Modern Tire Dealer

FEB 2019

Magazine for the professional tire industry

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M T D F e b r u a r y 2 0 1 9 8 N e w s / V i e w s A reversal: Chinese truck tires hurt U.S. I t took three years and a day, but the International Trade Com- mission (ITC) has reversed an earlier decision and ruled the U.S. tire market is being harmed by the import of truck and bus tires from China. On Jan. 30, 2019, the ITC filed a 62-page determination in response to an order from the U.S. Court of International Trade. e court remanded the ITC's earlier deci- sion not to impose tariffs on truck tires — effectively forcing the ITC to re-examine the case. What does it mean? Truck and bus tires imported into the U.S. from China could be subject to tariffs aer all. e court ruling doesn't consider tariff rates or a timeline. But all of the parties will have an opportunity to respond to the ITC's new findings. HOW IT HAPPENED When the ITC started its re-examination, it did so with five members on the com- mission. Four had been part of the original ruling, and they split their votes 2-2. e fih commissioner, Jason Kearns, was new to the case. Kearns had been nominated in the final days of former President Barack Obama's term in Jan. 2017, and then was nominated by President Donald Trump in June 2017. He was confirmed by the U.S. Senate in March 2018. e former commissioner who had determined there was no injury to the domestic tire market, Scott Kieff, le the ITC in June 2017, three years before his nine-year term was to expire. In a footnote to the report, it's noted the new commissioner, Kearns, "made his determination in these remand proceedings de novo by weighing all of the evidence in the record and reaching his own indepen- dent conclusion," and ended up being the swing vote. He voted with Irving Williamson and Rhonda Schmidtlein and determined the domestic truck tire market is being harmed by the imports. (Commissioners David Johanson and Meredith Broadbent maintained the market isn't being hurt by the Chinese imports.) HOW WE GOT HERE e issue of Chinese truck tires became a formal government complaint in January 2016 when the United Steelworkers union filed a complaint, saying the imports were harming the U.S. truck tire market. e complaint worked its way through the typical process, with investigations by both the Department of Commerce and the ITC. It was a surprise in February 2017 when the ITC voted 2-3 not to impose tariffs, as every other tariff investigation in the tire industry had resulted in duties being charged at the border. e USW had one more chance. ey appealed the ruling to the trade court. On Nov. 1, 2018, the court issued its ruling, and the ITC was forced to re-examine its work. WHAT THE COMMISSION REVIEWED e court upheld some of the ITC's find- ings, but found an issue with two points, and told the commission to reconsider them. e ITC did not reopen the record, meaning it examined the same data that was presented originally. It focused on the price effects of the imported tires and the impact of the imports. Price effects: In studying price effects, the ITC is charged with determining if there has been "significant price underselling" by the imports as compared to the domestic product. Also, the ITC must determine if the imports depress prices significantly or prevent price increases that otherwise would have occurred. e ITC looked at data for four differ- ent truck and bus tires, including price data for shipments to both original equipment manufacturers and the aermarket. "In total, the Chinese subject tires undersold the domestic tires in 79 of 85 comparisons. In the aermarket, the segment with the most significant growth over the investigation period and where the subject imports are concentrated, the Chinese truck and bus tires undersold the domestic tires in all 60 quarterly comparisons. ese quarterly data totaled 2.5 million tires. In the OEM market, the sub- ject imports undersold the domestic like product in 19 of 25 comparisons." e price differences were "substantial" and increased over the period of investiga- tion. "us, we find underselling by the subject imports to be significant." Impact of the imports: e ITC was looking at data from 2013-2015, and during that time the U.S. market grew by 21.3%. But the domestic tire makers' share of the market dropped by 7.7%, from 53.3% to 45.6%. Domestic shipments grew 3.9%. At the same time, Chinese imports grew by 41.9% and their market share increased from 28.7% in 2013 to 33.6% in 2015. Capacity utilization improved, U.S. production increased, but domestic ship- ments only grew by 3.9%, far below the overall consumption of 21.3%. Chinese tire makers say their imports are filling a gap in demand in the U.S., but the ITC says data doesn't support that claim. Industry wide, capacity contracted slightly from 2013 to 2015. e Chinese producers also argued that the financial health of U.S. tire producers proved there was no harm. "We disagree. We find that subject imports had a significant adverse impact on the domestic industry. e industry lost substantial market share to the subject imports in a period of strong demand. e subject tires undersold the domestic product by significant and increasing margins of underselling and depressed prices, preventing the domestic industry from increasing its revenues commensurate with growing demand. — Joy Kopcha ©GETT YIMAGES.COM/MARTIN BARRAUD

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