International Trade Commission Reverses Stance on Imported Chinese Tires

[kscarbel2]

Modern Tire Dealer (MTD)  /  January 31, 2019

It took three years and a day, but the International Trade Commission 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. On Nov. 1, 2018, the court remanded the ITC’s earlier decision not to impose tariffs on truck tires — effectively forcing the ITC to re-examine the case.

What does it mean? It likely means that truck and bus tires imported into the U.S. from China will be subject to tariffs. The court ruling doesn’t reveal the 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 commission. Four had been part of the original ruling, and they split their votes 2-2. The fifth commissioner, Jason Kearns, was new to the case. (He 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.)

The former commissioner who had determined there was no injury to the domestic tire market, Scott Kieff, left the ITC in June 2017 to return to academia. He left three years before his nine-year term was to expire.

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 independent 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.)

A condensed roundup: How we got here

The 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. The complaint worked its way through the typical government process, with investigations by both the U.S. Department of Commerce and the ITC. Typically, the ITC has the last word, and if the commissioners say there’s no harm to the domestic industry, then no tariffs are imposed on the affected goods. If the commissioners find there is injury, then there are tariffs.

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.

The USW had one more chance. They took the negative ruling to the U.S. Court of International Trade and appealed the ITC’s ruling. On Nov. 1, 2018, the court issued its ruling, and the ITC was forced to re-examine its work.

What the commission reviewed

The court upheld some of the ITC’s findings, but found an issue with two points, and told the commission to reconsider them. The ITC did not reopen the record, meaning it examined the same data that was presented originally. It focused on:

price effects of the imported tires

impact of the imports

Price effects: In studying price effects, the ITC is charged with determining if there was 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 which otherwise would have occurred.

The ITC looked at data for four different truck and bus tires, including price data for shipments to both original equipment manufacturers and the aftermarket.

“In total, the Chinese subject tires undersold the domestic tires in 79 of 85 comparisons. In the aftermarket, 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. These quarterly data totaled 2.5 million tires. In the OEM market, the subject imports undersold the domestic like product in 19 of 25 comparisons.”

Impact of the imports: The 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, the Chinese imports grew by 41.9% and their market share increased 4.9%, from 28.7% in 2013 to 33.6% in 2015.

Capacity utilization improved, U.S. production increased, but domestic shipments 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.

The Chinese producers also argued that the financial health of U.S. tire producers proved they weren’t being harmed by imports. And decreasing raw material costs could explain lower prices.

“We disagree. We find that subject imports had a significant adverse impact on the domestic industry. The industry lost substantial market share to the subject imports in a period of strong demand. The 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.

“Although profitable, due to the increasing presence of low-priced subject imports from China the industry lost revenues that it would otherwise have obtained, had unused capacity, and postponed investments that would have expanded capacity rather than simply maintained current equipment and current capacity levels. Lower shipments than what otherwise would have occurred also impacted the ability of the industry to expand employment opportunities in a period of increased demand.

“In sum, we find that the significant volume of subject imports, at prices that undersold the domestic like product and depressed domestic prices, adversely impacted the domestic industry. We consequently determine that the domestic industry is materially injured by reason of subject imports.”

[kscarbel2]

What a crock.

[6368]

39 minutes ago, kscarbel2 said:

What a crock.

Do you disagree with the findings...  or   just dislike protectionism in general.   

[kscarbel2]

12 hours ago, 6368 said:

Do you disagree with the findings...  or   just dislike protectionism in general.   

I dislike blatant protectionism for the sake of existing tire companies who see a way to rub out new competition thru legal process. The wealthy involved with the tire industry are annoyed with competition taking money out of their pocket, and sent their Washington lobbyists on a mission. I despise lobbyists in general.

Whether the tires are from China or Mars, they make a good product and have a competitive price. When the existing "tire club" promotes those two virtues, we're supposed to be impressed. But when a new guy in town offers the same two virtues and steals market share from the existing monopoly, they get accused of foul play. It's a crock.

What is “price underselling"???  They offered a better price. So what?  If the Chinese are guilty, then Amazon and Wal-Mart surely must be "guilty" of price underselling as well.

The 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%.

