The first shoe finally dropped late yesterday (Nov. 24) when the Commerce Department announced its preliminary countervailing duties on consumer tires produced in China and exported to the U.S.
The 15.69% duty level, which will be reviewed again before it is set in concrete in early April 2015, will be retroactive for a 90-day period from the official publication of the new duty in the Federal Register, which is expected to occur next week.
Separate and unique countervailing duties were set for Cooper Kunshan China Tire Co. Ltd. (12.5%), Giti Tire Fujian Co. Ltd. (17.69%) and Shandong Yongsheng Rubber Group Co. Ltd. (81.29%).
Still to come is the other shoe, a determination of anti-dumping duties, which is due Jan. 21, 2015. Both duties will impact all brands of tires exported to the U.S., regardless of manufacturer.
Countervailing duties, according to the Commerce Department, are intended to mitigate the impact of “financial assistance from foreign governments that benefit the production of goods from foreign companies and are limited to specific enterprises or industries, or are contingent either upon export performance or upon the use of domestic goods over imported goods.”
In discussions with industry insiders and analysts, a total import duty level of 45% to 50% would cause mild pricing disruption across the board, taking into account how other producers – domestic as well as non-China imports – are likely to react in order to maintain product slotting in the market.
A number of Chinese tiremakers have previously announced plans to source U.S.-bound product from plants outside of China. Giti Tire, a Singapore-based firm, has already announced plans to build a $560 million consumer tire plant in the U.S., so their exposure on the duties will be minimized.
There was no immediate reaction from the U.S. industry, which stayed largely quiet throughout the process since the USW filed petitions against Chinese makers back in June. The Steelworkers, however, expressed their excitement over the Commerce Department announcement.
“The Commerce Dept. is right to neutralize the negative effects of the unfair subsidies the Chinese government has granted to tire exporters,” said USW president Leo Gerard. “These illegal subsidies have resulted in thousands of lost American tire manufacturing jobs. If left unchecked, they would devastate tens-of-thousands more jobs in the U.S. economy.
“After the safeguard relief from Chinese tires that our union had fought for expired in 2012, Chinese tires came flooding back into the U.S. Today’s decision confirms an array of massive subsidies from China helped to drive this wave of exports back into our market. Countering those subsidies is the first step to restoring a level playing field for our tire industry and our tire workers.”
In its statement, the union said: “The USW filed the antidumping and countervailing duty trade case against Chinese passenger/light truck tires in June. According to the agency, 39 different subsidy programs are being investigated. In July, the U.S. International Trade Commission preliminarily found a reasonable indication that the domestic tire industry has been injured by Chinese tires. The Commerce Department has also agreed to initiate work on an additional nine subsidy programs identified by the USW.”