do a great job of representing manufacturers’ needs. And it’s more important than than ever before.

Winn Hardin: [00:03:24] Tom, you specifically mentioned the Middle East and the U.S. And of course both of those — large parts of the Middle East — leverage the U.S. grid standards. But do you guys also do Korea and other parts of the world that also leverage NFPA and related?

Tom Lawton: [00:03:37] Yeah, correct. So there are two types of metering in the world. There is what we call ANSI-based — American National Standards Institute. And those are the round meters that you’re familiar with. So in all the parts of the world that use those meters, we are one of the leaders. The rest of the world uses what we call IEC meters, and that is a European standard. Our meter you can very quickly engage and disengage, plug and unplug. Whereas in Europe you have to wire them and unwire them. So it’s a much more extensive process. Also, our power is a bit more secure than the IEC meters. So, yes, anywhere in the world that leverages our type of systems, that’s where we work. We do provide some products for the IEC world, but our focus is really the ANSI world.

Winn Hardin: [00:04:31] Gotcha. Gotcha. Okay, so as I mentioned earlier, supply chains, which is always near and dear to our heart here at Manufacturing Matters, but even more specifically in this time and age, “tariff” is a word that’s been bandied around quite a bit. It’s nice because when we did some robotic panels earlier this year on machine vision, we talked to leadership in that area, it was still too fresh. None of us really knew. There was more worries and concerns than there was facts for us to know where things are. So Debra, since you’re kind of at the center of the web when it comes to the power distribution industry, can you tell us a little bit? NEMA tackles a wide range of policy and regulatory issues, not just tariffs and supply chains, but as they relate to electrification. But where is NEMA focused right now on tariffs? What are you hearing from your member base? Give us the lowdown.

Debra Phillips: [00:05:20] Wow, that’s a big, loaded question. It’s probably the biggest issue. Supply chain and tariffs are probably the biggest issue that we’re dealing with right now. Earlier in the year it was tax and tax reform. And there were some good things that happened for the industry in the tax package that was passed. But right now it’s all tariffs, all supply chain, all the time. You know TESCO is a great member of NEMA, as are about 325 other companies. And so we represent companies of all sizes and of all postures in terms of supply chains, some big global multinational companies and some domestic-only companies. So you can imagine that everybody’s supply chains look a little different. So let me talk, maybe start with a broad industry perspective on supply chains. So the electrical sector, you may be surprised to hear that we are the number two importer and exporter in the United States, second only to the automotive industry. Highly complex integrated global supply chain in general terms. And that supply chain has changed pretty dramatically since 2018. At the start of the pandemic, we realized the risks of long supply chains leading into Asia. And so supply chains started to move in the electrical industry. About 30% of our imports at that time originated in China. We’re down to about 19%.

Debra Phillips: [00:06:48] So we’ve reduced reliance on China by about 35–40% since 2018, and a lot of that had to do with COVID and the pandemic and some of the supply chain constraints around that time. But also during the first Trump administration, tariffs were live. The 232 tariffs for steel and aluminum started during his first administration and carried through the Biden administration. So we’ve been dealing with those tariffs for some time now. I think what’s happened at the beginning of the year is just sort of a rapid evolution of many, many more tariff policies. There’s been an expansion of those 232 steel and aluminum tariffs. There’s been the imposition of copper tariffs for the first time. There’s been bilateral tariffs. And probably one of the most significant trade and tariff activities have been around Mexico and Canada, our neighbors to the north and south. As you mentioned, the electrical ecosystem in North America is highly integrated. Electricity flows across borders. Our products are pretty much harmonized from a standardization perspective. So we do a lot of business in Mexico and Canada, both from an import and an export standpoint. And so the U.S., Canada, Mexico agreement provided a lot of trade incentives to that North American ecosystem. But our neighbors in Canada and Mexico have been caught up in some of this trade and tariff activity.

Debra Phillips: [00:08:28] And so that’s been a challenge for the electrical sector because as supply chains moved out of Asia, many came here to the United States but also to Canada and Mexico, where it made good economic sense. And so we really are supportive of a robust trading environment with those neighbors. So we’re navigating the space. I can’t tell you the exact number, but there’s been something like 50 tariff actions since January 21. And so we’re trying to help our companies navigate it and just understand what’s changing on the day to day. Because from a bureaucratic standpoint, it’s not a minor issue. The steel and aluminum action was taken on a Friday. It was in effect on a Monday. And all of a sudden, manufacturers are having to calculate how much steel and aluminum are coming in in derivative products to calculate the basis for their tariffs. So from a bureaucratic and administrative standpoint, it’s not an easy task as well.

