WASHINGTON—A synthetic rubber maker owned by the Saudi Arabian government has been found to have dumped product far below value into the U.S. from Brazil.
Arlanxeo Brasil S.A. imported emulsion styrene butadiene rubber into the U.S. in portions of both 2018 and 2019 at nearly 35 percent less than fair market value, according to a final ruling from the International Trade Administration, part of the U.S. Department of Commerce.
The agency had issued a preliminary ruling earlier this year for the period of Sept. 1, 2018, to Aug. 31, 2019, and opened the process up for comments. The federal government ultimately finalized its ruling with no changes, according to a June 9 notice.
The ruling indicates Arlanxeo sent ESBR into the U.S. during that year-long period with a "weighted average margin" of 34.93 percent below value.
The 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 an earlier memo.
"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.
Excluded from the final ruling are products made by blending ESBR with other polymers, high styrene resin master batch, carbon black master batch and latex, the government said.
Arlanxeo argued the federal government used improper cost methodology to make it determination, but the Commerce Department rejected that idea.
"We disagree with Arlanxeo Brasil and have made no changes to our cost calculation methodology for these final results of review," the government said.
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. The profit as well as cost of packing for exportation also is factored into the weighted average margin.
Arlanxeo is owned by Saudi Aramco, the publicly traded oil and natural gas giant controlled by the Saudi Arabia government.
It was in November 2019 that the DOC revealed an antidumping review of ESBR from a single producer in Brazil, Arlanxeo. Deadlines for the case were paused three separate times due to COVID-19. The preliminary ruling came down in January.
The federal government, on Sept. 2, 2019, initially published a notice of opportunity to request an administrative order of the antidumping order. Lion Elastomers L.L.C., a domestic maker of synthetic rubber including ESBR, 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 at the time.
"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," he said.
McGrath could not be reached for further comment following the final ruling.