International Business Daily/July 7th,2014/Viewpoint of A07 Edition

Do you want to"double reverse"with Chinese tires again?

Qian Wenjie

This month,the United States will announce its decision on whether to initiate a"dual anti"investigation into China's passenger cars and light truck tires.If the United States launches a"double anti"investigation,the Chinese tire market will face tremendous pressure.Relevant enterprises should be prepared to respond to the positive factors in this case and strive for a favorable outcome to the greatest extent.

Brief Background of the Case

On June 4,the United States Federation of Steel Workers(USW)submitted an application to the United States Department of Commerce to initiate an anti-dumping and countervailing("dual anti-dumping")investigation against China's passenger cars and light truck tires.

According to the application submitted by the US side,the product is mainly listed in the US customs tariff as 4011.10.10,4011.10.50

4011.20.10.05,4011.20.50.10,4011.99.45,4011.99.85.The investigation period of dumping is from October 1,2013 to March 31,2014;The subsidy investigation period was the entire year of 2013.The applicant proposes to use Thailand as a substitute country in this investigation to calculate the normal value of Chinese products.

The applicant alleges that the number of tires exported from China to the United States increased sharply in 2013(see Table 1),and alleges that there is a 60.15%dumping margin and a 25.73%subsidy margin for Chinese export products.According to the applicant's statistics,the largest number of Chinese enterprises exporting tires to the United States in 2013 included Carlyle(Meizhou)Rubber Products Co.,Ltd.,Guplatin Tire,Jiatong Tire Co.,Ltd.,and others.

The American Tire Industry Association(TIA)recently raised an objection to the filing of the USW application,arguing that the applicant's alleged job losses in the US manufacturing industry have been affected by a series of trade policies and have continued for many years,rather than caused by China's export of tires to the United States.If the"double counter measures"are implemented and lead to a decline in the import of Chinese tires,the tire market in the United States will be disrupted and will cause significant damage to consumers and TIA member companies.

The United States International Trade Commission(ITC)will make a decision on July 18th to determine whether there is sufficient evidence that the import of Chinese tires has caused substantial damage to American tire companies,and whether further investigations are needed.

In fact,since China's accession to the WTO,several countries,including South Africa,Brazil,India,the United States,and Colombia,have launched trade investigations on passenger car tires exported from China(see Table 2).Relevant trade measures have a direct impact on the export volume and trend of Chinese tires,ultimately leading to the recent application by the domestic industry of the United States to launch a"dual anti"investigation against Chinese products.

Market trend analysis

In 2009,the United States Federation of Iron and Steel Workers filed a special warranty application for this product;In September of the same year,the US government announced that it would impose a special tariff of up to 35%on this product.The relevant measures would last for three years,with a successive decrease of 5%for the next two years.On September 26,2012,after the expiration of the US tire special warranty case against China,orders in the US market increased rapidly,and Chinese tires exported to the US quickly recovered,easing the pressure on domestic tire overcapacity to some extent.According to customs data,from January to February 2013,China exported 11.33 million tires to the United States,an increase of 24.5%year-on-year;The average export price was US$44.5 per piece,down 10.6%year-on-year.

According to data from the United States Department of Commerce and the Rubber Manufacturers Association(RMA),in 2013,the overall import volume of passenger car tires in the United States also reached a record high,with a year-on-year increase of 13.6%to 143.7 million tires.At the same time,the export volume of passenger car tyres from Chinese Mainland to the US market increased significantly.The growth of the overall imports of passenger car tires in the United States mainly came from three regions-Chinese Mainland(up 55.8%year on year),Indonesia(up 16.7%year on year)and Taiwan,China(up 22.7%year on year).In contrast,passenger car tires imported from South Korea(down 16.4%year-on-year),Japan(down 8.7%year-on-year),and Brazil(down 37.1%year-on-year)all declined in 2013.Chinese Mainland exported 46 million passenger car tyres to the US market in 2013,exceeding the record of 39.6 million in 2008;During the same period,China's exports of light truck tires to the United States also surged 75.8%year-on-year,reaching 5.28 million tires.

In the context of a sharp increase in the number of exports,it is not difficult for applicants to prove the existence of industrial damage.If the United States launches a"dual anti"investigation of Chinese tires,the Chinese tire market will face tremendous pressure;Once the United States begins to impose anti-dumping duties on Chinese tires,other overseas markets are likely to take similar measures.Therefore,Chinese enterprises should make adequate preparations to respond to dumping and injury in the upcoming double counter investigation,combining the characteristics of individual cases,and learn to safeguard their rights and interests through the trade rules of the WTO in international competition.