Winn Hardin: [00:09:48] Right. And that’s also based on where we’re importing the actual raw material from. I mean, whether it’s copper, steel, or aluminum. It’s not just calculating it once based on a certain class of material. We always need to multi-source. That’s what makes supply chains more robust. But I can only imagine the purchasing agents losing three or four years, looking three or four years older in just a couple of months and suddenly having this kind of hairdo after that scenario. Tom, has it been in your experience, when we talk about — Debra, you mentioned something just a minute ago about reshoring and how Canada and Mexico have played key partners in that effort. And we talk a lot on automation and more advanced technology, and we’ve seen the exact same thing. Most of the reshoring efforts that have happened have gone to Mexico in many cases. But maybe this is a question for both of you. Debra, you mentioned raw materials and the copper, steel, aluminum that make the enclosures and a lot of the key components. And then you’ve got Tom making finished and assembled meters. You’ve got switchgear providers where the vacuum interrupters are coming from Asia, but the actual cabinet assembly and everything here is usually done in the U.S. And I think a lot of people might be surprised — I know I was — to see that you guys are the number two importer of these types of materials, U.S. based. So is there any differentiation? You’ve mentioned raw materials and just inputs that we’re going to form into it. Components. I’m wondering is there any differentiation between the level of componentry that’s imported versus the final assembly that may be done more here in the U.S.? Is that even worth talking about in this scenario?

Debra Phillips: [00:11:27] I can start, and Tom you might add to this. I think it really depends on product category. So when you’re representing a sector that ranges from lighting products to transformers to wire and cable, it really depends on that product category that you’re talking about. But I would say across all of those product categories, there’s been a tremendous amount of investment in U.S. manufacturing over the past five or six years — $185 billion invested in U.S. manufacturing. That’s not Canada and Mexico. That’s manufacturing in the electrical industry that’s coming back to the United States. And a number of big announcements just in the past week or two: $1 billion from one company focused in Virginia. Another company, another $100 million. So the investments, I think, across the range of electrical materials to be manufactured here in the U.S. has been quite striking over the last five or six years, I think in part due to this focus on bringing more of our critical infrastructure manufacturing back here in the U.S.

Winn Hardin: [00:12:41] And that goes whether it’s a raw material, rolled steel to the componentry, to the assembly. It’s what’s coming back to being reshored in every one of those categories.

Winn Hardin: [00:12:51] All right. Tom, what’s your experience with supply chains? You’re the boots on the ground. How has it impacted and is NEMA doing certain operations or things, or other associations, that are helping you to manage the complexity of that new emerging supply chain?

Tom Lawton: [00:13:06] Yeah, I mean, they certainly are by raising the awareness, if nothing else. But they do a lot more than just that. For us, supply chains, as we all know, supply chains kind of broke partway through the pandemic, and all of a sudden things that as consumers and as businesses we were used to receiving in days and a few weeks suddenly became 12, 24 weeks, six months, a year-plus. We still have a couple of items that are out well over a year, and that’s problematic. You can’t plan for business demand that far out and be very accurate, unless it’s something that is worth billions and billions of dollars, like a power plant.

Winn Hardin: [00:13:50]  Yeah. Greenfield deployments.

Tom Lawton: [00:13:54] Right. But for these small things, you just can’t do that. And we make everything but the meter. We make everything around that meter. So we have a wide variety of components. We have a wide variety of materials. We started a large effort in fact in 2017. It was serendipitous. It was a good time to do it. I’d like to say it was brilliant planning. It was really just luck. But we had decided that we needed to differentiate ourselves from our competitors even more. All of our competitors in the U.S. make great product, because the electric utility industry demands that all of their suppliers do that. So we can’t differentiate on quality. That’s table stakes. But what we can differentiate is on the value, and part of that value proposition is the lead time. So we started bringing more, and we did a lot of vertical integration and have continued and accelerated that through the pandemic when things broke. And so we do more and more in-house, where we bring in metal, we bring in pellets, and we ship out finished products. But there are components — we’ve seen a huge initiative and investment by our government in chips. Why? Because it turns out we were not making them anymore in the United States. There’s a lot of electronic components that there is only one place to get them in the world anymore. And that’s not a healthy thing, because suddenly when that source says, “Oh, sorry Winn. It’s 42 weeks for that component,” that’s problematic even when that component is worth tenths of a penny. But “Sorry Winn. It’s 42 weeks.”

