Fair Trade Update: 232 Tariff Impacts Alarming Members, Foreign Imports Rising

Most of the activity this month related to fair and free trade was external to our ongoing trade cases against China.  Reports of increasing threats to the North American market from other countries continue to grow, and there is clear uncertainty about the impacts of the 232 tariff exemptions for Canada and Mexico on the U.S. industry.  I’ll come back to that in a minute, but first, let me catch you up on issues that did involve our China case.

The 8^th Annual Administrative Review is now underway.  Having virtually no opposition from the Chinese industry in either our Anti-Dumping (AD) or Countervailing Duty (CVD) cases, we have withdrawn most of our efforts.  Instead, we will be focus on individual Chinese exporters whose duties we think we can cause to be increased.  This is an efficient use of our resources and similar to the strategy we’ve deployed in recent administrative reviews.  As a result, we expect the base rates to stay the same, which are approximately 86% for the AD case, and 20% for the CVD rate resulting in an overall rate of 106%.

There were two scope decisions issued this month.  The first involved Ericsson Telecommunication Mounts. The Department of Commerce (DOC) found the telecommunication mounting kits at issue to be included within the scope of our orders. Ericsson’s products include six kits for mounts for telecommunications equipment, such as antennas and remote ratio units. The Department concluded that because the kits do not contain any non-aluminum extruded components beyond fasteners, they fail to meet the requirements of the “finished goods kit” exclusion.  This was a good win for the industry.  The second case involved Fasnap Boat Telescoping Poles. The DOC found the boat telescoping poles at issue, which support boat covers, to be excluded from the scope as “finished merchandise.” While the Department has previously found similar types of pole products to be excluded from the scope, we decided to try and test the subassembly argument in this proceeding. As we anticipated, however, the Department found the poles to be extruded as “finished merchandise.” However, the decision contains some good language regarding subassemblies being covered by the scope. This language will be helpful in some of our other pending proceedings such as the one involving solar panel roof mounts.

There were three issues that surfaced in the last few weeks that go beyond our case.  The first involves the World Trade Organization (WTO).  In a long running dispute at the WTO the Chinese have argued that calculations used to determine duty rates in CVD and AD cases amount to double counting.  The Chinese argue that since this is double-dipping the same data set, CVD cases should be dropped.  This fall, the WTO sided with China.  The WTO has given the US two options.  The first is for the U.S. to pay China restitution upwards of $4 billion, or drop those orders, or portions of those orders, that violate the WTO’s decision.  There is NO indication that the Trump Administration will do either.  This came to the attention of several AEC members, because our case was amongst those mentioned by the Chinese as in violation to the WTO’s decision.  However, this deals with the subsidy allegation on primary aluminum for less than adequate remuneration.  Even if that portion of the CVD margin were eliminated there are other programs that make up the overall CVD rate so the CVD margin will not go to zero.   And even if the CVD margin were to be eliminated or greatly reduced, our AD duties would still be in place at 86%.

The next issue that has alarmed members is the impacts of the 232 tariffs being dropped for Canada and Mexico.  In a slowing market, U.S. extruders are concerned that Canadian and Mexican extruders will have an unfair advantage in the market.  This is a difficult issue for the AEC, as it has members from all three countries.  Furthermore, this is a market issue in which the AEC has no role.  Cost and price issues in the market clearly can’t and shouldn’t be addressed by the industry’s trade association.   Remember, the Administration has expressly forbidden trade associations from actively engaging in the exclusion process.  So, if a member believes they have an unfair situation in the market, it is up to them to address it through that process.  The AEC operates on the principle of a fair and free trade environment.  Its members have voiced their support for that position.  To the extent that is not the case for an individual member as a result of the Administration’s 232 orders, they could attempt to win that argument through the exclusion process.  The AEC did host a webinar at the onset of the 232, which showed members how to engage the process because of the lack of access to domestically produced primary aluminum.  You can find that here… 

The only role I see in which the AEC could form a voice is to advocate for the full removal of all 232 duties on primary aluminum in order to create a level playing field for the industry.  However, after exhausting ourselves and our resources on this issue for months, it became clear to us that the Administration is not listening.  That is because this was never about the aluminum industry.  It was about larger trade deals with countries all across the globe.  We were just the ante.  As a result, we simply do not believe it would benefit the industry to have the AEC try to persuade the Administration again.  Even our own attorneys have told us that.  We need to preserve our resources for issues that we can address, like emerging imports from other countries.

As members are working with their customers for 2020 supply agreements, the news is building that there will be additional lost volume to foreign imports.  Several countries have been mentioned.  This is something we discussed at length at the Fall Management Conference in September.  The members of the Fair Trade Committee have engaged in a data collection effort that allows our legal team at Wiley Rein the opportunity to monitor the situation.  If you would be willing to participate, please let me know.  We will be working to assemble a full picture of our industry’s performance in 2019 once the New Year has begun.  Those early results and other relevant information about this growing threat will be discussed this spring at our Annual Meeting & Leadership Conference.   This will be a MUST ATTEND meeting for AEC members because of the weighty nature of this issue.  We heard about various remedies in September.  In March we will need to understand what direction makes sense in light of the data we collect.

Who could have imagined ten years ago that one day the AEC would be grappling with trade issues involving telescoping poles, WTO rulings, aluminum tariffs on Canada for “National Security” reasons, or any of the other hundreds of items that have crossed our paths over this time?  Well, here we are.  The good news is that since we did engage in this, we saved our industry.  As a result, North American extruders are stronger than ever before.  Our plants have been freshly capitalized with new equipment and capabilities, our customer base is expanding, our workforce operates more safely and at a higher level, and our market operates free from the predatory and illegal trade practices of the Chinese industry.  At every turn over the last decade, the AEC has been at the heart of this great turnaround.  Based on those fantastic results, we should have every confidence that together we can achieve even more.