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Preliminary ruling made against Chinese OTR tire makers

 
WASHINGTON -- The U.S. Department of Commerce has ruled Chinese manufacturers of pneumatic off-the-road tires are dumping their products in the U.S. market and will have to pay duties of up to 210 percent above the wholesale value of each tire.
The Feb. 6 preliminary government finding-particularly the dumping rates the Commerce Department found-got an ovation from Titan Tire Corp. and the United Steelworkers of America. Together they asked the International Trade Commission in June 2007 to impose duties on Chinese OTR tire makers.
Chinese OTR manufacturers and importers accused U.S. companies of taking advantage of a flawed antidumping investigation process to frame Chinese OTR tire makers for dumping. The final result of the process is hard to predict, they said, but it probably will result in widespread OTR tire shortages.
The ITC won´t make its final determination until June, followed in August by a ruling on material injury. All Chinese OTR tire importers now are required to begin posting a bond or cash deposit equal to the margin amounts Commerce determined for each manufacturer.
The decision will help level the playing field for U.S. workers by requiring Chinese tire imports to be priced fairly, said USW International President Leo W. Gerard. Morry Taylor, Titan chairman and CEO, echoed his statement.
Trade problems with China, according to Taylor, go far beyond OTR tire imports, or even the fact that U.S. OTR tire manufacturers can´t ship tires to China.
"Fundamentally, we´ve been getting shafted," he said. "The middle class has been hit harder by the trade situation than anything else. If you don´t have a manufacturing base, you´re either going to end up working for the government, or you´re in tough shape."
In a fact sheet about the dumping decision, Commerce said it found dumping margins among individual manufacturers ranging from 10.98 percent for Tianjin United Tire & Rubber International Co. Ltd. to 51.81 percent for Xuzhou Xugong Tyre Co. Ltd. Twenty-three importers representing more than 40 different OTR tire manufacturers had dumping margins of 24.75 percent.
For all producers and importers not mentioned individually in the determination, Commerce said, a countrywide rate of 210.48 percent would apply.
The antidumping duties will be levied over and above the wholesale cost of a Chinese-made OTR tire that enters the U.S. For example, a tire made by a China producer that costs $100 wholesale will be assessed duties of 210.48 percent.
About 8 percent of Chinese importers will have combined duties of above 55 percent, according to Bryan Ganz, CEO of Malden, Mass.-based GPX International Tire Co. "When you have duties of 55 percent or above, those tires are gone forever," he said.
Combining the antidumping duties with the countervailing duties levied in December, GPX and its allied brands will pay about 20 percent in duties, according to Ganz. GPX imports about $80 million to $90 million worth of OTR tires to the U.S. every year, which means duties of $16 million to $18 million the company will be forced to pass on to its customers, he said.
Ganz sent a letter to GPX customers notifying them it will raise prices on a product-by-product basis effective March 1. He insisted GPX is not dumping and said Commerce´s evaluations were based on incorrect or incomplete information. The new duties-which he referred to in the letter as "The Morry Taylor Tax"-would translate into some $200 million worth of OTR tires vanishing from the market in mid-February.
Although Bridgestone Corp. didn´t join in filing the antidumping petition, it supported the effort with many filings to the ITC and Commerce, Ganz said in a phone interview. He said he found it interesting that the largest importer of Chinese tires to the U.S. would complain about Chinese OTR imports. He also said he didn´t understand how Titan and Bridgestone can claim material injury, because OTR tires are highly differentiated in a market with strong brand preferences.
"Initiating these price increases will cause some sticker shock, and send customers scrambling for alternative supplies," Ganz said. "In some cases they´ll find them, in some cases they won´t. It will be an interesting, turbulent time for users of these tires."
Jeff Kreitzman, CEO of Valencia, Calif.-based American Pacific Industries Inc., said he, too, found it hard to believe U.S. OTR tire makers have been hurt by Chinese imports. "Titan´s stocks are at an all-time high," he said.
"It´s awfully sad that Titan feels it needs protection," Kreitzman said. "We´re looking at the potential for a trade war with China. Considering that the Chinese are among our largest trading partners, I don´t think this is the way you should go around doing business, but at least so far the U.S. government seems to think it is."
In August 2007, the ITC made a preliminary determination that Chinese OTR tire imports were causing material injury to U.S. OTR tire makers. The following December, Commerce determined that the Chinese government was subsidizing its OTR tire industry at rates ranging from 2.38 to 6.59 percent, depending on the producer.
 
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