Tom Lawton: [00:15:43] So we’re working really hard on working with our local suppliers, which we always have, but we’ve redoubled our efforts. We’re working really hard on bringing more and more things in-house. A lot of our manufacturers, the owners, are starting to retire, and there’s not necessarily a next generation behind them, at least on the smaller, privately held side of things, and so we’ve actually purchased several of our suppliers over the last 10 years as they retired. And then we brought them in-house. It’s a big building. We have room.

Winn Hardin: [00:16:16] You can see it right there. Although they need to let you inside the building, Tom. Really. Making the CEO sits in the front yard seems wrong.

Tom Lawton: [00:16:23] It’s a beautiful day out here. It’s a beautiful day.

Winn Hardin: [00:16:27] Sorry to interrupt.

Tom Lawton: [00:16:29] It’s okay. So again, what NEMA has been doing has been raising awareness. They have been working and lobbying incessantly on our behalf. They’re making the business world more aware. They’re making our government more aware. They’re making even consumers more aware that we need American manufacturing. We need suppliers that are in the U.S., and our utility customers need us to be right here in the U.S., a short drive or a short plane ride away, because we expect our utilities to be reliable and they need reliable vendors. We are right here for them.

Winn Hardin: [00:17:10] This seems like the perfect pivot to my next question, which is Debra, I know the bare minimum about the Make It American program that NEMA has launched. I’m going to guess that it has an impact on what we’re talking about here with Tom and his supply chain management.

Debra Phillips: [00:17:25] Yeah, it was the actual perfect segue. So maybe I’ll preface the introduction of the Make It American program with just a little around how we’re positioning the industry around this current trade and tariff environment. We understand the motivation, the idea that we’ve got to bring more critical supply chains back to the United States. We support the idea that we need to manufacture more here. We need an energy system that’s resilient and flexible and uses our domestic resources. And we support the idea that we’re going to win the AI race. And AI as you know is really energy intensive. And so we know demand is increasing. And all of those goals we can get behind, and but at the same time, while we’re ramping up and trying to do all of those things, this current trade and tariff environment, it’s complex. It’s raising costs. And we’re sort of raising our hand and saying, hey, we don’t want to lose pace on these investments in U.S. manufacturing, on these grid investments, these AI investments, because the cost of business is going up due to tariffs. So we’ve really been talking with the administration about making sure that there’s incentives to go along with these tariffs in these important areas like grid, like energy, power infrastructure, and data centers.

Debra Phillips: [00:18:55] And in addition to those incentives that we’re asking for in the form of tariff offsets, we also want to get behind identifying products that are made here at home so that purchasers can identify those. And this started a couple of years ago. When the bipartisan infrastructure law was passed, which sent trillions of dollars into the marketplace to upgrade our infrastructure, those trillions of dollars had domestic content strings attached. To get hold of those federal dollars, you needed to prove that about half of the value of the product was produced here domestically, and companies were struggling with how do you prove that? How do you evaluate your supply chains? Once you do it, how do you mark your product or mark your facility? And there were good guys that were doing the right thing and jumping through all those hoops. And then there were other players that were kind of, “Yeah, okay. Yeah.”

Debra Phillips: [00:19:57] And upon further investigation, you could see that it wasn’t a very robust undertaking to get to that answer with those bad guys. So NEMA stepped in, and we developed a standard around how to evaluate supply chains. We developed specifications for particular product categories like wire and cable, low-voltage distribution equipment. Worked with our member subject matter experts to put those documents in place. And then we started offering a certification to those standards, so you can certify that your company and a particular facility has the ability to make those domestic content decisions. And you can also certify down to the product level that you’ve got products that have been evaluated and they do in fact pass the domestic content test. And once you do that, you can mark your product with our Make It American mark. And so Tom and the TESCO team were one of the first entrants into this certification program. We now have about eight companies that are through that process and now starting to offer products out to the market with the NEMA Make It American mark.

