Monday, November 9, 2015

November 2015 Update: U.S. Fair Trade Case against China

We have had a great deal of activity recently on the Fair Trade front. Over the last few weeks, the Aluminum Extruders Council (AEC) Fair Trade case has:

  1. Requested a full investigation of allegations that Zhongwang (ZW) is transshipping aluminum extrusions through Vietnam and Malaysia into the U.S. in a plan designed to evade duties.
  2. Filed a Scope Clarification and Circumvention case against ZW at the Department of Commerce (DOC).  The AEC claimed ZW has not paid duties on subject merchandise they have brought into their warehouses in Southern California and then shipped to their facility in Delair, NJ only to be re-melted into billet.
  3. Received the post-preliminary results from the DOC on the CVD side of the 3rd annual review.
  4. Launched the 4th annual review process.
  5. Continued to push the DOC for a November decision on the 5050 alloy scope request.

Please see our special report on the first two items.  This is a major undertaking for the Council and the first time we have confronted ZW about the dozens of reports we’ve received about their shipments to the U.S.

The Third Administrative Review is set to be complete, and the final results released, before the end of the year.  In the meantime, we finally received the preliminary results on the countervailing duty side of the case.   Those results are fantastic for our case.  The rates actually went up for the first time since we won the case.  The post-preliminary results deliver a CVD rate of 22% vs. the 9% rate we’ve had the last two years.  The reason for the increase is based on the respondents that the DOC recruited for this year’s review.  One of them supplies extrusions for the curtain wall industry.  Since their shipments included glass and components, those items were a part of the calculation.  This is a great win for us.  The AD side should be announced soon.  We also expect to hear good news on that one.

We continue to push the DOC to make a decision on the 5050 scope request.  They are telling us they will announce that decision in November.  Since we plan a November meeting with the DOC, we will push on this again, if they haven’t announced a decision.  With the filing of the ZW case, we are also pulling the 5xxx alloy issue into our circumvention argument.  The idea here is simple, either the heat-treated so-called 5xxx series alloy extrusions are really 6xxx series disguised with some modest chemical changes and thus covered by our orders, OR this is simply a circumvention scheme to avoid duties.  Either way, we win.  I think news of this pending decision has seeped into the market.  I’ve received a few reports that some orders are returning to U.S. mills in the last few weeks.  If someone places an order today for this alloy, by the time it reaches a U.S. port it may very well be subject to duties!

The news continues to be good for our industry on the trade front.  Our Council’s profile is increasing in D.C. as we continue to defend our case.  This month, we actually went International.  Sapa volunteered to represent the AEC at two World Trade Organization panels in October.  These events were developed to educate the EU on issues of concern regarding China’s attempt to be recognized as a market economy.  We stood with many members of the steel industry and the European aluminum industry when making our case.  Thanks to Jason Weber of Sapa for making the trip.

Please stay tuned for more developments in the next few weeks.  I’ll be reporting on our trip to D.C. in a couple of weeks, we will be sending out a House letter for members to take to their Congressmen, and the results of the third administrative review will be announced.  So, again, thank you for your continued support.  Now more than ever we must stand together!

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!