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With President signing new countervailing duty law, tough trade talk continues; China's not happy

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WASHINGTON (March 26, 2012) — As China protests the new countervailing duty law President Barack Obama signed March 13, groups in the U.S. are using the legislation as a springboard to call for tougher enforcement of U.S. trade laws.

Meanwhile, the court case that occasioned the bill's introduction continues in federal appeals court.

"This is a very interesting case, putting us in a unique posture," said Francis J. Sailer of the Washington law firm of Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt L.L.P.

Mr. Sailer represents Tianjin United Tire & Rubber International Co. Ltd. (TUTRIC), which joined the former GPX International Tire Corp. to sue the U.S. Department of Commerce to stop it from levying countervailing duties against certain OTR tires imported from China.

Titan International Corp. and the United Steelworkers (USW) union petitioned the International Trade Commission (ITC) in June 2007, requesting antidumping and countervailing duties against certain Chinese OTR tires.

The ITC ruled in August 2008 that the U.S. OTR tire industry was suffering material injury because of Chinese imports, and the Commerce Department levied duties that in some cases went as high as 210.5 percent.

GPX case still in court

GPX blamed the duties for its Oct. 26, 2009, decision to file for Chapter 11 bankruptcy and liquidate most of its assets.

TUTRIC and GPX sued Commerce in the Court of International Trade in December 2008. In September 2009, the trade court ruled Commerce had erred in calculating countervailing duties against China, a non-market-economy (NME) country, and sent the countervailing duty decision back to the agency.

In August 2010, the court reconfirmed its decision.

Commerce, Titan, the USW and Bridgestone Americas Inc. appealed the decision to the U.S. Court of Appeals to the Federal Circuit. On Dec. 19, 2011, the appeals court went the trade court one better, ruling that Commerce had no authority to impose countervailing duties at all against an NME country.

It didn't help the pro-duties cause that the World Trade Organization (WTO) Appellate Body also ruled in March 2011 that Commerce had erred in levying both antidumping and countervailing duties against Chinese OTR tire makers.

Congress responded to the appeals court decision by introducing H.R. 4105, which expressly allows Commerce to apply countervailing duties to nations with non-market economies that subsidize manufacturers and importers.

H.R. 4105 passed the Senate by unanimous voice vote March 6 and the House 370-39 the next day. President Obama then signed the bill March 13.

Even before the bill was signed, Commerce, Titan and the USW requested an en banc review of the December 2011 decision before the entire 11-judge panel of the appeals court, according to Mr. Sailer.

After it was signed, Titan filed a notice of new precedent, on the grounds that circumstances had changed because of the new law, he said.

However, TUTRIC and GPX are pressing forward with the case, Mr. Sailer told Tire Business.

"The new law adds a different wrinkle to the case, but it doesn't necessarily obviate or moot the appeals court decision," he said. "Our position is that the court did not read the law incorrectly."

Terence P. Stewart of the Washington law firm of Stewart and Stewart, which represents Titan in the case, could not be reached for comment at Tire Business' press time.

In a March 13 article on his firm's website, however, Mr. Stewart hailed the new law as preserving vital U.S. countervailing duty laws against predatory practices by China and Vietnam.

Despite the December 2011 court decision, "(T)he retroactive reach of the legislation should mean that existing orders, investigations and administrative reviews will continue without interruption," Mr. Stewart wrote.

Meanwhile, because of the new motion from Titan, the appeals court requested new comments from the participants in the case. Those comments were due March 23, Mr. Sailer said.

The imposition of tariffs and duties seemingly had its desired effect. According to data from the U.S. International Trade Commission (USITC), imports of the OTR tires targeted by the duties—those up to 39 inches in rim diameter—dropped 32 percent in 2009 from 2008 and another 60 percent in 2010 from 2009.

In 2011 China exported 2.92 million such tires, just one-fourth as many as in 2008.

The value of said imports, however, dropped only 1.2 percent during that same time, to $210.2 million, the USITC numbers show.

China, Congress react

Passage of H.R. 4105 brought a swift response from Chen Deming, China's minister of commerce. In a March 7 statement reported by Xinhua, China's government-run news agency, Mr. Chen said the new law violated WTO standards.

"We don't have the obligation to abide by any domestic laws and regulations that are not in line with the rules of international organizations," Mr. Chen said, leaving little doubt that China would appeal the law to the WTO much as it did the Commerce Department countervailing duty decision.

Meanwhile, the Alliance for American Manufacturing (AAM)—an alliance of the USW and various U.S. manufacturers—continued to press for stronger U.S. trade law and law enforcement.

On March 16, the AAM issued a press release praising a letter to President Obama signed by 188 members of Congress calling for more vigorous trade protections for U.S. auto parts manufacturers.

"Chinese auto parts exports are rapidly growing and have increased almost 900 percent since 2000," the letter said.

"An unfortunate result of China's predatory and protectionist policies in the auto parts sector has been to begin to sever the traditional link between auto assemblers, parts producers and aftermarket producers.

"This, while our nation's auto producers are recovering, the auto parts sector faces serious challenges," it said.

Among the signatories of the letter are Sens. Sherrod Brown, D-Ohio, Debbie Stabenow, D-Mich., and Robert Casey Jr., R-Pa., and Rep. Sander Levin, D-Mich. All these legislators attended a Capitol Hill press conference Jan. 31 calling for stricter trade laws to fight Chinese auto part imports.

Also speaking at that conference were Terence Stewart, co-author of one of the reports on Chinese auto parts practices released that day; Leo W. Gerard, USW International president; and Scott Paul, AAM executive director.

Asked about H.R. 4105 on March 19, Mr. Paul said,

"The new law simply reaffirms what has been U.S. practice in past years and helps fight subsidized imports from China and other non-market economies.

"Without this tool, China could continue to subsidize its export-led growth model that has injured hundreds of thousands of workers across the U.S.," he said.

Mr. Paul said he was confident the new law would withstand a WTO challenge.

"Not only is it based on firm international legal principles, but if the WTO were to overreach and attempt to undermine this law, it would seriously erode confidence in the WTO system here in the U.S.," he said.

To reach this reporter: mmoore@crain.com; 202-662-7211.

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