Winn Hardin: [00:21:18] Gotcha. Quick question before we start to get Tom’s response to what it’s been like to go into the program, what it’s meant to TESCO. Debra, has been working with, say, NIST or Department of Commerce? Where does the responsibility lie for working with you and helping you develop these?

Debra Phillips: [00:21:35] So we are an American National Standards Institute accredited standards body. So we abide by ANSI rules. Tom mentioned that ANSI governs the meters that his company produces as well as a lot of other electrical equipment. So we an approved standard developing organization. So we’ve got the authority to do that on the industry’s behalf. But having said that, we want to develop the standards, but this Make It American program is only good if the market recognizes it as robust. So we’ve been having a lot of discussions with government agencies that are funding these infrastructure projects, whether it’s the Department of Energy, the Department of Transportation, Department of Commerce, the Made in America office in the White House, EPA, the Small Business Administration to educate them about this program, to point them in our direction and our list of products and companies that have been through this, as well as state agencies, because a lot of the funding flowed from federal down to state level. So we’ve been having this discussion with about a dozen state agencies around the availability of these products, the companies that have gone through the program, so that they can feel confident in procuring product from these certified entities.

Winn Hardin: [00:23:02] Okay. Okay, great. And we’ll get Tom’s response on going through it, but I’m very interested at some point, Debra, maybe you can come back in a future question. I mean, the original Made in America program, CE marks. Around the world, we’ve seen these best practices that are basically honor-based systems, right? There’s no enforcement mechanism. Maybe there is a certification system in some cases. I think we’ll be talking a little bit about that. So at least there’s a paper trail that this process has been pursued. Or in the case of UL — you don’t put a UL mark on something unless you’re serious, because UL will come back. And you never want to talk about the stick. So I want to focus on the carrot. And Tom, you can tell us about all the great things that have happened from that. But it’ll be interesting to hear if there’s any sticks in the background. So, Tom, what’s it been like at TESCO?

Tom Lawton: [00:23:49] Well when you talk about there are many voluntary programs that are out there, and the issue with that becomes that that really starts to water down the value of those claims, because people say, “Oh, Winn, I’ll bet the content is only 10% or 20%, or maybe all they do is put the cover on in the U.S. and they call it made in the U.S.”

Winn Hardin: [00:24:14] Right.

Tom Lawton: [00:24:15] And people want to see that just like UL was a construct actually of electric utility companies, it was a construct in the early days of electrical appliances, where a lot of manufacturers didn’t know what they were doing, and they would provide plugs with wires for their appliance that were two bare copper wires. Well, that’s not going to do very well. And fires were caused. People were hurt. It was really bad. UL came along and said, “Look, if we test it and put our mark on it, it’s safe.”

Winn Hardin: [00:24:53] Right.

Tom Lawton: [00:24:53] And the U.S. public agreed with that. We have ANSI standards. The ANSI standards have no weight of law. We are one of the voting members when it comes to electric meters. We also participate on the EV side because the superchargers that you use, there’s basically an electric meter in there. So we make the equipment to make sure it’s accurate.

Winn Hardin: [00:25:19] Right.

Tom Lawton: [00:25:19] But the standards groups, the standards that we create are only voluntary until a utility commission in a state says, “Hey, we’re going to use that for our law.” At that point it becomes law and it’s the stick, as you said, not the carrot.

Winn Hardin: [00:25:35] Gotcha.

Tom Lawton: [00:25:35] NEMA has always been great, and it’s been very well-known to us over many, many years because they act as the secretariat for our Committee on Electric Metering. They publish all the standards. If you need an electric standard, if you’re having trouble sleeping at night, don’t take a pharmaceutical. Just read those standards. They will put you to sleep, I promise. But they’re very technical, and they’re very well thought out. NEMA does all the administrative work to put that together, and that’s a lot of work. The gentleman that has done that for years is just phenomenal. And then NEMA publishes it. So it was a natural when this whole Build America, Buy America came out from the federal government. NEMA put some structure around it and they said, “Okay, let’s create a process and a standard,” and they were the right ones to do it. And so we did. We jumped in. We were one of the first ones to go through it because we wanted to demonstrate just how much American content is in our products. And it is not 100%, but it’s darn close, because as I said before, there’s just a couple of things that sometimes you can’t get. Many of our products are 100%. Many of our products are 90%-plus. But in the Make It American program, we could demonstrate for each of these products: Here’s what it is. Here’s the paper trail. Here’s the outside certification. And oh, by the way, just like UL, just like ISO 9001 and things like this, you have outside auditors who come in and say, “Hey, Winn, show us your documentation. Show us that you made this product here in this building. Show us that this was formed on your press brake. Show us where this metal came from.”

