WASHINGTON—The International Trade Commission has voted to uphold the imposition of antidumping duties on consumer tires from South Korea, Taiwan and Thailand, but terminated the investigation into dumping from Vietnam.
The vote was 4-1, with Republican Commissioner David Johanson dissenting.
The Commission affirmed the imposition of countervailing duties on said imports from Vietnam.
The decision cements elevated import duties on nearly $3.5 billion in imports from the three remaining Asian lands, as determined earlier by the U.S. Commerce Department, which based its ruling on its belief that such tires "are being, or are likely to be, sold in the U.S. at less than fair value."
The investigation—which was carried out in response to a petition from the United Steelworkers in May 2020—covered the period from April 1, 2019, through March 31, 2020.
The final rates published by Commerce are:
• In South Korea—Hankook Tire & Technology Co. Ltd., 27.05 percent; Nexen Tire Corp., 14.72 percent; "all others" 21.74 percent.
• In Taiwan—Cheng Shin Rubber Industry Co. Ltd./Maxxis International, 20.04 percent; Nankang Rubber Industry Co. Ltd., 101.84 percent; "all others," 84.75 percent.
• In Thailand—Sumitomo Rubber (Thailand) Co. Ltd., 14.62 percent; LLIT (Thailand) Co. Ltd. (Linglong), 21.09 percent; "all others," 17.08 percent.
In Vietnam, Commerce had determined five named companies—Sailun Vietnam Co. Ltd.; Kenda Rubber (Vietnam) Co. Ltd.; Bridgestone Tire Manufacturing Vietnam L.L.C.; Kumho Tire (Vietnam) Co. Ltd.; and Yokohama Tyre Vietnam Co. Ltd.—did not engage in dumping and therefore would not be assessed duties.
The ITC chose to end all investigation on this portion, but did vote to assess countervailing duties on Sailun Vietnam and Kumho Tire Vietnam of 6.23 percent and 7.89 percent, respectively, as well as 6.46 percent on all other companies.
P/LT tire imports from the targeted nations totaled 85.4 million units in 2020, according to U.S. Commerce Department data, including 13.8 million from Vietnam.
The USW, which represents approximately 12,000 workers at eight consumer tire factories in the U.S., "welcomed" the ITC's decision, saying it affirms what USW members see every day: "a deliberate effort to undercut our domestic industry and overtake our market."
The USW represents workers at plants operated by Cooper Tire & Rubber Co. (Findlay, Ohio, and Texarkana, Ark.); Goodyear (Fayetteville, N.C., and Topeka, Kan.); Michelin North America Inc. (Fort Wayne, Ind., and Tuscaloosa, Ala.); Sumitomo Rubber North America (Tonawanda, N.Y.); and Yokohama Tire Corp. (Salem, Va.)
There are 16 other non-unionized tire plants in the U.S. producing P/LT tires, with roughly 20,000 workers, according to Rubber & Plastics News research.
The USW recently won certification at one other plant, Kumho Tire Co. Inc.'s in Macon, Ga.
The ITC commissioners based their decision in part on testimony given May 25 during a virtual ITC hearing by a dozen or so representatives of the petitioners—the United Steelworkers (USW) union—and those opposing the action, such as tire makers from the subject nations, importers, private branders and government officials.
Importers/distributors of the targeted P/LT tires have been paying duties on tires they have imported since January, after Commerce ruled preliminarily in favor of continuing the investigation.
Partly as a result of that, P/LT tire imports from Thailand and Taiwan fell measurably (down 18.9 percent and 42.5 percent, respectively) in the first quarter compared with the first three months of 2020, according to the latest Commerce Department data.
Overall, P/LT tire imports rose 2 percent in the quarter, as shipments from countries like Mexico and Indonesia jumped by double digits to help fill the void.
Among U.S.-based companies affected by Commerce's ruling are:
Achilles Tires USA Inc.; American Kenda Rubber Ind. Co. Ltd.; American Omni Trading Co.; Duro Tire & Wheel; Federal Tire North America Inc.; Foreign Tire Sales Inc.; Hankook Tire America Corp.; Horizon Tire Inc.; Kumho Tire USA Inc.; Linglong Americas Inc.; Maxxis International–USA; Nexen Tire America Inc.; Sentury Tire USA Inc.; TBC Corp.; Tireco Inc.; Vee Tyre & Rubber Co.; and Zafco International L.L.C.
At the May 25 hearing, the USW argued that "subject imports" increased their share of the domestic market for P/LT tires by 5.3 percentage points during the period of investigation, in large part because such products "undersold the domestic-like product about 90 percent of the time.
"Underselling at significant margins was nearly universal in all products," the USW contends, "covering tires from all countries and regardless of whether the imports and domestic product were branded or private label."
The USW's position was presented predominantly by Roger Shagrin and Elizabeth Drake, attorneys with Shagrin Associates of Washington.
Their testimony was supported by statements from USW President Tom Conway; Kevin Johnsen, chair of the USW's Rubber and Plastics Industry Conference; and the presidents of USW Locals in Fort Wayne, Ind.; Findlay, Ohio; Texarkana, Ark.; and Fayetteville, N.C.
