18 Nov 2016
U.S. Takes Action to Combat Mainland China’s Alleged Unfair Trade Practices in the Aluminium and Steel Sectors
The U.S. government has taken various actions in recent weeks aimed at combatting certain unfair trade practices that are allegedly being pursued by mainland Chinese aluminium and steel producers and exporters. These are part of a comprehensive effort by U.S. authorities to improve the enforcement of U.S. trade laws. Other major recent developments on this front include the enactment earlier this year of the Enforce and Protect Act as part of the Trade Facilitation and Trade Enforcement Act and the issuance of an interim rule that establishes a formal process U.S. Customs and Border Protection will use to investigate claims of antidumping and countervailing duty evasion.
First, U.S. importers of a common type of aluminium extrusion face substantial AD and CV duties following a preliminary determination by the U.S. Department of Commerce’s International Trade Administration that these products are circumventing the AD and CV duty orders on aluminium extrusions from mainland China. This action could have a significantly negative impact on a broad range of sectors that rely on these popular products, including the automotive, appliance, building, decorative home products, transportation, solar, heating and parts industries, and highlights the importance of having a comprehensive AD/CV monitoring programme in place.
The ITA’s preliminary finding involves heat-treated extruded aluminium products that meet the chemical specification for 5050-grade aluminium alloy from all producers and exporters in mainland China. The agency will now instruct CBP to require a cash deposit of estimated duties on all unliquidated entries of subject merchandise retroactive to 21 March 2016 and will render a final decision on its anti-circumvention inquiry by 9 January 2017.
The ITA also recently initiated separate reviews to determine whether the AD and CV duty orders on cold-rolled steel flat products (CRS) and corrosion-resistant steel products (CORE) from mainland China are being circumvented. Affirmative determinations in either of these proceedings could have a significantly negative impact on the automotive, appliance, construction and other industry sectors that rely on these products.
The ITA is investigating (i) whether imports of CORE produced in Vietnam using carbon hot-rolled steel and cold-rolled steel flat products manufactured in mainland China are circumventing the AD and CV duty orders on CORE from mainland China; and (ii) whether imports of CRS produced in Vietnam from hot-rolled steel produced in mainland China are circumventing the AD and CV duty orders on CRS from the mainland. Domestic producers are requesting that the ITA treat imports from Vietnam as subject goods under the scope of these orders and impose AD/CV cash deposit requirements. The ITA states that if its preliminary determinations are affirmative it will instruct CBP to suspend liquidation and require AD/CV cash deposits at the applicable rates for each unliquidated entry of subject goods that is entered or withdrawn from warehouse for consumption on or after the date the inquiries were initiated.
Meanwhile, in a 21 October letter to U.S. Trade Representative Mike Froman a group of eight senators that includes Finance Committee Ranking Democrat Ron Wyden (Oregon) urged the Obama administration to “bring swift and formal action against China’s unfair trade practices at the World Trade Organization (WTO) before U.S. manufacturers and their workers incur further irreparable harm.” The lawmakers claim that exponential growth in mainland China’s heavily subsidised aluminium sector has had “significant implications” for the U.S. aluminium industry. The letter states that mainland China currently produces more than half of the world’s aluminium, up from 30 percent in 2007, leading to the closure of nine aluminium smelters in the United States since 2008 and the loss of 15,000 jobs in the past decade, including 1,500 in 2016.
The lawmakers argue that mainland China’s extensive subsidisation of its aluminium sector has contributed to global excess capacity and export surges and is allowing companies in the mainland to operate at a loss or otherwise independent from market considerations. According to the eight senators, mainland China’s subsidies “appear to be in violation of China’s WTO obligations and threaten the entire U.S. aluminium sector.” Accordingly, the administration should quickly initiate a WTO case against these subsidies in order to ensure a strong U.S. aluminium sector, which the lawmakers believe is critical to U.S. manufacturing and national security.
A broader group of 12 senators wrote to U.S. Treasury Secretary Jacob Lew on 2 November to call on the Committee on Foreign Investment in the United States to closely review and ultimately reject the proposed acquisition of U.S. aluminium manufacturer Aleris Corporation by Zhongwang USA LLC, a subsidiary of the mainland China-based Zhongwang International Group. The lawmakers argue that this acquisition would undermine U.S. national security by “jeopardising the U.S. manufacturing base for sensitive technologies in an industry already devastated by the effects of China’s market distorting policies, and creating serious risk that sensitive technologies and knowhow will be transferred to China, further imperilling U.S. defense interests.”
According to the letter, Aleris operates some of the world’s most advanced aluminium facilities that produce extensively reviewed and tested specialised alloys with uses ranging from defence-grade armour to aerospace and other applications. Among other things, the lawmakers are of the opinion that the mainland Chinese policies that have contributed to the erosion of the U.S. industrial base “have been implemented and utilized by Zhongwang and other Chinese state-owned and state-supported enterprises to the detriment of U.S. national security.” The letter also highlights the fact that Zhongwang is currently under investigation by the DOC for allegedly evading U.S. import duties.