Winn Hardin: [00:27:22] Right.

Tom Lawton: [00:27:23] They put the structure around it, and again, NEMA’s been great. They are recognized throughout the country. They will administer and publish all of these ANSI standards. They know how to put standards together. They know how to put audits together. And they did a really nice job. They did a really nice job. So it’s a lot easier for us to have a conversation with our customers and their procurement departments. And as soon as we say, “Yeah, this is the NEMA certification, the Make It American. We’ve gone through their process. We’ve got their audit.” Now they can believe, “Ah, okay, TESCO is doing what they said they’re doing.”

Winn Hardin: [00:28:03] Full faith that it’s not just an empty promise but one that they can actually take home and sleep comfortably with without risk of fire or health damage. Debra, what can you tell us about the specifications? What are the level of requirements and where’s NEMA today and where are we going?

Debra Phillips: [00:28:21] Sure. So there’s kind of, I guess I would call it a foundation standard that talks about the process that any organization that’s doing a supply chain evaluation to determine domestic content would have to go through. So it’s rigorous in that it clearly abides by all of the Build America, Buy America requirements to receive federal funding. So very rigorous, but flexible in terms of its implementation, so a company like TESCO can go through this process and a company like Siemens can go through this process. So it’s got to be scalable so that organizations of all sizes, all types could navigate it. So that’s the base document that describes the process that would be used to evaluate supply chains. And then to go along with that process document there are specifications that go deeper into certain types of products. So I mentioned there’s a wire and cable specification. There’s a low-voltage distribution specification. There’s a high- and medium-voltage distribution equipment spec. There’s a building control system spec and a grid automation spec. So it gets into products in those particular applications. There’s certain componentry that is common in those product categories. So it goes a little bit deeper in terms of how to evaluate those components for domestic content in those particular product categories.

Debra Phillips: [00:29:58] And that’s where some companies have decided that they want to mark product. And so they’ll go deeper, and they’ll get that product specification and demonstrate to the auditors that come in and look at their manufacturing facilities and look at these specific products that they’ve gone through this rigorous evaluation. And there’s more coming. There’s a few more specs coming on motors, dynamic messaging signs. So this is really important highway infrastructure that’s being invested in, electric vehicle supply equipment, and industrial automation. And those companies are members of NEMA too. So an industrial automation product spec coming. And I just wanted to add: We’re not the auditors. We set the standards. We set the specifications, but we bring in third parties. And UL is one of those third parties that comes in to actually do the audit and make sure that the company and the facility and the particular product that’s being looked at meets the specifications. And when that third-party auditor affirms that that’s the case, then we issue the marks that can be used by the company.

Winn Hardin: [00:31:18] Gotcha. I know from working with a lot of manufacturers and a lot of different spaces over the years, the larger the product portfolio, the more difficult it can be to get these certifications, especially down to the individual product level. Which is something that small and medium-sized manufacturers worry about, whether it’s in switchgear or lighting systems, LED lighting systems, for example. Are smaller manufacturers able to leverage work that larger companies or component makers may have done? Or are there other ways that you’ve specifically said, we understand the 100-, 200-, 300-person outfit, applying these kinds of standards and going through that level of certification — whether it’s UL, IEC, or some of the other third party — can be an expensive task. Is there any advice you can give to them about how they can be part of this program?

Debra Phillips: [00:32:11] Tom, do you want to take that? Well, I’ll just start by saying it was really important to us that companies of all sizes can go through this process, because, in fact, a lot of our smaller members, about half of our member companies, are small companies, would meet the Small Business Administration definition of small companies. And a lot of those small companies are doing business largely in the United States. Their supply chains are largely domestic. So they would be a huge beneficiary of this program. So it was really important to us that we developed a program that they could navigate, that they could get through. And one of the reasons why we were so happy that TESCO kind of went through it early to tell us: Is this achievable for a smaller company? And you heard Tom’s experience, and I’m sure he’ll say more, and I’ll just say two of the companies that were going through the process last week were smaller companies. So we’re getting good uptake from that small-company audience, and it really was one of our targeted audiences because we know how important these domestic supply chains are to our smaller members.

