WASHINGTON—Arlanxeo Brasil S.A. imported emulsion styrene butadiene rubber into the U.S. from Brazil in portions of both 2018 and 2019 at less than fair market value, according to a preliminary ruling.
The International Trade Administration, part of the U.S. Department of Commerce, recently made a preliminary determination that Arlanxeo dumped the synthetic rubber into the U.S. market.
The preliminary ruling indicates Arlanxeo sent ESBR into the U.S. from Sept. 1, 2018, to Aug. 31, 2019, with a "weighted average margin" of 34.93 percent below actual value.
This weighted average margin is determined by comparing export prices in question with what the federal government determines the actual export prices should be for a particular product.
Creating this so-called constructed value involves combining the cost of materials and fabrication as well as selling, general and administrative expenses, and the profit of "the foreign like product in the comparison market," the federal government said. The cost of packing for exportation also is factored into the weighted average margin.
With the Commerce Department out with a preliminary determination, interested parties have 30 days from the date of the decision notice to comment on the initial results. The preliminary finding was published in the Federal Register on Jan. 26.
"The final results of this administrative review shall be the basis for the assessment of antidumping duties on entries of merchandise under review and for future deposits of estimated duties, where applicable," the commerce department said in the Federal Register notice.
The preliminary ruling covers cold-polymerized ESBR, including products in primary forms, bales, granules, crumbs, pellets, powders, plates, sheets and strips. "ESB rubber consists of nonpigmented rubbers and oil-extended non-pigmented rubbers, both of which contain at least 1 percent of organic acids from the emulsion polymerization process," the Commerce Department said in a memo covering the ruling.
"ESB rubber is produced and sold in accordance with a generally accepted set of product specifications issued by the International Institute of Synthetic Rubber Producers. The scope of the order covers grades of ESB rubber included in the IISRP 1500 and 1700 series of synthetic rubbers," according to the memo. The 1500 grades are light in color, while the 1700 grades are oil-extended and thus darker in color.
The Commerce Department said it intends to issue the final results no later than 120 days from the date of publication of the notice.
More than a year has passed since the DOC revealed in November 2019 that it would be initiating an antidumping review of ESBR from a single producer in Brazil, Arlanxeo. Deadlines for the case were paused three separate times during the past year.
The federal government, on Sept. 2, 2019, initially published a notice of opportunity to request an administrative order of the antidumping order, and Lion Elastomers L.L.C. requested a review on Sept. 30 of that year.
In a hearing in January 2020, Arlanxeo argued that the Commerce Department made errors in two ways while looking at the case. It claimed the government did not take into consideration a tax that was placed on ESBR sold in Brazil when comparing the domestic and export numbers. This tax was not applicable to material imported into the U.S. and should have been considered when comparing numbers from both countries.
Lawyers for Arlanxeo also said the DOC should have better considered how ESBR made by the company is distributed in each market.
"The law requires that the matching of the home market sales in the U.S. sales be fair. One of the considerations is to match sales at the same level of trade, so you don't create a dumping margin just by matching, for example, wholesale prices and retail prices," Arlanxeo attorney Kenneth Weigel said during a January 2020 hearing, according to a transcript of the session.
Arlanxeo uses a main distributor in the U.S., Arlanxeo USA L.L.C., but primarily sells directly to end users in Brazil, Weigel said.
The difference in pricing in the U.S. compared with Brazil would be "significantly less" if the distribution model in the U.S. was more like what the company uses in Brazil, he said during the hearing.
Matt McGrath, an attorney representing Lion Elastomers, during the hearing came out in support of the federal government's approach to determining prices in the case.
"The record, we believe, supports your finding that there should be only one level of trade for ESBR, consisting of all sales in the home market to be compared to all sales in the U.S. market," he said. "We agree on the basic points that a number of things are required to be looked at when you're determining levels of trade. And DOC looks at the totality of the circumstances in these cases to make sure the price comparisons are made at the same level of trade."
Arlanxeo is owned by Saudi Aramco, the publicly traded oil and natural gas giant controlled by the Saudi Arabia government.