Washington – It's a (multi) million-dollar dilemma.
Is the US tire industry being threatened by rising consumer tire imports from South Korea, Taiwan, Thailand and Vietnam?
Or do tire producers from there service a portion of the US tire aftermarket that essentially has been abandoned by US-based tire makers?
Researchers from the US International Trade Commission (ITC) are poring through thousands of pages of testimony and supporting documents submitted in late May/early June from the opposing sides to try and determine who presents the better case.
All of the testimony in this case – which is based on a petition filed 12 May by the United Steelworkers union – was submitted electronically. Because of restrictions on in-person meetings related to Covid-19, the ITC opted to not hold hearings.
The commission has until 17 July to make its ruling, according to the extended deadline released 11 June by the Commerce Department. The original deadline was 29 June.
The ITC could, however, issue its ruling at anytime before then. The ruling will come from ITC commissioners, who base their decision on the commission's investigation of the submitted evidence. The staff investigative team includes an investigator, a supervisory investigator, an economist, an attorney, a statistician, an industry analyst and an accountant/auditor.
The opposing sides have outlined their positions clearly in documents filed with the ITC.
The USW said in its opening statement it believes the record will show that subject imports used "pervasive underselling" to gain market share and also "suppressed and depressed domestic prices."
"Our petition demonstrates that the average unit value of subject imports is far below the unit value of other major trading partners such as Canada, Mexico, and Japan," said Elizabeth Drake, a partner with Schagrin Associates, the Washington-based law firm representing the USW.
"In addition, domestic producers' own statements to investors confirm that low-priced Asian imports pose a risk to their operations."
The USW alleges companies in these four Asian locales are dumping products in the US at margins ranging from 33% (Vietnam) to 217% (Thailand), and it provided the ITC with nearly 2,000 pages of information supporting its position.
The USW also provided statements on the impact of rising imports from the four Asian entities on US factories producing passenger and/or light truck tires from the presidents of USW locals at those facilities: Goodyear plants in Fayetteville, North Carolina, and Gadsden, Alabama; a Michelin North America plant in Fort Wayne, Indiana; Cooper Tire & Rubber Co. plants in Findlay, Ohio, and Texarkana, Arkansas.; and Yokohama Tire Corp.'s plant in Salem, Virginia.
Combined, these factories employ nearly 8,000 hourly workers and represent about 46 million units of annual P/LT tire capacity. Goodyear's Gadsden plant, where production had been dwindling over the past couple of years, has now been closed permanently.
Each of the union reps testified that the plants where they work ramped up output in 2015-16 after the imposition of elevated duties in imports of P/LT tires from China, but in the intervening years, the plants' production tickets have ebbed as the subject imports started to rise.
In some cases, the daily production ticket in 2019-20 had fallen to below levels prevalent in the 2013-15 at the peak of Chinese imports.
The USW argues that P/LT imports from the subject areas rose roughly 20% from 2017 to 2019, reaching 85.3 million tires, valued at $4.4 billion (€3.9 billion) last year. The data show that the vast majority of the increase can be attributed to Thailand, where Chinese tire makers have built as many as five new factories in the past several years.
On the other side of the issue, Richard Smallwood, President and CEO of Sumitomo Rubber North America Inc., said in his testimony that the imposition of antidumping duties on US imports of passenger and light truck (P/LT) tires "would be economically nonsensical and harmful to the domestic industry."
Imports that are the subject of the USW petition – including those produced by Sumitomo Rubber in Thailand – “play a vital role in supplying the vast gap between the total production capacity of the US industry and total US demand," Smallwood said.
"Moreover," he added, "as is true for Sumitomo Rubber and other global tire producers, subject imports actually help to sustain – rather than threaten – the economic viability of US tire producers."
Many of the other companies testifying against the duties referenced Smallwood's position in their testimony.
Besides Sumitomo, the only other US-based tire producer to submit public testimony on the matter was Hankook Tire America Corp., which argued in its statement that based on the available evidence, at least two of the four factors that the ITC must consider in determining injury – the degree of "fungibility" and differences in the channels of distribution – "weigh strongly against" cumulating Korean imports with other subject imports.
Hankook also argues that the record indicates that the majority of P/LT tires imported from Korea are "high-quality, branded tires that enjoy a high degree of customer brand recognition" in the US market and thus do not compete in the same market tiers as other subject imports.
Other US tire makers that submitted comments deemed classified are Bridgestone Americas.