Tom Lawton: [00:33:20] And the folks at NEMA were really good about telling us, “Okay, here’s what we need.” So our team understood what the process would look like before they came so we could prepare adequately. And we didn’t have to prepare on a Friday afternoon at 4:00. We could do it when we had the time. We could prepare. They came in. They were there for a couple of days, as you would expect on any sort of external audit. They’ve got to get a lay of the land. What are you making here? What’s your process look like? Talk to the people. Make sure that it’s not just — it’s got to be more than just a paper document. “Oh, look, Winn, we’ve got a great process. Here it is. It’s 3 inches of paper.” Well, right away you should be suspect, because that 3 inches of paper, there’s no way anybody on the manufacturing floor ever read all 3 inches of that. Is procurement really handling that? Are you tracking everything correctly? What’s your process? Show us that the metal you thought you bought is the metal that got used in this product. Show us what you’re doing. So they made it relatively straightforward. I won’t say easy. Nothing’s ever easy. It’s straightforward. They told you, “Look, this is what we’re going to look at.” And then they came in and they spent the time to really do it. It was not overly disruptive. So even for a small company, a lot of times, as smaller companies, you look at these bigger behemoths and you say, “Oh gee, they have a whole department to do that.” Well no. We gave them our heads of manufacturing, our plant manager, several of his key folks on his staff, and they went through the different departments and products. And it was a very manageable process. So they did a great job. I thought of making sure that it was accessible to smaller and larger companies.

Winn Hardin: [00:35:07] And that audit process took pretty much two days on the ground at TESCO?

Tom Lawton: [00:35:11] Correct. Correct.

Winn Hardin: [00:35:12] Can you tell us how long the preparation went before that, and related to it, did you find that you had to create new systems or tracking procedures or paper trails to be able to qualify? Or was it pretty much there? And it was just bringing together the tribal knowledge into a place that showed, proved what you were doing already?

Tom Lawton: [00:35:34] So yes and yes. Anytime that you go through an external audit, it forces you to take a few things that you take for granted, that is verbal. You know, geez, Debra, every time we do a podcast with Winn, we always have a pre-meeting, and we spend about 15 minutes. We kind of go through things. We make sure that everybody’s on the same page. We know what we’re going to be talking about. And that’s not documented anywhere. It’s just, well, of course you do that. So it forces you to actually document, and in the documentation, you end up creating better checklists. And most businesses rely on checklists. There’s a packing checklist. There’s the process checklist. There’s the assembly, the testing, the painting. You name it — there is a checklist. And just in forcing you to go through the rigor of doing it, because somebody from the outside is going to ask you for it. It forces you to tighten up your process. So yes, we had the processes already in place. But we also documented them a lot better and tightened several of them up as a result of the audit.

Winn Hardin: [00:36:46] That’s great because especially small enterprises, you spend so much time doing, they don’t always have the time to take a step back, look, evaluate. When you have to quantify efficiency, it forces you to learn some quick lessons. And you always come out the other side better for it. So that’s fantastic to hear about. Tom, were there any other particular legislative, either in the past or forthcoming, or regulatory actions that either impacted your business or made this program more exciting for you?

Tom Lawton: [00:37:16] So I’ll take that as a two-part question.

Winn Hardin: [00:37:21] You can take it as a four if you want. There was a lot of ifs, ands, or buts. Up to you, bro.

Tom Lawton: [00:37:25] So the first part about legislation, and I’ll move back to something a little bit away from the tariffs and things of that nature. But Debra mentioned that early on we were all very concerned about tax, and we were very concerned about tax because our employees were not moving ahead. We gave very substantial raises and rate adjustments. I wouldn’t even call them raises as much as full-on rate adjustments. For this job, we’re now paying this amount, especially as COVID went on. And when it appeared that there was a chance that the 2017 tax program could actually — it was going to go away. It was literally going to go away. That’s the way the legislation was written. And if that had gone away, that would have been a real disaster for us. And everybody who works here at TESCO, and NEMA was really good about making sure that the administration understood the needs. We had hosted a Ways and Means Committee meeting. They were the ones who were tasked with writing or suggesting the new legislation. So people kind of forget already that that was a big deal. And NEMA and the administration, they got something done that was really important for all manufacturing, all manufacturers. I thought it was very telling that at the meeting we hosted here at our place, we had 20 people from all political spectrums — left and right and in the middle. And the one thing that everybody agreed to was it was not better for any of the production folks or the professional folks or the workers in manufacturing or retail. It was not better. And if we didn’t do something on the tax side of things, it was going to get a lot worse. So it was interesting that everybody coalesced around it. It wasn’t political at all. Like I said, we had all political spectrums in that room.

