WASHINGTON (Aug. 31, 2009)—Proposed tariffs from the U.S. International Trade Commission (ITC) on Chinese passenger and light truck tire imports essentially would end Chinese tire imports to the U.S.
That's the opinion submitted to the U.S. Trade Representative Office (USTR) by Cooper Tire & Rubber Co. and Toyo Tire Holdings of Americas Inc., both of which have factories in the U.S. and China.
"Such a high tariff would prohibit Cooper Tire from importing any tires from the People's Republic of China," Findlay, Ohio-based Cooper Tire said in a redacted public version of its comments to the USTR. "The added costs of the duties would make any such imports economically unfeasible."
Cooper has a lot at stake, with its own factories in Chengshan, China, and a 50-50 joint venture with Taiwan's Kenda Rubber Industrial Co. Ltd. in Kunshan, China, that has been producing Cooper-brand tires since February 2008.
"Cooper Tire strongly believes that the ITC's proposed high tariff remedy is not reasonable or rational," Cooper wrote, without quantifying how many tires it imports from China.
Cooper also noted imposing tariffs would "undermine Cooper's strategy of producing certain types of tires in China and other tires in the U.S." This not only would cost Cooper its "advantage of rationalized production costs," the firm wrote, it also would not easily be able to maintain its full complement of tire types in the U.S.
"Cooper Tire invested in China because it could not compete on costs with lower-cost tires being imported by other U.S. producers and importers from many different countries, not just China," Cooper said.
Earlier, Cooper executives told analysts the company was readying contingency plans for maintaining supplies to U.S. dealers should the Obama administration choose to impose duties on Chinese tires imported into the U.S.
Cooper imports several million passenger and light truck tires annually from two joint venture factories in China. The Cooper Kenda plant, with 5,000 units of daily capacity, manufactures exclusively for Cooper through 2012.
Cooper is looking at the "reality of various scenarios," Chairman Roy Armes said during a conference call to discuss Cooper's second-quarter results. "Given a reasonable enough amount of time,…we feel we can deliver most of the tires" obligated to dealers.
Toyo also argued strongly against the duties.
"The ITC's proposed tariffs would prevent Toyo from importing any tires from China during the three-year remedy period," the tire maker said in its redacted public comments. "The ITC's proposed remedy would, in effect, be a zero quota."
Toyo imports tires for the mid-range market from its plants in China.
"The proprietary technology used in (our Georgia plant) provides superior weight uniformity and is not as necessary for less expensive tires of smaller diameters such as those typically imported from China," Toyo said.
Toyo's testimony is consistent with comments from U.S. tire dealers and distributors, who said U.S. tire makers typically make only high-end tires domestically and import lower-priced tires from China and elsewhere.
Cooper and Toyo are the first two tire makers to comment publicly on the proposed tariffs.
Bridgestone Americas Inc. said it "supports free and fair trade as an essential part of our economic system. It's important that international trade is conducted on a level playing field that fosters healthy competition, leading to innovation, better quality and lower costs for consumers."
Goodyear and Michelin North America Inc. issued similar statements emphasizing "free and fair" trade.
The ITC proposed three years of tariffs on Chinese tire imports June 29, in response to a petition for relief from the United Steelworkers (USW) under Section 421 of the Trade Act. The duties would total 55 percent the first year, 45 percent the second and 35 percent the third. President Obama has until Sept. 17 to decide whether to order the tariffs, order alternative action or do nothing.
Imports of Chinese passenger tires grew to 39.6 million units last year, valued at $1.23 billion, and imports of light truck tires were 6.54 million units, or $333.6 million, according to U.S. Department of Commerce data.
The USW has had few supporters for its position, but tire reinforcements maker Performance Fibers and the United Auto Workers union are now backing the union's stance.
Richard Black, vice president of global marketing and technology for Performance Fibers, said the U.S. tire fiber industry has been decimated by imports from China and other Asian countries.
Performance Fibers has lost 225 jobs this year alone because of Asian competition, and all its North American competitors are out of business, he said.
Supporting the USW, UAW Legislative Director Alan Reuther noted that the Bush administration refused to grant Section 421 relief to four different industries hurt by Chinese imports.
"Section 421 was created for a good reason," Mr. Reuther wrote. "Trading nations expected that there would be injurious market-disrupting surges when China entered the World Trade Organization....The UAW believes the Obama administration should seize the opportunity presented by this Section 421 case to enforce the law and thus help to restore the confidence of American workers that they will have a fair chance to compete."
In lengthy post-hearing briefs to the USTR, advocates and opponents of the tariffs rebutted each other's positions while reiterating their own major assertions.
"It is beyond question that, economically, a $50 private brand or other entry-level tire, such as those imported from China, is not ‘highly substitutable' with the $100 or $150 major-brand tire produced in the United States, as the USW claims," said the American Coalition for Free Trade in Tires, a group of tire dealers and distributors opposed to the tariffs.
The USW disputed this claim.
"Domestically produced passenger and light truck tires compete directly with Chinese tires throughout the market," the union said. "Indeed, the Commission found that shipments of domestically produced tires into the so-called ‘Tier 3' accounted for the second-largest volume of replacement tire shipments by the domestic industry."
What issue concerns you most heading into 2019?
|The threat of more tariffs.||
27% (27 votes)
|The new Congress in Washington.||
35% (35 votes)
|Price fluctuations for the products we sell.||
10% (10 votes)
|More disruptions across the industry.||
29% (29 votes)
|Total votes: 101|