Among companies based in the subject zone that submitted comments are: Cheng Shin Rubber Ind. Co. Ltd. (Maxxis International); Deestone Corp. Ltd.; Federal Corp.; Kenda Rubber Co. Ltd.; Nankang Rubber Tire Corp.; Nexen Tire Corp.; Otani Radial Co. Ltd.; Sentury Tire (Thailand) Co. Ltd.; Southern Rubber Industry J.S.C.; and Vee Tyre & Rubber Co. Ltd.
Among US-based distribution companies that submitted statements are: American Omni Trading Co.; American Pacific Industries; American Tire Distributors Inc. (ATD); Atturo Tire Inc.; ITG-Voma Corp.; Les Schwab Tire Centers; Maxxis International – USA; Sentury Tire USA; TBC Corp.; and Unicorn Tire Corp.
ATD, which submitted comments on its behalf and for its Hercules Tire & Rubber Co. subsidiary, said it agreed with arguments presented by other respondents that demonstrate "there is no reasonable indication of material injury or threat thereof by reason of subject imports in this case" and imposing elevated duties on imports of the subject P/LT tires "would in fact cause substantial harm and disruption to the domestic industry, which depends on imported products to fill important gaps in the US market."
Domestic producers generally devote their available capacity to their own proprietary brands for their original equipment and aftermarket customers, ATD stated, making imports "necessary to fill important gaps in the US market for private label product" such as the Hercules brand.
ATD went on to say that, based on the available evidence, "subject imports are not injurious to the domestic industry" and "do not compete with the domestic like product and the domestic industry cannot meet the demand that subject imports fill.
ATD said it accepts that imports increased during the period of investigation, but stressed that the USW's "characterisation of this increase as a 'surge' is disingenuous," and any increase in subject imports is "attributable to shifting excess US demand as China exited the market" following the imposition in 2015 of antidumping and countervailing duties on consumer tires from China.
Barry Littrell, chief operating officer of American Pacific Industries, said API works with a number of overseas manufacturers, including several in Thailand, to secure supply for the lines of mostly Tier 4 tires it sells in the US
As such, API sees itself as "filling a gap in demand that US producers are unwilling to satisfy."
"If the … petition results in final tariffs," he testified, "domestic producers will not have anywhere close the production capacity required to make up the shortfall in the replacement segment of the US market that would be created if duties are imposed."
US-based producers manufacture "almost none" of the 13- to 15-inch P/LT tires that comprise a significant portion of the imports from Thailand and other subject countries, he added.
"Even during the COVID-related economic downturn, demand in the replacement segment of the US P/LT tire market has been strong as consumers have been looking for better values," he stated. "This trend has reinforced the dominance of Tier 3 and Tier 4 tires in the replacement market."
Among the brands API sells are Gladiator and X-Comp.
In his comments, Chris Brackin, president of American Omni Trading, said replacement-market tires for older vehicles move further down the value chain over time and are manufactured in lower-cost locations.
"This is true not only for the Thai tires which AOT sells, but also replacement tires manufactured and sold by OEM suppliers, most of which use cost averaging to shift replacement tire production to lower-cost foreign facilities.
"Foreign tire plants, including those in Thailand, are better able than the domestics to undertake small production runs of tires; to produce tires having highly specialised designs; to product private label tires; and to supply tires for smaller rim diameters that the domestic industry simply does not produce."
Brackin also pointed out that it's "noteworthy that domestic producers did not petition for these investigations, and many of them stand in public opposition to it."
"In closing," he said, "there is little indication that the domestic industry producing P/LT tires is injured, or threatened with injury, by virtue of the subject imports."
Among the brands American Omni sells is Deestone, which is the flag brand of Deestone Rubber Co. Ltd Deestone also makes the Thunderer brand that American Omni sells.
Andy Lee, vice president of operations at Maxxis International–USA, stated bluntly: "Maxxis Group's imports in no way injure the domestic industry."
Maxxis focuses on two market segments in the US – OEM spare tires for passenger cars and light trucks assembled in the US and replacement tires sold through independent distributors.
Lee testified that as US consumers are keeping their cars longer than in the past, leading to replacement tires as a steady business. Typically, a consumer replaces tires at least twice over ownership of the car.
As the domestic industry is not able to meet supply in this market segment, subject imports are necessary to meet demand, he contends.
"In considering the facts of this case, it is important to note that if duties are imposed in this case, it is the consumer that will lose. The domestic industry will continue to lack capacity to meet US demand. Where replacement tires become too expensive, consumers will simply purchase a lower-tier tire."