8 May 2009
Safeguard Petition Filed against Tyre Imports from China
On 20 April, the U.S. International Trade Commission received a so-called Section 421 petition requesting a safeguard on imports of certain tyres from the Chinese mainland. This petition covers new pneumatic rubber tyres of a kind used on motor cars (except racing cars) and on-the-highway light lorries, vans and sport utility vehicles, classified under HTSUS subheadings 4011.10.10, 4011.10.50, 4011.20.10 and 4011.20.50. The petition was filed on behalf of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union under Section 421 of the Trade Act of 1974, which implements the transitional product-specific safeguard provisions contained in China's WTO accession agreement.
Under Section 421, the USITC determines whether a specific product from the mainland is being imported into the U.S. in such increased quantities, or under such conditions, as to cause or threaten to cause market disruption. "Market disruption" is defined as rapidly increasing imports, either absolutely or relatively, so as to cause or threaten to cause material injury to a U.S. domestic industry. If the USITC makes an affirmative determination it proposes a remedy, which the president may or may not implement. The petitioner in this case has requested the establishment of an annual import quota of 21 million units on subject mainland Chinese tyres, which would increase by five percent per year over a three-year period. The petition alleges that this remedy would return mainland Chinese imports to their 2005 levels and provide the domestic industry with the opportunity to significantly increase its production and shipments of consumer tyres.
The proceeding at hand is the seventh case filed under Section 421 since that provision was incorporated into U.S. law in 2000. In four of the six previous cases (involving steel wire garment hangers, pedestal actuators, ductile iron waterworks fittings and circular welded non-alloy steel pipe), the USITC determined that market disruption took place but President Bush decided against granting import relief. In two other cases, involving brake drums and rotors and uncovered innerspring units, the USITC found that there was no market disruption.
The high costs associated with Section 421 proceedings, coupled with the unwillingness of the Bush administration to provide any relief during the past eight years, has discouraged U.S. manufacturers from using this trade remedy mechanism. This could quickly change, however, if the USITC finds market disruption (or a threat of market disruption) in this case. While the ability to invoke this safeguard will remain available only through 11 December 2013, the case at hand is especially significant and its impact could go well beyond mainland Chinese tyres. Any decision by the president to grant import relief would likely mark the start of a new paradigm in U.S. trade remedy policy that could shape U.S.-China trade relations for the next four and possibly eight years. Equally important, a decision to provide relief would certainly encourage several U.S. industries, such as the textile sector, to consider pursuing Section 421 safeguard actions on a range of products.
The probability that the president will grant import relief if the USITC finds market disruption or a threat thereof in this proceeding is probably fairly robust. President Obama told the National Council of Textile Organizations during his presidential campaign that he would decide any Section 421 safeguard cases on their merits rather than on ideological grounds. In addition, administration officials have made clear that ensuring strong trade enforcement will be one of their principal priorities on the trade front. Many Democrats were deeply dissatisfied with the policies of the Bush administration in this area and have pushed for legislation to limit presidential discretion in Section 421 investigations. In fact, the wide-ranging trade remedy legislation (H.R. 496) introduced in the House on 14 January by Ways and Means Committee Chairman Charles Rangel (Democrat-New York) and Ways and Means Trade Subcommittee Chairman Sandy Levin (Democrat-Michigan) includes a provision that would allow Congress to override a presidential decision not to establish temporary duties or quotas when recommended by the USITC in a Section 421 investigation and would impose additional limitations on the president's authority to deny remedial action.
There is a fairly tight schedule for consideration of Section 421 petitions. As regards the current investigation, the USITC will hold a public hearing on 2-3 June. Requests to appear at the hearing are due by 26 May; pre-hearing briefs are due by 28 May; post-hearing briefs are due by 8 June; final comments on market disruption are due by 16 June; the USITC will transmit its market disruption determination to the president and the U.S. trade representative on 19 June; final comments on remedy are due by 24 June; and the USITC will transmit its report to the president and the USTR on 9 July. The case will then move to the USTR for further deliberation and recommendation, which is due within 55 days after receipt of the USITC's recommendation. A final decision would have to be made by the president within 10 days of the White House's receipt of the USTR's recommendation.