Site Visit: Houston has a Regulatory Problem that Advocacy Aims to Solve
By David Rostker, Assistant Chief Counsel
International trade and the oil industry are the lifeblood of the Houston economy, and as the major oil companies expand domestic and international operations, small businesses in Houston grow with them. The Office of Advocacy visited two such small businesses in Houston that fill very special needs for the oil industry operating here and abroad.
Everest Valve Company designs and manufactures custom high-quality valves for the most demanding environments. Engineering firms around the world, including large multinationals like KBR, rely on Everest to provide reliable valves for facilities engaged in oil and gas production, petrochemical processing, pharmaceuticals, and even waste incineration. Everest was founded in 1978 by two immigrants, President Phillip Blest and Vice President Braja Das, working from their homes. They built their reputation and capacity, first with a contract with the Department of Energy to provide check valves in the construction of the Strategic Petroleum Reserve, and then, in their big break, an order for tank bottom valves for Exxon Mobil. They have grown to a multi-million dollar business, employing around 30 engineers and fabrication professionals, milling their high-tolerance product from U.S. steel and alloys, offering valves ranging in size from ¾- inch to 10 feet. They have sold valves around the world, with almost a quarter of their sales to Mexico and Canada.
Even with this record of success, Everest has the challenges of a lot of small business. Cash flow constraints strain their finances. They have successfully relied on first Ex-Im Bank, then SBA programs, including the Export Working Capital Program. However, their long-time source of private finance is leaving SBA’s lending guarantee programs, reminding the Office of Advocacy that these SBA programs rely heavily on a private market that is very sensitive to overregulation. The SBA District Office in Houston is working with Everest to find alternative sources of private capital that will work with the SBA Loan Guarantee Programs.
Everest is looking to the future. It is now a family business, with a son, a daughter, son-in-law and a nephew all working for the company and preparing the company for the next 40 years.
Another small business we visited was Axistrade, a company that provides maintenance repair and operations support to multinational clients, including many of the major oil companies, by sourcing and shipping a wide range of commercial and specialty products to domestic and international facilities. The business ebbs and flows with the international oil market, as it expands through West Africa, the Middle East, and Central and South America. Although it currently does little business in Mexico, the Founder and CEO Sadik Dalal hopes that recent efforts by U.S. companies to break into oil exploration in Mexico will expand their exports there as well.
Founded in 2001, Axistrade grew slowly until it was able to secure financing through SBA programs like the Export Working Capital Program, eventually growing to over 30 employees today, in their own warehouse. Around 80 percent of their shipments go by sea, making proximity to the Port of Houston key to the success of their business.
One of the biggest challenges Axistrade faces operating internationally are non-tariff restrictions on the oil operations. For example, some countries require U.S. companies operating overseas to source locally MRO support, which, in practical terms, means that Axistrade is forced to sell to an overseas middleman in order to support their clients. This increases the risks, both of nonpayment and failure to deliver on-time, and reduces profit margins.
Axistrade’s main complaint about federal regulations was the complexity of human resources work, from requirements on hiring and payroll to the mandates in the Affordable Care Act. Its solution is to contract out to a large firm specializing in Human Resources so Axistrade can focus on the complexities of international logistics.
The Office of Advocacy greatly appreciates the efforts of the SBA District Office in Houston, led by District Director Tim Jeffcoat and Deputy Director Mark Winchester for arranging for these two invaluable site visits.
Advocacy was in San Antonio and Houston, Texas for Regional Regulatory Reform Roundtable and NAFTA Modernization Outreach Meetings on March 19-20.
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David Rostker is an Assistant Chief Counsel for Advocacy whose portfolio includes the environment. Rostker can be reached at firstname.lastname@example.org.
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