They were the first AD/CV duty cases self-initiated by Commerce in about 25 years.
Undervalued imports have materially injured domestic industry, including by contributing to the closures of production facilities in Decatur, Ala., and Texarkana, Texas, in recent years, Aleris North America President Michael Keown and Arconic Inc. Vice President of Sales for North America Patrick Boittiaux said of plants that had been operated by their companies, respectively.
Keown and Boittiaux were speaking during an ITC hearing held to consider whether domestic industry is injured as a result of imports of common alloy aluminum sheet from China.
During the hearing, Perkins Coie attorney Michael House, representing the Chinese respondents, said that imports of common alloy aluminum sheet from China compose a small portion of the U.S. market, and that economic data show the imports haven’t impacted the health of the U.S. industry and bear no correlation to the movement of U.S. prices during the period of investigation (POI).
Commerce on April 17 announced its preliminary determination that the government of China is unfairly subsidizing subject imports, and on June 18 announced its preliminary determination that these imports are being sold in the U.S. at less than fair value, according to Commerce fact sheets.
U.S. Customs and Border Protection has been collecting cash deposits on imports related to subject Chinese entities at preliminary subsidy rates ranging from 31.2 percent to 113.3 percent and at a preliminary dumping rate of 91.47 percent. Commerce lowered the preliminary dumping rate in August, after initially collecting at a rate of 167.16 percent.
Commerce announced its preliminary determination in the CV duty case in April and its preliminary determination in the AD duty case in June. The POI for the CV duty case is the full year of 2016, and for the AD duty case is April 1 to Sept. 30, 2017.
Dumping of common alloy aluminum sheet from China has forced Ravenswood, W.Va.-based Constellium Rolled Products into manufacturing niche products to be profitable, and recent price improvements have been of “limited benefit” to the company, CEO Buddy Stemple said during the hearing.
“The publication of unfair trade [remedy] orders will help ensure the recent improvement in prices, that have been urgently needed by our company, do not disappear after only a few months,” he said. “Orders will also create the certainty needed for our company to pursue significant investments in our operations.”
In determining whether U.S. industry is materially injured, the ITC considers factors including imports’ volume, price and impact on a given U.S. sector.
Novelis Corp. Director of Sales and Marketing Davide Ricci said his company has observed a large volume of Chinese common alloy aluminum sheet being sold in California for less than half of the price of U.S.-originating sheet.
In the U.S., purchasers of common alloy aluminum sheet have demanded that U.S. producers meet prices of their Chinese competitors, which has led some U.S. producers to lower their prices, and forced some to go out of business, said Kelley Drye attorney John Herrmann, who argued in favor of AD and CV duties.
Herrmann said the volume of imports of common alloy aluminum sheet from China has grown by 731 percent in the last 10 years.
In 2017, the volume of imports from China was more than twice that from the second-largest source, Canada, and almost six times that of Indonesia and Bahrain, the third- and fourth-largest sources, respectively, of common alloy aluminum sheet imported to the U.S., Herrmann said.
Further, U.S. domestic producers lost substantial market share prior to the POI, including Novelis, which lost 100 million pounds in annual sales over the past decade, Herrmann said. Had U.S. producers retained the market share lost in 2017 alone, revenues would have been almost $200 million greater, he said.
Undersold imports translated to increased U.S. market share for subject imports, especially in 2017, Herrmann said.
In addition to hearing from attorneys and U.S. aluminum companies in favor of AD/CV duties, the ITC heard from representatives of Chinese industry and U.S. firms that oppose AD and/or CV duties on common alloy aluminum sheet from China.
Well after Herrmann pointed to U.S. market share uncaptured by U.S. companies in his presentation, House noted that, generally, U.S. sales and prices of the subject products grew during the POIs and that imports from China have remained an overall small part of the U.S. market.
“Nonsubject imports, meanwhile, are already beginning to displace Chinese imports at a dramatic pace,” House said.
He pointed to increased competition from third-country sources as a major reason for U.S. industry’s inability to recapture market share.
“This is not a record that supports an affirmative determination that subject imports from China have caused material injury,” House said.
Mo Xinda, the light metals department director for the China Nonferrous Metals Industry Association, said that Chinese products are not targeting the United States and that U.S. producers have largely transitioned away from manufacturing sheet commodity products and toward producing the more specialized automotive aluminum sheet.
Keown said that Aleris would not necessarily have invested in a plant in Lewisport, Ky., focused on automotive sheet production if the company was making the “proper returns” on the more basic commodity aluminum sheet.
“The returns we were making on common alloy continue to suffer,” he said. “The automotive lightweighting initiative took off. It is one that we and the board decided to invest in. But the common alloy business that we have will continue to be a significant market that we play in.”
Among the witnesses testifying in opposition to the proposed AD and CV duties were representatives from the National Marine Manufacturers Association, the Recreational Vehicle Industry Association, SeaArk Boats and powerboat manufacturer Correct Craft Inc.
Correct Craft President William Yeargin noted that aluminum prices have broadly grown by 13 percent in the last two years, which has forced his company to pass on some of the increased costs to customers and made it more difficult to quote prices to Correct Craft’s dealers.
“Because of this case, we are unable to lock in pricing, which has scared off some dealers who do not want to place orders without knowing that they can price the boats next year at a level that would be purchased,” he said.
Correct Craft doesn’t normally source aluminum sheet from foreign countries, but continuation of the current situation would leave the firm “with no option,” as U.S. firms are producing less of the product and delivering less to Correct Craft, Yeargin said.
“We are actively exploring other sources of supply elsewhere in the world,” he said. “The [AD/CV duty] case will not increase the sale of domestic aluminum sheet. For us, it will lead to the opposite.”