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Duty-Day arrives

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WASHINGTON—Dec. 1 was D-Day for importers of passenger and light truck tires from China.

That's the day they were required to start paying the newly determined countervailing duties on those tires, as spelled out in the U.S. Department of Commerce's notice in the Dec. 1 Federal Register.

In addition, the duty—15.69 percent for all but three companies singled out by Commerce—is being applied retroactively 90 days from Dec. 1, in accordance with sections 703(d)(1)(B) and (d)(2) of the Tariff Act of 1930, according to the Federal Register notice. The duty is on top of the existing 4-percent tariff.

The United Steelworkers (USW) union, whose petition in June led to the Commerce Department's opening an investigation into Chinese imports, said it was “gratified” that Commerce has determined countervailing duties are warranted. Importers/marketers of the targeted tires from China, on the other hand, collectively expressed their disappointment at the decision. Nonetheless, several are vowing to stay active in the marketplace.

One subset of importers had reason to breathe a sigh of relief: Commerce exempted ST-type trailer tires from countervailing duties. (See related story on page 25.)

The firms singled out by Commerce—Cooper Kunshan China Tire Co. Ltd., Giti Tire Fujian Co. Ltd. and Shandong Yongsheng Rubber Group Co. Ltd.—were given separate countervailing duties of 12.5, 17.69 and 81.29 percent, respectively.

In addition, Cooper Kunshan and Giti Tire are exempted from the 90-day retroactive assessment because they were found to have not increased their exports to the U.S. substantially since the original announcement in May that Commerce was opening an investigation.

According to Commerce Department data, imports of passenger tires from China through September were up 15.5 percent over the first nine months of 2013 to nearly 40 million units. By contrast, overall imports were up just 4.3 percent to 113.4 million units, reflecting double-digit declines in imports from South Korea, Canada and other major trading partners.

The pace of imports from China picked up noticeably in the third quarter, the figures show. The monthly average for July-September was 5.1 million units, up 25 percent over the 4.1 million average for the first six months.

The average price of a Chinese tire import in 2014 was $35.72, the data show, down nearly $3 from the 2013 average.

Countervailable subsidies are defined by Commerce as: “financial assistance from foreign governments that benefit the production of goods from foreign companies and are limited to specific enterprises or industries, or are contingent either upon export performance or upon the use of domestic goods over imported goods.”

From a business practice standpoint, U.S. Customs and Border Protection (CBP) is responsible for collecting the duties owed on tires imported to the U.S. from Dec. 1 forward as well as on tires covered by this action that have been withdrawn from warehouses for the 90 days prior to Dec. 1.

Commerce also continues evaluating imposing anti-dumping duties on Chinese consumer tire imports, with a preliminary determination due by Jan. 21, the spokesman said. Combined with the countervailing duties, the total import duties could settle in at 45 to 50 percent, according to Robert Higginbotham, an analyst with SunTrust Robinson Humphrey Inc.

After Commerce publishes its final determination, the department's International Trade Commission will review the decisions and make public its separate determination within 45 days, the Federal Register notice states.

In its filing, Commerce said it intended to disclose within five days of this public announcement to interested parties the calculations it performed in connection with this preliminary determination.

Interested parties may submit case and rebuttal briefs, as well as request a hearing. In a prepared statement, USW President Leo Gerard said the “Commerce Department is right to neutralize the negative effects of the unfair subsidies the Chinese government has granted to tire exporters. These illegal subsidies have resulted in thousands of lost American tire manufacturing jobs. If left unchecked, they would devastate tens of thousands more jobs in the U.S. economy.

“Our union is here to defend more than 28,000 tire workers from unfair trade practices,” Mr. Gerard continued. “After the safeguard relief from Chinese tires that our union had fought for expired in 2012, Chinese tires came flooding back into the U.S. Today's decision confirms an array of massive subsidies from China helped to drive this wave of exports back into our market.”

Tom Conway, USW International vice president and chair of the Goodyear Tire & Rubber Co. bargaining committee, pointed out: “After our petitions were filed, the Chinese producers increased the flood of tires into our market to try to escape any additional duties on those tires. As a result of today's agency determination, which includes a preliminary critical circumstances finding for all but two of the Chinese exporters, we will have the opportunity for any duties that do become final to potentially also apply to those tires that entered over the last three months, if final critical circumstances determinations are made next year.”

