Monday, May 7, 2012

U.S. Consuming Industries and Solar Cell/Panel Tariffs

By CITAC Staff

Imports work to reduce the cost and increase the choices of consumers, including manufactuers, construction companies and developers.  Our trade policy needs to consider the costs to our economy of protection, even when dealing with unfair trade.

An April 23  LA Times article lays out the arguments on both sides, which is all too often not done.  When both sides are considered, we see that the costs of preclusive tariffs on imports of solar cells and panels will probably outweigh the benefits.  Unfortunately, that is usually the case, which is why antidumping and countervailing duty laws and procedures need to be re-examined and reformed. 

When duties are imposed by the Commerce Department, one key item of information is missing: the amount of the duties.  Commerce only releases the amount of “deposit” required, which may be more or less than the final duties.  Those duties are only revealed years after the entry.  US importers responsible for paying the duties cannot pass on the duties in full, because the products they imported will already have been sold into the US market.  When a large bill comes from Customs, the importer must pay it without hope of reimbursement—indeed, reimbursement is strongly discouraged under the US system. 

The only safe course for US importers faced with AD/CVD actions is to stop importing altogether.  This denies the competitive benefits of imports in the US market.

The solar cells and panels case is a good example.  Cells and panels from China are accused of being dumped and subsidized.  The Commerce Department, which investigates these allegations, is predisposed to find dumping, and nearly always does.  Subsidies by China are also usually found, but even the Commerce Department generally has trouble finding extensive subsidies—they really are not there.  However, because the final duties are not known for a long time, imports will dry up as long as the duties are a possibility.  Imports will decline dramatically if not disappear.

The effect of declining imports on the market is clear—solar energy competes with other forms of energy and will wither if the costs of construction and installation go up in comparison with other forms of electric generation.  There will be fewer solar projects.  This will cost jobs in construction, transportation, installation and maintenance in the solar energy field.  While the federal government says it wants to encourage development of renewable energy, the Administration’s own Commerce Department is effectively discouraging it.

While some claim that dumping and subsidies must be stopped at all costs, the reality is that we do not face such a stark choice.  Antidumping and countervailing duty laws and procedures can be reformed to that they effectively take the impact of dumping and subsidies out of the market without stopping imports.  Most countries outside the United States have trade remedy laws that do this much more effectively, and in a much more balanced way, than the United States.

Since imports work for everyone, we owe it to ourselves to balance the impact of trade restrictions on the American economy.  It is not hard to do—all it takes is the will to see both sides of the trade debate. 


Wednesday, April 18, 2012

ITC Rejects Duties on Bottom-Mount Refigerators

In addition to Steel Wheels, petitioners suffered another defeat at the ITC on the very same day when Commissioners voted 5-0 to not impose duties on imports of bottom-mount refrigerators from South Korea and Mexico, ruling that these imports did not harm the domestic industry. This cased pitted heavyweights in the appliance business -- Whirlpool (petitioner) against LG Electronics, Samsung and others.  The ruling means that anti-dumping duties ranging up to over 30% won't be imposed.   ITC Press Release is here.  Whirlpools statement is here.  News coverage included AP, Reuters and The Wall Street Journal.

ITC Unanimously Rejects Duties on Steel Wheels from China

CITAC Counsel Lewis Leibowitz reports that the ITC voted no injury on steel wheels from China, one of the rare times that the ITC rejected dumping duties for China.

The vote was 6-0.  Read the ITC news release here.

Tuesday, April 3, 2012

Brazil and the US—A Comparison of Consuming Industries

Two recent cases brought to mind the CITAC comparison chart, of trade remedy practices in various countries.  If you have seen the chart, you know that the US ranks last among major trading nations, along with China, in the friendliness of trade remedy practices to downstream industries and consumers.  This is unfortunate, because it makes the US less competitive with other countries in manufacturing and retailing.

One of the important issues is the ability to get suspension of antidumping or countervailing duties (or other remedies such as safeguards) in conditions of “short supply”.  When raw materials are scarce, and the domestic industry cannot supply domestic customers, sound policy should require antidumping and countervailing duties to be reduced or suspended.

In Brazil, this situation happened very recently.  The sole significant producer of toluene diisocyanate (TIS) in Brazil suspended production.  The Brazilian authorities acted quickly, even though the antidumping duties on the product had been put in place only last November.  When it became apparent that there would be a shortage of this important chemical (used to make polyurethane, glues, varnishes and other products used in the furniture, mattress and automotive industries), Brazil suspended antidumping duties on TSI for one year.  The duties were significant, and applied to imports from the US and Argentina [confirm].

Compare this to a recent case in the U.S. Court of International Trade.  The sole remaining producer of a extruded rubber thread, product important to the textile industry, went into bankruptcy.  Commerce initiated a “changed circumstances” review based on a filing by a Malaysian exporter and supported by the US producer.  Actual users of the product lack standing under US law to request such a review.  Commerce revoked the order prospectively, but later the importer/exporter and the bankrupt domestic producer asked for the revocation to be back-dated to 1995, to allow for refund of duties pursuant to a settlement agreement.  Commerce refused.  The parties appealed to the courts, which ruled on March 21 that Commerce should reconsider the request and remanded the case.

The differences in how Brazil and the US handled these situations are instructive.  In both cases, the domestic petitioner was not able to serve domestic demand.  Brazil acted quickly and decisively, but not permanently, to open the market for downstream purchasers for an industrial chemical product.  The U.S. authorities started a process only when both sides approached Commerce jointly and the petitioner asserted “no interest” in continued antidumping duties.  Even then, when the parties reached a settlement that allowed for the recovery of import duties, Commerce balked.

The US needs an effective to allow downstream users access to important sources of raw materials and finished goods that do not have adequate supplier in our market.  Antidumping and countervailing duties make no sense if there is not adequate domestic supply.  Petitioners, who are more interested in protection than in the national economic interest, have opposed such efforts at reform in the past.  But the government should consider the interests of all in an economy that works, even while it addresses unfair trade.