The stakes are considerable — thousands of jobs, tens of millions of tires and up to $4 billion in trade — and the final outcome of a year-long investigation is just weeks away.
On May 24, the U.S. Commerce Department affirmed the imposition of antidumping duties of up to 98.4% on consumer tires from South Korea, Taiwan, Thailand and Vietnam, based on its belief that such tires "are being, or are likely to be, sold in the U.S. at less than fair value."
Commerce focused its investigation on a period covering April 1, 2019, through March 31, 2020.
Now the final determination of whether the duties stand, are denied or altered is in the hands of the five commissioners of the International Trade Commission (ITC), which is scheduled to issue its ruling on the matter on or about June 23.
The commissioners will base their decision in part on testimony given May 25 during a virtual ITC hearing by a dozen or so representatives of the petitioners — the United Steelworkers (USW) union — and those opposing the action, such as tire makers from the subject nations, importers, private branders, government officials, etc.
Commerce has been studying the situation since late December, when it issued its preliminary determination to impose anti-dumping import duties on passenger and light truck tires shipped from the four Asian lands, ranging at that time from 13.25% to as high as 98.44%.
The investigation into these imports stems from petitions filed in May 2020 by the USW, which argued such imports were injuring the domestic tire industry and jeopardizing jobs at U.S. tire factories.
In its determination, Commerce altered the antidumping rates on a number of companies, lowering some and raising others.
The final rates put out by the agency are:
- In South Korea — Hankook Tire & Technology Co. Ltd., 27.05% (down from 38.07%); Nexen Tire Corp., 14.72% (up from 14.24%); the "all others" rate dropped to 21.74% from 27.81%.
- In Taiwan — Cheng Shin Rubber Industry Co. Ltd./Maxxis International, 20.04% (down from 33.33%, which already was a revision from the original preliminary rate of 52.42%); Nankang Rubber Industry Co. Ltd., 101.84% (up from 98.44%); the "all others" rate slipped slightly to 84.75% from 88.82%
- In Thailand — Sumitomo Rubber (Thailand) Co. Ltd., 14.62% (up from 13.25%); LLIT (Thailand) Co. Ltd. (Linglong), 21.09% (down from 22.21%); the "all others" rate was raised slightly to 17.08% from 16.66%.
- In Vietnam, the rate for other named companies — Sailun Vietnam Co. Ltd.; Kenda Rubber (Vietnam) Co. Ltd.; Bridgestone Tire Manufacturing Vietnam L.L.C.; Kumho Tire (Vietnam) Co. Ltd.; and Yokohama Tyre Vietnam Co. Ltd. — remains at 0%. The Vietnam-wide rate for other companies stayed at 22.30%.
In addition, Sailun Vietnam and Kumho Tire Vietnam were assessed countervailing duties of 6.23% and 7.89%, respectively. All other companies were assessed a countervailing duty of 6.46%.
Importers/distributors of the targeted P/LT tires have been paying duties on tires they import since January, after Commerce ruled preliminarily in favor of continuing the investigation.
Partly as a result of that, P/LT tire imports from Thailand and Taiwan fell measurably (down 18.9% and 42.5%, respectively) in the first quarter compared with the first three months of 2020, according to the latest Commerce Department data.
Overall, P/LT tire imports rose 2% in the quarter, as shipments from countries like Mexico and Indonesia jumped by double digits to help fill the void.
At the May 25 hearing, the USW argued that "subject imports" increased their share of the domestic market for P/LT tires by 5.3 percentage points during the period of investigation, in large part because such products "undersold the domestic-like product about 90% of the time.
"Underselling at significant margins was nearly universal in all products," the USW contends, "covering tires from all countries and regardless of whether the imports and domestic product were branded or private label."
The USW represents approximately 12,000 workers at eight consumer tire factories operated by Cooper Tire & Rubber Co. (Findlay, Ohio, and Texarkana, Ark.); Goodyear (Fayetteville, N.C., and Topeka, Kan.); Michelin North America Inc. (Fort Wayne, Ind., and Tuscaloosa, Ala.); Sumitomo Rubber North America (Tonawanda, N.Y.); and Yokohama Tire Corp. (Salem, Va.)
There are 16 other non-union tire plants in the U.S. producing P/LT tires, with roughly 20,000 workers.
The USW recently won certification at one other plant, Kumho Tire Co. Inc.'s in Macon, Ga.
The USW's position was presented predominantly by Roger Shagrin and Elizabeth Drake, attorneys with Shagrin Associates of Washington.
Their testimony was supported by statements from USW President Tom Conway; Kevin Johnsen, chair of the USW's Rubber and Plastics Industry Conference; Terry Cunningham, president of USW Local 715L at the BFGoodrich Tire plant in Fort Wayne, Ind.; Brian Brubaker, president of USW Local 207L at Cooper Tire & Rubber Co.'s Findlay, Ohio, plant; Terry Halter, president of USW Local 752L at Cooper's Texarkana, Ark., plant; Terry Brewington, president of USW Local 959L at Goodyear's Fayetteville, N.C., plant; and Mickey Williams, president of USW Local 12L, which represented workers at Goodyear's closed plant in Gadsden, Ala.
While the USW's case is based almost entirely on establishing that the subject imports were sold at dumping rates in the U.S. — and therefore took market share away from U.S.-produced goods — those testifying against the duties argued to a large degree that that the subject imports compete for business in the industry's lower tiers that U.S.-based tire production doesn't serve.
