Push For Extra Tire Duties Escalates China Trade Dispute

Push For Extra Tire Duties Escalates China Trade Dispute

Push For Extra Tire Duties Escalates China Trade Dispute
By Meena Thiruvengadam

WASHINGTON — The U.S. International Trade Commission on Monday recommended imposing punitive duties of up to 55% on low-cost Chinese tire imports, a move that could sharply increase costs for consumers while escalating a trade dispute between the countries.

“The duty will not have the effect of increasing domestic production of low-cost tires – it simply will not help U.S. workers,” said Vic DeIorio, executive vice president for China’s GITI Tire in the U.S. “Chinese-made tires have filled a market void created when U.S. manufacturers abandoned the economy segment of the mass market.”

The United Steelworkers, which represents about 15,000 tire workers, has been pushing for a cap on the number of passenger vehicle tires that can be imported from China to the U.S. each year, saying it could save domestic jobs.

Trade commissioners on Monday sidestepped capping import levels and instead voted 4-2 in favor of charging additional duties on the imports on a sliding scale: 55% of Total value in the first year, 45% in the second year and 35% in the third year.

“In our opinion, these tariff levels would remedy the market disruption that we have found to exist,” the commissioners said in a statement.

GITI maintains importers facing higher prices for Chinese tires will simply shift their gaze toward other low-cost tire producers such as Venezuela. Also, “duties will result in higher tires prices for American consumers at a time when they can ill afford it,” DeIorio warned.

Representatives of U.S. tire importers expect much of the costs for the additional duties to be passed on to consumers. “Most tire distributors are small companies that can’t eat that additional cost,” said Marguerite Trossevin, a Jochum Shore & Trossevin law partner representing several tire importers. “This is much more likely to cause a disruption in the market than provide any kind of remedy.”

Philippe Bruno, a Greenberg Traurig law partner representing several tire importers, said the high duties will essentially make Chinese tire imports extremely cost prohibitive for at least the first year. “With 55% you’re talking about tires that are going to be as expensive as a Michelin,” he said.

He expects consumers would be asked to shoulder two-thirds to three-quarters of the costs for the additional duties.

The two U.S. trade commissioners voting against the duties said they don’t believe the Chinese tire imports are to blame for domestic tire makers’ woes.

“This is an industry in which the trend toward gradual downsizing appears likely to continue regardless of the Commission’s action today,” their statement read.

The commission is scheduled to submit a report to President Barack Obama, who will have final say on the matter, by early next month.

Source: Dow Jones Newswires, June 29, 2009

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