Trade Cases

U.S. Mills Accuse Korea, Taiwan of Chinese Circumvention Tactics

Written by Tim Triplett

U.S. steelmakers filed trade cases this week on cold rolled and corrosion resistant (CORE) steels alleging that Korea and Taiwan are guilty of using the same circumvention tactics as the Chinese–namely sending hot rolled and cold rolled substrate to Vietnam.

As many predicted, the Commerce Department’s recent Chinese circumvention ruling has set a precedent that domestic steelmakers hope to exploit to further restrict what they consider unfair imports from other countries without having to file new antidumping and countervailing duty petitions. U.S. mills filed three petitions this week, one on cold rolled steel products originating in South Korea and two on CORE products from substrate originating in South Korea and Taiwan that have been converted and then shipped to the U.S. from Vietnam.

The latest cases follow on the Commerce Department’s finding in May that Chinese producers circumvented U.S. antidumping and countervailing duty orders on Chinese cold-rolled steel by shipping hot-rolled steel from China, converting it in Vietnam, and then shipping it to the United States from Vietnam. In that circumvention ruling, Commerce found that the process of cold-rolling the substrate in Vietnam was “minor or insignificant” compared to the process of manufacturing the hot-rolled substrate in China in a vertically integrated steel mill. That decision reversed the long-held view that processes such as cold rolling and galvanizing were substantial enough to change the steel’s country of origin.

Commenting on this week’s filings, Washington trade attorney Lewis Leibowitz said the Chinese circumvention finding vastly extends the reach of antidumping and countervailing duty orders. “The precedent set under the Chinese orders, if followed, will allow orders on a few countries to be expanded indefinitely. The concept is dangerous to steel traders, importers and users in the United States,” he said.

U.S. steelmakers Nucor, ArcelorMittal USA, U.S. Steel, California Steel Industries and Steel Dynamics, Inc., filed complaints June 12 arguing that shipments of cold roll and CORE steels from Vietnam declined shortly after the Commerce decision on China, but then picked up again as other countries stepped in.

The U.S. imposed duties on Korean cold-rolled flat products around the same time it imposed duties on Chinese cold-rolled steel in 2016. Korean cold rolled is subject to antidumping margins of 20.33-34.33 percent and countervailing duty margins of 3.91-58.36 percent. Since then, U.S. imports of cold-rolled steel from China and Korea have declined, yet imports from Vietnam have remained elevated, contend the domestic mills. U.S. imports of Vietnamese cold-rolled in the first quarter of 2018 totaled 62,000 tons, a number equal to the total volume of U.S. imports of Vietnamese cold-rolled steel for all of 2015. “Clearly, China is not the only substantial source of substrate in Vietnam,” said the petitioners.

Korea’s largest steel producer, POSCO, wholly-owns cold-rolled steel producer POSCO VIETNAM, facilitating POSCO’s shipment of hot-rolled substrate to its Vietnamese affiliate. “As such, there is a reasonable basis to believe that POSCO, as well as other Korean cold-rolled steel producers, are likely involved in this circumvention scheme,” stated the filing.

Allowing Korean producers to continue this tactic unabated would seriously undermine the effectiveness of the AD/CVD orders, said the petitioners, who requested immediate relief. “Given the unique facts of this proceeding, in which Korean cold-rolled steel producers are using the same strategy as Chinese cold-rolled steel producers, the department should contemporaneously issue a preliminary determination of circumvention when it initiates the investigation,” the petition states.

The petitioners also allege that imports of CORE from Korea (corrosion-resistant products such as galvanized and Galvalume), completed in Vietnam, circumvent the AD/CVD orders on CORE from Korea, which is subject to antidumping duties of 8.75-47.79 percent, and countervailing duties of 0.72-1.19 percent. U.S. imports of Vietnamese CORE in first-quarter 2018 equaled nearly 81,000 tons—more than three times the total volume of U.S. imports of Vietnamese cold-rolled steel for full-year 2015, indicating that China is not the only substantial source of substrate in Vietnam, stated the petitioners.

The U.S. steelmakers also petitioned the Commerce Department alleging that imports of CORE steels from Taiwan that are completed in Vietnam are in violation of U.S. duties on Taiwan. CORE products from Taiwan are subject to a 10.34 percent duty.

In late 2016, Commerce’s anti-circumvention investigation of CORE produced in Vietnam from Chinese substrate signaled that Chinese steel producers had to consider the risk of duties when they shipped their substrate to Vietnam for processing into CORE aimed at the U.S. market, thus Chinese shipments to Vietnam declined. Taiwanese steel producers stepped in to fill the gap, the petitioners allege. For these reasons, the domestic mills contend that Commerce should initiate a circumvention investigation of CORE made in Vietnam from HRS or CRS manufactured in Taiwan. 

Commerce is expected to determine whether to initiate the requested circumvention investigations during the next month or so, according to attorney Leibowitz.  “The Chinese ruling will be duplicated many times if the courts sustain Commerce’s ruling,” he said.

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