Richard Smallwood, president and CEO of Sumitomo Rubber North America Inc., summed up the anti-duties delegation's position by saying:
"The U.S. tire market is in a state of constant and accelerating transition, and producers in the U.S. do not have the capacity or production flexibility to fully and profitably service all market segments."
He noted that applying duties in subject tires will not help U.S. production.
"This is not a problem caused by the subject imports and they should not be punished for supplying tires the market needs."
Mr. Smallwood also noted that while duties would cut off or limit supplies from the four subject countries, "multinational producers will find ways to supply the tires demanded by the U.S. market."
Mr. Smallwood also pointed out that nearly all companies producing consumer tires in the U.S. have retooled or are in the process of retooling their factories for higher value-added products — tires in 18-inch and larger-rim-diameter sizes, high-performance tires and/or tires designed for SUVs, CUVs, etc. — which are almost mutually exclusive with the imported products targeted by the USW's petition and the Commerce Department's investigation.
Curtis Brison, U.S. passenger car and light truck sales vice president at Hankook Tire America Corp., said, "…a global tire manufacturer like Hankook cannot practically and efficiently rely on a single U.S. manufacturing facility to produce all of the many tire models demanded by our U.S. customers.
"We rely on imports to complement our U.S. production and thereby provide our U.S. customers with an attractive range of tires.
Mr. Brison added, "The success of Hankook's U.S. operations and ongoing investment in Clarksville, Tenn., depends on our ability to continue supplying our U.S. customers with imports from Korea."
Mr. Brison noted that the U.S.-based manufacturing capacity is limited in its ability to serve the diverse demands of the replacement market, and "even if U.S. demand were not so diverse, imports would still be necessary because the U.S. tire industry does not have sufficient production capacity to make the total volume of tires required by U.S. customers."
This latter situation is compounded by U.S. producers' poor track record in fill rates, meaning retailers and distributors have to carry multiple brands and a wide variety of SKUs in order to ensure that they always have product available to meet consumer demand.
"This further drives the need for imported tires," he said, "particularly in the replacement market segment."
Michael Matthis, president of private-brand tire distributor Atturo Tire Corp., pointed out that "there is virtually no domestic availability of private-brand tires," which represent a sizeable percentage of the U.S. aftermarket.
"Tier 3 and Tier 4 private-brand tires represent an attractive replacement alternative when there are fewer miles left on an older vehicle's life cycle."
Mr. Matthis noted that U.S. producers moved production of such brands — if they agreed at all to make them — to their own offshore facilities.
Atturo, he said, tried to source its tires from U.S. producers, but found only one interested party, which suggested they be made at its factory in China.
As a result, Atturo turned to manufacturers in Taiwan and Thailand, which produce the brand "with the precise performance and technical specifications we request."
Victor Li, executive vice president of private- and import-brand distributor Tireco Inc., testified that companies like his "service a critical segment of the market which U.S. producers have shied away from."
Tires imported and sold by Tireco "complement rather than substitute for the (high-value-added) market, which is the U.S. producers' focus," he said. "Our retail and wholesale dealers request that Tireco address this market (for lower tier tires), and that is precisely what we do.
"We hope the Commission realizes that assessing additional duty on imports will not bring product of the tires we sell to the U.S. Prices will rise, but domestic production will not rise."
The government of Taiwan, based on its analysis of the U.S. tire market, argues that the U.S. domestic tire industry has not suffered due to imports of P/LT tires from Taiwan, which it notes represent no more than 5% of the U.S. replacement market for such products by volume and less than 4% by value.
Taiwan, through its Taipei Economic and Cultural Representative Office in the U.S., also urged the agency to restrict its investigation to the original 2017-19 time period and to not include any data from 2020, arguing that it would be "distortive and unfair" to include data for the full-year considering the extraordinary nature of the world economy during the COVID-19 pandemic and the extreme impact on U.S. production.
The USW also testified that the U.S. tire industry has suffered considerable financial impact because of the underselling, but Ned Marshak, an attorney for GDLSK, a law firm representing Thai tire makers, countered that in 2020, "in the face of a global pandemic, … domestic producers realized over $2 billion in operating income."
The operating income/sales ratio was 18.7%, he testified, six points higher than that in 2014.
Among the companies affected by Commerce's ruling are:
Achilles Tires USA Inc.; American Kenda Rubber Ind. Co. Ltd.; American Omni Trading Co.; Duro Tire & Wheel; Federal Tire North America Inc.; Foreign Tire Sales Inc.; Hankook Tire America Corp.; Horizon Tire Inc.; Kumho Tire USA Inc.; Linglong Americas Inc.; Maxxis International – USA; Nexen Tire America Inc.; Sentury Tire USA Inc.; TBC Corp.; Tireco Inc.; Vee Tyre & Rubber Co.; and Zafco International L.L.C.
A number of other private branders source tires from one or more of the subject nations and therefore also likely would be impacted.
The ITC has five commissioners who will review the case and determine what the final outcome should be. They are Jason Kearns, a democrat from Colorado and chair of the commission; Randolph Stayin, a republican from Virginia and vice chair; David Johanson, a republican from Texas; Rhonda Schmidtlein, a democrat from Missouri; and Amy Karpel, a democrat from Washington.