Oh well, they had a better price. But remember other Asian tire makers (e.g. Hankook) had a hand in reducing the domestic tire maker's market share as well......but they don't get flagged.....it's all political. Tires are one of an operator's biggest expenses. We don't need government propping up high tire prices to keep the rich.....rich. The talk of a free market is just a tale.

[Dirtymilkman]

I agree 100 percent. Competition is a necessity. If they meet safety standards and are what they say they are, then sell away. Chinese tires are a great option free auxiliary axles and trailers. You don't wanna burn off 600 dollar Bridgestones. 

[davehummell]

Back a few years I sent the triaxle from our other yard over to the tire shop for a steering tire the driver came back with made in china printed on the tire I told him take the truck back and get a good tire he didn't want to so I told him it's your life and you could be putting someone else's life in trouble. I was shocked that tire lasted as long or longer than any other we had installed on that truck. Jump forward to my new job and the owner put double coin steers on all the trucks we were in the trash hauling and it was ruff on tires. His reasoning was we had lots of flats and always cut tires so we never saw any real tire life. He had 10 trucks and 6 trailers and we spent a lot on tires every month. I moved over to a can am spyder and the back tire was made in china or god know's where it didn't last over 8000 miles go figure

[6368]

i've seen good and bad chinese tires.  Mostly when i buy tires i buy a made in the usa tire(ameristeel d460 ..used to be general) from a foreign owned company( continental). because that is what i have gotten the best service from

"price underselling"  isn't that selling below the cost of production in order to gain market share?

You talked of the "club" but didn't mention the USW... i'am sure those guys want to keep making wages that i'am pretty sure exceed the wages in china.

[kscarbel2]

22 minutes ago, 6368 said:

i've seen good and bad chinese tires.  Mostly when i buy tires i buy a made in the usa tire(ameristeel d460 ..used to be general) from a foreign owned company( continental). because that is what i have gotten the best service from

"price underselling"  isn't that selling below the cost of production in order to gain market share?

You talked of the "club" but didn't mention the USW... i'am sure those guys want to keep making wages that i'am pretty sure exceed the wages in china.

First, they have absolutely no proof that those tires were sold below cost.

Second, they love to make money as much as the next person. They don't sell below cost.

Triangle, Double Coin and many other Chinese brands are first-rate tires. With tractor-trailers there legally carrying 46 to 49 metric tons (101,413lb to 108,027lb), they need to be (Many actually run up to 120,000lb). Those tires are on vacation in the states.

[HeavyGunner]

Competition is good in a market but how do US companies compete with a country with a history of slave wages and under cutting us? China has been taking advantage of many companies by make fake products and selling them as the real thing. I had that personally happen to me last year. Went to buy a scope, came new in a box right off the shelf, said Carl Ziess Tm and got home and found out it was a fake. China also ran out aluminum plant out of business. Aluminum sales were up so they ramped up production and as soon as they did that the Chinese supplied their own smelter with free electricity and they under cut our market so bad they finally shut down the plant for good and tore it down.  With that being said I don’t feel too bad for some push back toward China. 

[kscarbel2]

1 hour ago, HeavyGunner said:

Competition is good in a market but how do US companies compete with a country with a history of slave wages and under cutting us? China has been taking advantage of many companies by make fake products and selling them as the real thing. I had that personally happen to me last year. Went to buy a scope, came new in a box right off the shelf, said Carl Ziess Tm and got home and found out it was a fake. China also ran out aluminum plant out of business. Aluminum sales were up so they ramped up production and as soon as they did that the Chinese supplied their own smelter with free electricity and they under cut our market so bad they finally shut down the plant for good and tore it down.  With that being said I don’t feel too bad for some push back toward China. 

No slave wages in China.....not for many, many years. In year 2019, the cost of labor is high. That's why most off-shored manufacturing has shifted out of China to elsewhere (India, Thailand, Vietnam, ect.).

There is massive manufacturing in China, but most is for domestic consumption.

Thanks to protectionist policies, if multi-nationals want to profit in China, they essentially have to produce there and thus share some of the spoils with the people and country from whom they are profiting. I call that "fair", and we should practice that in the states.