Actively Responding to the US"Double Anti"Investigation is the responsibility of the US International Trade Commission(ITC)and the US Department of Commerce(DOC)

The Commission is mainly responsible for investigating whether imported products have caused harm to the United States industry,and the United States Department of Commerce is mainly responsible for investigating whether there are dumping and subsidies in imported products.In other words,this investigation includes two aspects:industrial injury and dumping/subsidy.

The defense of injury usually needs to be conducted in the name of the industry association of the exporting country,in conjunction with the importer and the end-user of the exporting country,to demonstrate that the domestic industry of the importing country has not suffered the injury alleged by the applicant,or that there is no causal relationship between the so-called dumped imports and industrial injury.

Compared to other cases,the upcoming tire"double anti"investigation has three significant characteristics:First,the prosecution of this case is the United States Federation of Steel Workers,which has substantial differences from the investigated products and industries.Therefore,

The lack of a logical correlation between the industry damage advocated by the United States Iron and Steel Workers'Federation and the so-called dumped products may become a breakthrough in this non harm defense.

Secondly,the American Tire Industry Association raised objections at the filing stage and actively participated in the hearing,resulting in a delay in the filing time.This fact indicates that,first of all,the American Tire Industry Association and Chinese exporters have common interests in this case;Secondly,the American Tire Industry Association has considerable strength and voice,and can influence the decisions of the ITC.Therefore,in the next procedure,our industry association and export enterprises should actively contact the American Tire Industry Association to ensure the consistency of defense opinions,data,and positions.

Third,many of the existing tire export manufacturers are companies invested by the United States in China,such as Goodyear,Guplatin tires,Carlisle tires,and so on.In the non damage defense,we should actively seek the support of the American parent companies of such enterprises.

The arguments for the damage defense can include the following aspects:First,American tire companies are building and expanding tire factories,and the operating rate and profits of the entire industry are rising.Even if there are periodic fluctuations,they are caused by factors such as market supply and demand,exchange rate,and cost changes,which are unrelated to Chinese products.Secondly,although the price of Chinese tire products has decreased,this is mainly due to factors such as lower raw material costs and a 5%devaluation of the RMB;In addition,although the prices of Chinese products are low,they are sometimes still higher than the average prices of Mexican and Thai products.Third,launching a"double anti"investigation and taking measures against Chinese products will lead to a decline in dealer performance,an increase in unemployment,and a rise in product prices in the United States.These negative impacts will be borne by American importers and consumers,which is not conducive to the maintenance of public interests.In view of this,the investigation authority should objectively evaluate the claims of the applicant,and strictly determine whether to file a case and subsequent decisions based on facts and laws.

The defense of dumping and subsidies needs to be addressed separately by each export enterprise.Due to the large number of enterprises involved,the United States Department of Commerce usually adopts a sampling method to narrow the scope of investigation.The investigation authority will publish the sample selection results within 2-4 weeks of receiving the sampling questionnaire.Within 60 days after filing a case,all responding enterprises must submit an individual tax rate application questionnaire,otherwise they will receive the highest punitive tax rate.For sampled enterprises,it is necessary to fill in the dumping/subsidy questionnaire within the prescribed time limit and prepare for on-site verification in the following months.

In the"double counter investigation",the information filled in by the sampled enterprises can only be recognized by the investigation authority after on-site verification.Therefore,whether the information can pass the verification smoothly is the key to the success of the enterprise's response to the lawsuit.Although the products,time,and enterprises involved in each"double counter investigation"are different,the methods and focus of verification are regular and can be followed.For example,when verifying export data,the investigation authority usually requires to consult which original documents,and how different documents are cross-checked with each other;Verify what issues officials may have with different subsidy programs;For the differences between financial data,what explanations the enterprise provides are easily adopted by the investigation authority,etc.In response,experienced lawyers can answer these questions.Therefore,before conducting an audit,an enterprise should follow the advice of a lawyer to properly organize its financial information and conduct sufficient exercises in order to be able to handle the audit with ease and ease.

To sum up,with regard to the upcoming investigation of"dual anti tire"in the United States,our export enterprises should actively participate in the industry's harmless defense and timely fill in and submit the information required by the investigation authority,in order to maximize the fight for low or even zero tax rates.

(This article is translated by software translator for reference only.)