Published on June 25, 2014

USW, Chinese tire maker reps tangle at ITC hearing

WASHINGTON (June 25, 2014) — Representatives of the United Steelworkers union and Chinese tire manufacturers fired their opening salvos June 24 before the International Trade Commission at a preliminary hearing on whether the ITC should levy antidumping and countervailing duties against Chinese passenger and light truck tire imports.

USW representatives argued that the huge surge in Chinese tire imports since the Obama administration’s Section 421 tariffs ended in September 2012 are prima facie evidence of the need for duties. Union local presidents also told of production and job losses at their tire plants since the Section 421 tariffs ended.

However, attorneys for the Chinese companies countered that the strong operating profits of domestic tire makers in the past two years demonstrate that the U.S. tire industry is not suffering material injury from Chinese imports or anything else.

For continued coverage of the tariff issue, keep checking back to tirebusiness.com.

The USW petitioned the ITC for relief June 3 under Section 701 and 731 of the Trade Act. In its petitions, the union said Chinese tire shipments had more than doubled since the end of the Section 421 tariffs — to 50.8 million in 2013 from 24.5 million in 2011

“If current trends continue, imports from China will increase by 10 million tires this year,” said Terence P. Stewart, the Washington attorney representing the USW. Mr. Stewart also said that nearly 100 percent of recent Chinese tire imports have gone to the U.S.

However, attorneys and analysts representing the Subcommittee of the Producers of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers (CCCMC) and the China Rubber Industry Association (CRIA) said the Chinese were merely regaining the market position they had lost during the three years of high tariffs.

At the hearing, the USW and the Chinese tire makers painted contradictory portraits of the domestic tire industry, disagreeing even on whether the tires imported from China could be directly compared with tires made in the U.S.

James P. Durling, an attorney for the Chinese tire makers, said there are three separate tiers of tire manufacturing.

Tier 1, he said, consisted of premium tires made by the most well-known companies — Goodyear, Bridgestone Corp., Group Michelin. Tier 2 contains the lesser-known brands, such as Cooper and Yokohama, whereas Tier 3 contains obscure brands and private brands.

Curtis, Mallet-Prevost, Colt & Mosle L.L.P. photo
James P. Durling, attorney for Curtis, Mallet-Prevost, Colt & Mosle L.L.P., testified on behalf of Chinese tire makers at the ITC hearings.

“The Chinese do not compete significantly in Tier 1, and the U.S. does not compete significantly in Tier 3,” Mr. Durling said.

Mr. Durling is an attorney with Curtis, Mallet-Prevost, Colt & Mosle L.L.P. in Washington, D.C.

'Tiers’ disputed

The USW discounted tiers in its testimony. The ITC itself did as much in the 2009 hearings leading up to the Section 421 tariffs, Mr. Stewart said.

“The ITC found no clear dividing line between alleged ‘tiers’ in the market, and no agreement as to what the tiers were,” he said. The agency found Chinese-made tires to be highly interchangeable with U.S.-made ones, he said.

Chinese imports also are having an adverse impact on U.S. tire prices, according to Mr. Stewart. The USW has found current dumping margins to be as high as 92 percent, and also uncovered more than 40 government subsidies available to Chinese tire makers, including 12 directly encouraging exports to other countries, he said.

Mr. Stewart’s testimony was supplemented by that of union local presidents who said they are seeing the effects of Chinese imports in their workplaces.

Michelin North America Inc. laid off 100 workers at its plant in Tuscaloosa, Ala., in October 2013 — an action directly attributable to unfair competition from the Chinese, according to Mark Williams, president of USW Union Local 351L which organizes the Tuscaloosa plant.

“When President Obama imposed safeguard duties on Chinese tires in 2009, it led to a lot of optimism at our plant,” Mr. Williams said. At that time, plant management made plans to augment equipment and staff at the factory to boost production to 18,500 tires per day from 12,000, he said.

Daily production at Tuscaloosa stood at 16,500 tires in early 2012, but began declining in mid-2012, just before the tariffs ended, according to Mr. Williams.

“After the layoffs we fell to 9,500 tires a day as we worked off excess inventory,” he said. “We have now crept back up to 12,000 tires a day, but that is still less than 75 percent of what we produced when the safeguard was in place.

 

Photo courtesy of Jem Atlas / Linked In
Jem Atlas, an analyst with Bloom Tree Partners L.L.C., testified at the ITC hearings.

“Of the 60 to 65 tire building machines in our plant, about a third are sitting idle and unmanned,” Mr. Williams said. “And while our laid-off workers are now being recalled, it is only because we have not been backfilling additional jobs lost to attrition since the layoffs.”

Representatives of the Chinese, however, said that whatever might be happening at U.S. tire plants, it isn’t because of Chinese imports.

However, Jem Atlas, an analyst with Bloom Tree Partners L.L.C. who said he has no direct affiliation with any Chinese companies, noted that “the USW’s claims of material injury are difficult at best.”

Mr. Atlas performed a study that examined the status of Goodyear and Cooper Tire & Rubber Co., two companies with major stakes in North American tire production and sales. Their current operating margins are at all-time highs, he claimed.

Mr. Atlas quoted recent statements from both companies saying that their strategic growth plans for North America are completely on track. In regard to Cooper, he said, management blamed unexpected glitches in a new IT system that hampered tire distribution for lower-than-expected 2013 results, as well as the failed merger attempt with India's Apollo Tyres Ltd.

In a subsequent email to Tire Business following the ITC hearing, Mr. Atlas said he was trying to make two primary points: that the industry is at historically high margin levels and that the managements of these companies assert that the outlook in North America is bright.

Mr. Durling presented charts and figures that he said showed no correlation between domestic tire industry profits and Chinese imports. The domestic industry, he said, has positioned itself in a place where it can maximize profits, and where imports from China and other countries are an expected part of the U.S. tire market mix.

“The domestic tire industry is investing in capital expenditures, research and development,” he said. “This industry is renewing itself. That is a sign of strength, not weakness.”

The ITC is scheduled to make its preliminary determination by July 18 on whether to continue the investigation. It must report its findings to the Commerce Department by July 25.

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To reach this reporter: mmoore@crain.com.

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