While the USW's case is based almost entirely on establishing that the subject imports were sold at dumping rates in the U.S.—and therefore took market share away from U.S.-produced goods—those testifying against the duties argued to a large degree that the subject imports compete for business in the industry's lower tiers that U.S.-based tire production doesn't serve.
Richard Smallwood, president and CEO of Sumitomo Rubber North America Inc., summed up the anti-duties delegation's position by saying:
"The U.S. tire market is in a state of constant and accelerating transition, and producers in the U.S. do not have the capacity or production flexibility to fully and profitably service all market segments."
He noted that applying duties in subject tires will not help U.S. production. "This is not a problem caused by the subject imports and they should not be punished for supplying tires the market needs."
Smallwood also noted that while duties would cut off or limit supplies from the four subject countries, "multinational producers will find ways to supply the tires demanded by the U.S. market."
He also said that nearly all companies producing consumer tires in the U.S. have retooled or are in the process of retooling their factories for higher value-added products—tires in 18-inch and larger-rim-diameter sizes, high-performance tires and/or tires designed for SUVs, CUVs, etc.—which are almost mutually exclusive with the imported products targeted by the USW's petition and the Commerce Department's investigation.
Curtis Brison, U.S. passenger car and light truck sales vice president at Hankook Tire America Corp., said, "a global tire manufacturer like Hankook cannot practically and efficiently rely on a single U.S. manufacturing facility to produce all of the many tire models demanded by our U.S. customers.
"We rely on imports to complement our U.S. production and thereby provide our U.S. customers with an attractive range of tires.
Brison added: "The success of Hankook's U.S. operations and ongoing investment in Clarksville, Tenn., depends on our ability to continue supplying our U.S. customers with imports from Korea."
He noted that the U.S.-based manufacturing capacity is limited in its ability to serve the diverse demands of the replacement market, and "even if U.S. demand were not so diverse, imports would still be necessary because the U.S. tire industry does not have sufficient production capacity to make the total volume of tires required by U.S. customers."
This latter situation is compounded by U.S. producers' poor track record in fill rates, meaning retailers and distributors have to carry multiple brands and a wide variety of SKUs in order to ensure that they always have product available to meet consumer demand.
"This further drives the need for imported tires," he said, "particularly in the replacement market segment."
Michael Matthis, president of private-brand tire distributor Atturo Tire Corp., pointed out that "there is virtually no domestic availability of private brand tires," which represent a sizable percentage of the U.S. aftermarket.
"Tier 3 and Tier 4 private-brand tires represent an attractive replacement alternative when there are fewer miles left on an older vehicle's lifecycle."
Matthis noted that U.S. producers moved production of such brands—if they agreed at all to make them—to their own offshore facilities.
Atturo, he said, tried to source its tires from U.S. producers, but found only one interested party, which suggested they be made at its factory in China.
As a result, Atturo turned to manufacturers in Taiwan and Thailand, which produce the brand "with the precise performance and technical specifications we request."
Victor Li, executive vice president of private- and import-brand distributor Tireco Inc., testified that companies like his "service a critical segment of the market which U.S. producers have shied away from."
Tires imported and sold by Tireco "complement rather than substitute for the (high-value-added) market, which is the U.S. producers' focus," he said. "Our retail and wholesale dealers request that Tireco address this market (for lower tier tires), and that is precisely what we do.
"We hope the Commission realizes that assessing additional duty on imports will not bring product of the tires we sell to the U.S. Prices will rise, but domestic production will not rise."
The government of Taiwan, based on its analysis of the U.S. tire market, argues that the U.S. domestic tire industry has not suffered due to imports of P/LT tires from Taiwan, which it notes represent no more than 5 percent of the U.S. replacement market for such products by volume and less than 4 percent by value.
Taiwan, through its Taipei Economic and Cultural Representative Office in the U.S., also urged the agency to restrict its investigation to the original 2017-19 time period and to not include any data from 2020, arguing that it would be "distortive and unfair" to include data for the full-year considering the extraordinary nature of the world economy during the COVID-19 pandemic and the extreme impact on U.S. production.
The USW also testified that the U.S. tire industry has suffered considerable financial impact because of the underselling, but Ned Marshak, an attorney for GDLSK, a law firm representing Thai tire makers, countered that in 2020, "in the face of a global pandemic, … domestic producers realized over $2 billion in operating income."
The operating income/sales ratio was 18.7 percent, he testified, six points higher than in 2014.
A number of other private branders source tires from one or more of the subject nations and therefore also likely would be impacted.
The ITC has five commissioners. Besides Johanson, they are: Jason Kearns, a Democrat from Colorado and chair of the commission; Randolph Stayin, a Republican from Virginia and vice chair; Rhonda Schmidtlein, a Democrat from Missouri; and Amy Karpel, a Democrat from Washington.
The ITC will publish its final decision on or about July 5. Commerce will then issue final orders on or about July 12.
The ITC will publish a public report—Passenger Vehicle and Light Truck Tires from Korea, Taiwan, Thailand, and Vietnam (Inv. Nos. 701-TA- 647 and 731-TA-1517-1520 (Final), USITC Publication 5212, July 2021)—that will contain the views of the commission and information developed during the investigations.
The report will be available by July 28, accessible on the U.S. ITC website.