Tom Lawton: [00:39:25] And I think the congressmen that were there I think they were a little surprised by the fact that everybody came together on it. So NEMA did a great job of helping to convey our needs and desires. And the administration and the Congress did a good job doing it. In terms of the tariffs and the Make It in America, Build America, Buy American, are these helping? Yes, they are helping. We are not typically the kind of company to go out and get mandated contracts. Hey, as a result of this certification, you must give us this contract, or we’re only one of two or three people that can get it. That’s not the universe that we play in, but it helps tremendously in the conversation because the awareness is sky high. More people are talking about it. We host a manufacturing day for local high schools. Pre-pandemic, we couldn’t get 30 people in the room. We had over 100 last year. This year our event is coming up in October. That’s Manufacturing Month. We’re hosting it the third week of October. We have a day. We have not one, not two, not three, which had been our previous record for a number of high schools participating. We have six high schools from within a 10-mile radius who are all coming, and they are bringing 200 students.

Tom Lawton: [00:40:54] Because people realize that manufacturing is a great career alternative, is a great career period. Whether they want to jump right from high school into the workforce or they want to go and get a college degree and go into the workforce or they want to go and get an advanced degree and go into the workforce. All those people are here. We have PhDs and we have GEDs working here.

Tom Lawton: [00:41:19] We have immigrants working here. We have people that can go back to the Mayflower. And they’re all working side by side, because manufacturing, these are real careers. These are great careers. They weren’t great careers back in the 1950s. These are great careers in the 2020s and beyond. And people are suddenly starting to recognize or remember that again. It’s amazing. And programs like this, these kinds of certifications are huge in making the general public aware, because not only do we sell to utilities, we have to market to the general public because we need the best and the brightest to come work here.

Tom Lawton: [00:42:01] We need the hardest workers to come work here and make these things. I can’t tell you how important that is. It’s not legislative. Nobody’s giving us millions and millions of dollars of contracts because of this. But we’re getting really good people, and we’re having great conversations when we’re sitting in the procurement office or the engineering offices and saying, “Yeah, we make everything right here.”

Winn Hardin: [00:42:29] And just the whole process of manufacturing is nothing like it was 20 and 30 years ago. There’s so much more technology. And companies and enterprises are leveraging that technology to appeal to younger workers, who are used to it and want it, as well as different hierarchical reporting structures and the ability to share information on a flatter scale than what — maybe not Debra because you’re too young, but Tom, you look like you’re kind of close to my generation in terms of the organizations we were used to. So I can’t wait to see some video about how that school days activity goes. And it should be really, really exciting. Debra, before we move on, is there any kind of requirement related to GSA, folks who play in the GSA, not just the DOD, but general GSA as it relates to the Make It American program?

Debra Phillips: [00:43:24] There’s domestic content requirements tied to all of that federal funding. And the requirements that were embedded in the bipartisan infrastructure law are just one example of domestic content requirements. But there’s many others that are in place across federal agencies. So we expect with this administration even more focus on domestic content. For infrastructure projects, the domestic content requirement is currently 55%. By 2027 it’ll go up to 75%. And other domestic content programs are formatted similarly, where it ratchets up over time. So we expect more and more focus on the percent of products that are produced right here at home across federal agencies in the coming years.

Winn Hardin: [00:44:26] Gotcha. And this is really an ignorant question on my part, because I’ve known NEMA for decades, but I’m assuming you guys have some Canadian manufacturers and Mexican manufacturers who are members. Is that a fair statement?

Debra Phillips: [00:44:38] Oh, yeah.

Winn Hardin: [00:44:38] I know there’s a separate cUL for Canada operations and everything. What do you have to say for folks who are on the other side of the border but still would like to see this sort of program?