While many importers/marketers contacted by Tire Business declined to comment initially, a handful—Giti Tire (USA) Ltd., Horizon Tire Corp., Omni United USA and Sentury Tire Americas among them—did take the occasion to state their cases.

The Rubber Manufacturers Association (RMA), which represents U.S.-based tire producers, is not taking a position on the matter, while the Tire Industry Association (TIA) declined to comment at this time beyond its June statement opposing Commerce's decision to investigate the situation.

Giti Tire, which was given a duty of 17.69 percent—two points higher than the general duty—said it believes these preliminary duties “do not reflect its actual circumstance” and that the company intends to seek clarification from Commerce on its calculation. It vowed to continue to work throughout the preliminary period to ensure that its actual circumstance is properly reflected in the department's calculation.

Giti, which earlier this year committed $560 million to build a plant in South Carolina, stressed that it has a “long-term commitment to the U.S. market, its customers, the American consumer and its American workforce.” Giti Tire is the Rancho Cucamonga, Calif.-based subsidiary of Singapore-based Giti Tire Group, which produces tires in China and Indonesia.

Miami-based Sentury Tire, a subsidiary of Qingdao Sentury Tire Co. Ltd., said the decision “hasn't dampened Sentury's...commitment to its U.S. distributors and dealers” and that it is “committed to delivering high quality tires at an affordable price” despite the duties, according to Maxwell Wee, director of sales.

Mr. Wee noted that Sentury is moving to an expanded warehouse and office complex in Miami in January and will be unveiling new programs and products to support its Delinte and Landsail brands.

“Unfortunately,” he said, “we feel this action penalizes tire customers who have come to depend on” Sentury's brands. He pledged that Sentury Tire will “do all that's humanly possible to maintain a program that works for our tire distributors and dealers.”

Houston-based Horizon Tire, whose China-sourced brands include Aoteli, Antares, Crosswind, Herovic and Sotera, said the big loser in this action will be U.S. consumers who can least afford the upcoming price increases on tires—Chinese-made or otherwise—sold in the U.S.

“The tariff end result will only prove to be a 'de facto' tax increase to U.S. consumers,” Horizon said.

The importer/wholesaler said it believes pricing levels ultimately will revert to the pre-tariff tier levels 1, 2 and 3 as the U.S. market adjusts pricing to include products sourced from all over the world. The company said it is confident its sales will not decrease in the coming year and could even improve as many brokers and distributors turn to suppliers that are committed to being in the U.S. market.

At the same time, Horizon took steps to protect itself against the seeming inevitability of U.S. action by having Shandong Linglong Tyre Co. Ltd. move production of Horizon's Crosswind brand to Linglong's new factory in Thailand.

“This is not to say that Chinese made products will not prove to be viable products for sale in the U.S. moving forward,” the distributor added.

Omni United, whose portfolio includes the Corsa, Goodride and Radar brands, said the “quantum of the [duties] surprised us, but we are still trying to understand its full implication in the short, medium and long term,” according to Scott Rhodes, vice president of sales. He noted it is difficult to make business plans at this time because of the still outstanding issue of antidumping duties.

Nonetheless, he said, Omni United is “committed to continuing to serve our customers in the best and least disruptive way. As a company we have diverse geographical manufacturing in place to combat geo-political risks and we will not be making any changes in our business model at this time.”

Other companies started making preparations some time ago for what many felt would be the inevitable re-introduction of elevated tariffs and/or duties on Chinese tires.

During the recent Specialty Equipment Market Association Show in Las Vegas, several firms discussed their contingencies, including Taiwan's Kenda Rubber Industrial Co. Ltd., India's JK Tyre Industries Ltd., China's Shandong Linglong Tire Co. Ltd. and Thailand's Vee Rubber Corp.

Each of these firms pointed to expanding production capacities they have opened or are building in nations other than China. For Kenda, it's Taiwan and Indonesia; for JK, it's Mexico; and for Linglong and Vee, it's Thailand.

To reach this reporter:; 330-865-6145; Twitter: @reifenmensch
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Previous | Published March 18, 2019

Where can you expect to see the most growth in 2019?

Tire sales
45% (34 votes)
General automotive service
15% (11 votes)
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7% (5 votes)
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15% (11 votes)
Anywhere we can get it.
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