Analysis: Impact of US import duties still murky

Akron, Ohio – A strange thing happened along the path to throttling the Chinese threat to the US tire industry.

It never really quite happened. At least not yet.

There have been noticeable departures of some importers/distributors, and trade data indicate that Chinese imports are down – way down – but some wholesalers indicated they’ve not seen widespread panic among legitimate importers of Chinese-sourced tires.

There aren’t widespread shortages. There hasn’t been a measurable increase in prices.

While the reasons for this are both myriad and murky, at least part of this phenomenon can be traced to the stockpiling of tires in the fourth quarter of 2014 by importers/distributors hoping to augment their stocks ahead of the imposition of antidumping and countervailing duties, originally expected to happen before the end of 2014.

That strategy appeared to backfire, however, when the US Commerce Department made the duties retroactive by 90 days when it announced them in January. That decision had a temporary chilling effect on distributors, some of which started raising prices almost immediately.

Tire Business, ERJ’s sister publication in the US, has been monitoring the US duties investigation since the United Steelworkers union petitioned the federal government in June 2014 for relief from rising imports of China, which it claimed were subsidised and being dumped in the US.

Commerce defines countervailable subsidies as “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.”

Dumping, according to Commerce, occurs when imported merchandise is sold in, or for export to, the US at less than the normal value of merchandise.

“The dumping margin is the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise. The weighted-average dumping margin is the sum of the dumping margins divided by the sum of the export prices and constructed export prices,” Commerce said.

The department later reduced the amount of duties and eventually rescinded the retroactive order. More recently, Commerce directed the Customs and Border Patrol to “refund any cash deposits made to secure the payment of estimated countervailing duties with respect to entries of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after 2 Sept 2014.”

As a result, merchandise that in effect was being held “in limbo” due to the on-again/off-again nature of the actual duties being levied and the retroactive question is now free to be moved out of storage.

Since the duties became effective officially on 10 Aug, it’s too soon to determine what effect this will have on supply and pricing.

Affected companies have made a number to deal with the elevated duties:

• Cooper Tire & Rubber Co. moved production of certain lines of tires to its plant in Krusevac, Serbia, from China to move away from the tariff situation on tires from China. Cooper declined to identify which lines were moved.

• Aeolus Tyre Co. Ltd. suspended distribution of passenger tires in the US after it was hit with the highest duties, which tallied at 120.6 percent. Aeolus’ consumer tire program was still in its infancy, having started in the US in 2014. Mike Leverington, general manager of Aeolus Tire America, said the company felt those levels of duties would be difficult to absorb and instead decided to redirect its consumer tire export capacity to other markets. Aeolus continues to import and distribute Aeolus-brand truck tires, predominantly through Alliance Tire Americas.

• Shandong Linglong Tyre Co. Ltd. has shifted all of its production for the US to its year-old plant in Chonburi, Thailand, according to John Hagan, the COO of Linglong Americas, the Chinese tire maker’s recently established sales/liaison company in Medina, Ohio. That plant – operating as Linglong International Tire (Thailand) (LLIT) – opened in early 2014 with annual capacity of 2 million tires with plans to quintuple that to 10 million.

• Foreign Tire Sales shifted production of its Prometer line to Linglong’s Thai factory. The Union, New Jersy-based private brander decided to make the move last fall and is ramping up production in Thailand as rapidly as possible, a spokesman said. The shift involved moving molds from China as well as providing LLIT new ones.

• Atlas Tire, a Copley, Ohio-based distributor of Atlas-brand tires, has disbanded, and Linglong Americas has taken over responsibility of the brand, which it had produced for Atlas.

• Independent Tire Dealers Group LLC dropped the Diamondback brand and Tire Alliance Group dropped the Auto Grip, Blacklion and Runway brands in favour of the Achilles and Vee brands, produced in Indonesia and Thailand, respectively.