OTR antidumping duties-is anyone really happy? 'Level playing field' debated as case winds through court

By Miles Moore, Senior Washington Reporter (TB)

Washington DC -- Stiff antidumping and countervailing duties on off-the-road (OTR) tyres imported from China have been in place in the US for nearly 2½ years.

They seem likely to remain in place for the foreseeable future, despite a federal judge's reversing and remanding the duties nearly 18 months ago. Under federal statute, the duties will remain in place if and until all avenues of appeal are exhausted.

The Commerce Department's appeal of the decision will take time, said Maurice “Morry” Taylor Jr., chairman, president and CEO of Titan International Inc., who with the United Steelworkers (USW) union successfully petitioned the International Trade Commission (ITC) for action against Chinese OTR tyre makers.

“It will be years, considering the government bureaucracy and the courts and how they work,” Taylor told Tire Business. “I'll be retired by then, and I don't plan to do that for a number of years.”

The USW declined comment for this story, citing its ongoing contract negotiations with Titan.

No 'positive effects'

Titan and the USW first petitioned the ITC in June 2007, requesting antidumping and countervailing duties against Chinese OTR tyres. Two months later, the agency made a preliminary ruling of material injury.

The Commerce Department made enormous preliminary antidumping duty determinations-intended to cover underselling in the US market-in February 2008, with some tyre makers receiving antidumping duties as high as 210.48 percent. Preliminary countervailing duties, meant to counteract government subsidies to companies that export goods to the US, were much lower, ranging from 2.38 to 6.59 percent.

On Aug. 15, 2008, the ITC voted 5-1 that the US OTR tyre industry was suffering material injury because of Chinese imports, and the Commerce Department made a final adjustment of its duty findings.

Hebei Starbright Tire Co. Ltd. saw its antidumping duties (28.69 percent from 191.5) and countervailing duties (14 percent from 6.59) rise in the final determination. But Tianjin United Tire & Rubber International Co. Ltd. saw its antidumping duties reduced from 51.81 percent to zero, while its countervailing duties stood at 6.85 percent.

Twenty-five other companies listed as “separate-rate” importers saw their antidumping duties rise from 9.48 to 12.58 percent, and all other Chinese OTR tyre makers were assessed the 210.48-percent rate.

Of the importers bringing Chinese OTR tyres to the US, the one affected most drastically was the former GPX International Tire Corp., based in Malden, Mass., whose OTR tyre manufacturing subsidiary was Hebei Starbright.

The two companies brought suit against the Commerce Department in December 2008, claiming the agency's decision on duties was causing them great material injury.

GPX filed for Chapter 11 bankruptcy protection in 2009 and later that year sold off most of its assets. Its solid OTR tyre assets went to MTL Acquisition Group L.L.C., which formed Maine Industrial Tire L.L.C., while its other assets were purchased by Alliance Tire Group.

Although GPX is still listed as the plaintiff in the lawsuit against the Commerce Department along with Hebei Starbright, it no longer makes or imports tyres that are subject to the duties, according to Maine Industrial Tire CEO Bryan Ganz.

The solid OTR tyres Maine Industrial sells-which represented about 12 percent of GPX's former business-are not covered by the duty order, he said. That business is now owned by Alliance Tire.

“These duties have had a devastating effect,” he said. “The business my grandfather founded is now gone, and hundreds of employees lost their jobs.”

Only Titan and Bridgestone Americas were winners in the duty decision, and for them it was only a temporary victory, according to Ganz, who noted that Titan's sales fell in 2009. (Titan's total annual sales were $727.6 million in 2009, down from $1.04 billion the year before.)

“I don't see any positive effect from this,” he said. “It was foolish to think that we could put duties on the tyres from one country, and all that production would come back to the US.”

A pending case

In August 2010, Judge Jane Restani of the US Court of International Trade reconfirmed her decision of 11 months before, determining that the Commerce Department had been unfair to Chinese OTR tyre makers in making its duty determinations.

The Commerce Department assumes that countervailing duties level the playing field by raising the prices of goods exported to the US, Judge Restani said in her ruling. Yet, in calculating antidumping duties for goods from non-market-economy countries such as China, it compares a subsidy-free normal value with the original subsidized export price.

“Thus, the margin is greater than it would be if subsidies were reflected on both sides of the comparison,” she wrote. “These methodologies, therefore, when used concurrently, result in a high likelihood of double counting because they effectively counteract the same behavior twice.”

Taylor said he believes Judge Restani's decision eventually would be overturned.

My lawyers think that judge is way off-base,” he said. “There is no way for Commerce to be able to tell, in that society, what things sold for, because the manufacturers can just go back to the government and get more money.”

From Tire Business (A Crain publication)