Monday, November 9, 2015

Special Report: Details Behind the China Zhongwang Case Filing

As noted in our post from October 23, the Aluminum Extruders Council filed a Circumvention and Scope Clarification case against China Zhongwang (ZW).  Mounting evidence from private investigators, testimony from former employees, data from online import and export databases, and anecdotal evidence from a variety of reporters and other sources made it quite clear that ZW has consistently and systematically been exporting aluminum extrusions that are simply welded together into what are essentially aluminum slabs.  While they claim these so-called ‘deep-processed’ extrusions are aluminum pallets, there is no evidence that ZW or any of its U.S. based operations market such a product.  It is simply incomprehensible that a company would export hundreds of millions of pounds of these extrusions into the U.S. without even marketing them.

The feedback we’ve received so far indicate that ZW intends to do with these extrusions what they have done in Mexico and Vietnam with similar schemes: send them to a ZW-owned re-melt facility to convert them back into billet.  This is problematic for the industry on several fronts.  First, it is important to understand that Chinese aluminum costs are so heavily subsidized that most of the margins calculated in our case come from the primary metal inputs.  So, these Chinese extrusions that will find their way into the U.S. extrusion market have not been taxed to account for those subsidies.  This is a critical issue.  In the case of ZW, those duties could be as high as 180%.  Without that duty, this metal represents an unfair advantage to ZW-owned U.S. extrusion operations.  Secondly, since these slabs are destined to be scrapped, a U.S. extruder could gain an unfair advantage when it competes for LEED programs on the building and construction front.  Lastly, our trade orders are quite clear.  The entire U.S. aluminum extrusion market must abide by those rules, and for the most part they have.  Allowing the largest extruder in China to sustain a program like this is unfair to the industry.  ZW must operate within the Department of Commerce (DOC) orders in our case.

Prior to filing this case, the AEC, and others, went to U.S. Customs to address the allegations made in the Dupre Report about transshipments from ZW into the U.S. through Vietnam and Malaysia.  The way our system works, is that an e-allegation made to Customs goes into a queue wherein they decide whether or not to investigate.  We will not be informed of an investigation. So, we intend to keep the pressure on Customs to investigate these very serious charges.

Having now filed the case, the DOC has 45 days to determine whether or not it will launch an investigation.  In order to help the DOC make the right call, we have asked AEC members to reach out to their Senators to sign a letter we are circulating.  The letter is being co-led by Senators Portman (R- OH) and Brown (D - OH).  It should be noted that the letter is addressed to both the DOC for the circumvention case, and U.S. Customs to investigate the transshipment claims.  We will have a House letter very soon.  Also, I, along with our legal team, will be visiting with the DOC later this month to make our case face-to-face.

As always, we will stay in touch with AEC members as this process unfolds.  We will be asking for another set of letters to go out once we get to the House side, and I suspect a trip to D.C. in December and/or January will be required.  Again, thank you for your continued support for this most vital program!

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