Everyone in the U.S. tire industry, including tire dealers and distributors, should prepare for the possibility that there will be countervailing and antidumping duties against certain passenger and light truck tire imports from China, starting as soon as early next year.
Being prudent is the only logical way to address a situation few people expected would happen but now seems almost inevitable. Many in the industry remain incredulous that the U.S. Department of Commerce is moving forward with its investigation into duties on Chinese passenger and light truck tires.
This disbelief is illustrated by the recent statement of Robert Gross, executive chairman of Monro Muffler Brake Inc., who described as “asinine” the specter of a new round of U.S. duties on imports of consumer tires from China (see story on page 1). He made the comment during a first-quarter conference call with analysts that was also attended by Monro President and CEO John Van Heel.
Still, Monro isn't sitting idle while the Commerce Department does its due diligence, hoping the situation will go away. It's preparing for the potential impact should duties be applied—an approach others in the industry should follow.
“In the short term we will leverage our own distribution centers, logistics network and low borrowing costs...to increase our orders of direct-import tires,” Mr. Van Heel said during the conference call. “This will allow us to increase our competitive advantage on costs and allow us to continue to offer our customers great value.”
While the federal government's decision-making process tends to move slowly, the investigation into anti-dumping and countervailing duties seems to be on the political fast track.
Consider these deadlines:
c On Sept. 17 Commerce is scheduled to make its preliminary determination on the amount of subsidies the Chinese government gives to Chinese tire makers.
c On Dec. 1 its final determination on subsidies is due, the same day it is set to make a preliminary determination on dump-ing margins.
c Should the department find in favor of both cases, the International Trade Commission will make a final determination on or before Jan. 15, 2015, on whether the U.S. tire industry is being materially injured by Chinese imports. If that happens, it will issue a countervailing duty order seven days later.
c As for the antidumping duties, the ITC will make a final determination on material injury March 31, 2015, and issue its antidumping duty orders on April 7, 2015.
Chinese-made passenger and light truck tires are a huge part of the U.S. tire market—more than 20 percent of all replacement units sold last year.
Tire dealers and distributors should use the experience gained during the recently ended three-year run of elevated tariffs to prepare again for the impact on the market that duties would impose rather than be caught unaware.