Debra Phillips: [00:44:52] Yeah. Well, so we coordinate quite extensively with our partners in Canada. The trade association up there is called EFC. And we have a counterpart in Mexico as well called CANAME. And so we coordinate quite extensively. I think we’ve done that even more this year because of the trade dynamics. And I expect that to increase as we move into next year because now the shotgun has gone off for USMCA renegotiations. And so once this process really ramps up in earnest, I expect that we’ll be coordinating quite extensively to try to get that trade agreement in good shape, because I think there’s a good understanding of what we’re doing here for Make It American and why. But there’s also a commitment to keep this trade system between U.S., Canada, and Mexico going. We’re stronger if we can continue to trade with one another. Each of us has our own strengths in terms of size of the economy, in terms of natural resources, in terms of workers and employees. And so we want to take advantage of that and really think that we as a region can outpace the rest of the world if we work together. So those relationships are strong and good, and I expect them to really be leveraged in the coming year or so.

Winn Hardin: [00:46:25] Yeah. Would you agree that it’s kind of a fair statement that a program like this, its end goal is not to be 100% American-made, right? I mean, we’re not trying to undo a lot of the market growth and the markets that came open to us because of some level of globalization. It’s about having those critical pieces of equipment local where you need them both for supply chain support as well as for critical infrastructure.

Debra Phillips: [00:46:48] That’s absolutely right. That’s absolutely right.

Winn Hardin: [00:46:50] Beautiful, beautiful. Are there any last thoughts that you guys wanted to share regarding what we should be looking for from NEMA in the next phase? It was taxes not too long ago. And now we’re talking about the Make It American program. And I would love to hear some of the progress on advanced quick equipment depreciation, because that always does really good for us manufacturers. Anything else on your boards, Debra?

Debra Phillips: [00:47:14] Sure. Well I think we’re spending a lot of time really trying to think about our energy system, our grid system, and its readiness for the demand that’s coming online. A lot of that is is being driven near-term by data centers and AI. But longer term it’s electrification of industry. It’s electrification of mobility systems. The onshoring of U.S. manufacturing requires a lot of electrical infrastructure. The average data center, 40% of it is electrical. So that’s great for business. But we don’t want the grid to be a limiting factor for growth. So we’re spending a lot of time with our utility partners, with our data center partners, with our power infrastructure partners, really thinking about how we transform our U.S. grid to be more nimble, more flexible, more interconnected. We’ve got to deploy efficiency technologies. Generation is important. And, yes, we’ve got to bring new generation online. But that takes time. And in the meantime, we’ve got to do things more efficiently. And there are a lot of electrical technologies that help us do that. Whether digital substations, use of AI, reconductoring, dynamic line rating. There’s just a lot of market-ready technologies that we can deploy to help our grid as we bridge the gap between what we’ve got online to deliver electrons today versus what we’re going to need 10 years from now. So really that’s our future, five-year-out focus.

Winn Hardin: [00:49:01] Well we’re glad you’re there taking the lead on that because  even before we talked about AI, before we had Bitcoin exchanges, before we had all these other huge — renewables, electrification of transportation — we already had a grid that was old and needed some love. And control systems and everything were already at a point where we really needed to step up and make some changes. And then suddenly we increased demand by, what, 10x, over a very short period of time. And this is not going to plateau anytime soon. So there’s certainly an important need, and focus and time and attention in the near term are certainly critical. So I appreciate, Debra, all the work you’re doing. And Tom, thanks for joining us today and keeping the meter’s rolling over at TESCO — surely appreciate that.

Tom Lawton: [00:49:47] Well, the heart of a smart grid is the smart meter.

Winn Hardin: [00:49:50] Right on. Right on. There you go. We’re going to be over at Snyder’s partner conference pretty soon, so maybe we’ll see you there and be able to continue this conversation or next year at the NEMA show or so many other places. Look forward to hearing, Tom, how TESCO has used this to benefit even further heights, and maybe there’ll be something new at that point I’m sure we can talk about. But in the meantime, Debra, Tom, thank you so much for joining us today. I really appreciate it. To all the folks out there, we hope you like and subscribe to this podcast. If you want to see any of our past episodes again, Manufacturing-Matters.com for the primary website or check it out wherever you go for your podcast or your favorite platform. If you have any questions for Tom or Debra, please get them to us directly and we’ll forward them on or go right to their people at NEMA and TESCO Metering. And until then, thanks again for joining us on Manufacturing Matters.

Tom Lawton: [00:50:40] All right. Thank you very much. Good to see you, Debra.

Speaker4: [00:50:43] You too. Bye bye.