Ruling gives China an edge

May 3, 2017
Subsidized imports hurt U.S. retreaders

The recent announcement from the International Trade Commission (ITC) that truck and bus tires from China do not injure the U.S. truck tire manufacturing industry and that there will be no anti-dumping and countervailing duties for the foreseeable future comes as a surprise. Just a few months ago, the Dept. of Commerce  calculated countervailing duties that ranged from 38.61% to 65.46% while anti-dumping margins ranged from 9% to 22.57%.

From the International Trade Commission (ITC) decision:   

Based on the record in the final phase of these investigations, we determine that an industry in the United States is not materially injured or threatened with material injury by reason of imports of truck and bus tires from China found by the Dept. of Commerce (“Commerce”) to be sold in the United States at less than fair value (“LTFV”) and subsidized by the government of China.

In another perfect example of political absurdity, ITC basically confirms that truck and bus tires imported from China are subsidized by the Chinese government and sold in the U.S. below cost. Adding to the political theater is the fact that one of the commissioners chose not to participate in the vote, so a normally six-person commission became a five-person commission that voted 3-2 to not assess a tariff.

Coincidently, in July 2015, the commission voted 3-3 on duties for passenger and light truck tires so tariffs were assessed on Chinese imports. The commissioner who abstained in the truck tire case voted for tariffs on passenger and light truck tires. If we have learned anything about politics in the last few years, it’s that the winds can change quickly  with no logical reason behind the shift. Add this one to the list.

Ultimately, the commission determined that the U.S. truck and bus tire manufacturing industry was not harmed by Chinese imports. Prices were not suppressed and market share was not significantly affected. Of course, the inter­modal industry was a major opponent of the tariffs because most of their tires are not manufactured in the states, and duties would only cost them more money. On the other side, the labor unions and retreaders testified in favor of the tariffs because Chinese imports threaten jobs and the retread industry.

It all comes down to cost vs. price. Major fleets are focused on cost per mile. Price is not an issue when all of the factors are considered. If an expensive truck tire delivers more original tread mileage and then allows multiple retreads, the total life cycle cost determines the value. Few of the imported Chinese truck tires can compete with the major brands on cost. Sophisticated fleets are not going to be fooled by low prices if they result in higher costs.

Price buyers are only focused on the dollars. They are not concerned with cost per mile nor do they intend to retread their casings on a large scale. It’s been a while since I’ve sold truck tires on a daily basis, but the conversations I’ve had with dealers over the past 20 years tell me that nothing has changed. Small fleets and owner-operators are only interested in price. To them, the difference between a $200 tire and $300 or $400 tire determines if the family goes on vacation or out to dinner. They are basically surviving paycheck to paycheck. If the tires wear out faster or do not make it through the retread process, they will cross that bridge when they come to it.

The biggest losers in all of this are the retreaders and the fleets that expect casing credits. It’s difficult to sell a cap and casing to a small operator when a brand new Chinese import is competitively priced. Why pay the same or more for a “used” product when you can get something brand new?

The unfortunate and inaccurate stigma associated with retreaded tires cannot be overcome for some people, so the industry is forced to deal with subsidized imports that result in unfair competition in a market that only gets more competitive as the quality of imports improves.

Labor unions and retreaders will monitor the situation closely over the next few years, so don’t be surprised if they take another shot at imposing tariffs on imported truck and bus tires from China.  

About the Author

Kevin Rohlwing

Kevin Rohlwing is the SVP of training for the Tire Industry Association. He has more than 40 years of experience in the tire industry and has created programs to help train more than 180,000 technicians.

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