Certain Passenger Vehicle and Light Truck Tires from China Investigation No
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Certain Passenger Vehicle and Light Truck Tires From China Investigation No. TA-421-7 Publication 4085 July 2009 U.S. International Trade Commission Washington, DC 20436 U.S. International Trade Commission COMMISSIONERS Shara L. Aranoff, Chairman Daniel R. Pearson, Vice Chairman Deanna Tanner Okun Charlotte R. Lane Irving A. Williamson Dean A. Pinkert Robert A. Rogowsky Director of Operations Staff assigned Nathanael Comly, Investigator Amy Sherman, Investigator Eric Land, Industry Analyst Ray Cantrell, Industry Analyst James Fetzer, Economist David Boyland, Accountant William Gearhart, Attorney Steven Hudgens, Statistician George Deyman, Supervisory Investigator Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Certain Passenger Vehicle and Light Truck Tires From China Investigation No. TA-421-7 Publication 4085 July 2009 CONTENTS Page Determination .................................................................. 1 Views of the Commission ......................................................... 3 Separate Views on Remedy of Chairman Shara L. Aranoff ............................ 39 Separate and Dissenting Views of Vice Chairman Daniel R. Pearson and Commissioner Deanna Tanner Okun ............................................ 45 Part I: Introduction ............................................................ I-1 Background .................................................................. I-1 Statutory criteria and organization of the report...................................... I-1 Statutory criteria ........................................................... I-1 Organization of the report.................................................... I-2 U.S. market summary.......................................................... I-2 Summary data and data sources .................................................. I-2 Previous and related investigations................................................ I-3 The subject merchandise........................................................ I-3 Scope of the investigation.................................................... I-3 Tariff treatment ............................................................ I-4 Like or directly competitive domestic article ........................................ I-4 Physical properties and uses .................................................. I-4 Manufacturing processes ..................................................... I-7 Like or directly competitive product issues ......................................... I-10 The U.S. market .............................................................. I-11 U.S. producers............................................................. I-11 U.S. importers............................................................. I-18 U.S. purchasers ............................................................ I-19 Apparent U.S. consumption................................................... I-19 Part II: The question of rapidly increasing U.S. imports .............................. II-1 U.S. imports ................................................................. II-1 U.S. imports relative to production ................................................ II-4 U.S. producers’ imports and purchases ............................................. II-7 Part III: The question of material injury ........................................... III-1 U.S. capacity, production, and capacity utilization ................................... III-1 U.S. producers’ U.S. shipments, company transfers, and export shipments ................. III-6 U.S. producers’ inventories ..................................................... III-8 U.S. employment, wages, and productivity ......................................... III-8 U.S. producers’ and importers’ comments regarding whether imports of subject tires from China have been a cause of material injury to the domestic industry ................... III-10 Financial experience of U.S. producers ............................................ III-12 Background ............................................................... III-12 Operations on subject tires ................................................... III-12 Research and development expenses, capital expenditures, assets, and return on investment...................................................... III-18 Continued. i CONTENTS Page Actual or anticipated negative effects on U.S. producers of imports of subject tires from China................................................... III-20 Part IV: The question of threat of material injury ................................... IV-1 The Chinese industry and market ................................................. IV-1 Producers in China.......................................................... IV-1 U.S. producers’ subject tire manufacturing facilities in China ........................ IV-3 Operations in China......................................................... IV-6 China’s export markets ...................................................... IV-8 U.S. importers’ inventories...................................................... IV-12 US. imports after December 31, 2008 ............................................. IV-12 Import restrictions or remedies in other countries .................................... IV-13 The global tire industry ......................................................... IV-13 Part V: The question of the causal relationship between the alleged injury and imports .... V-1 U.S. market penetration of imports................................................ V-1 Prices and related information ................................................... V-3 Channels of distribution...................................................... V-3 Market segmentation........................................................ V-4 Supply considerations ....................................................... V-7 Demand considerations...................................................... V-9 Substitutability issues ....................................................... V-12 Factors affecting purchasing decisions .......................................... V-12 Comparisons of domestic products and subject imports ............................. V-15 Comparisons of domestic products and nonsubject imports .......................... V-17 Comparisons of imports from China and nonsubject imports ......................... V-18 Elasticity estimates ......................................................... V-18 Factors affecting pricing ..................................................... V-21 Pricing practices ........................................................... V-21 Price data................................................................. V-23 Lost sales and lost revenues................................................... V-36 Part VI: U.S. producers’ efforts to compete and requested relief ....................... VI-1 Efforts by U.S. producers to compete.............................................. VI-1 Requested import relief......................................................... VI-1 Appendixes A. Federal Register notices....................................................... A-1 B. Hearing witnesses ............................................................ B-1 C. Summary data............................................................... C-1 D. Supplemental questionnaire responses on market segmentation ........................ D-1 Note.--Information that would reveal confidential operations of individual concerns may not be published and therefore has been deleted from this report. Such deletions are indicated by asterisks. ii UNITED STATES INTERNATIONAL TRADE COMMISSION Investigation No. TA-421-7 CERTAIN PASSENGER VEHICLE AND LIGHT TRUCK TIRES FROM THE PEOPLE’S REPUBLIC OF CHINA DETERMINATION On the basis of information developed in the subject investigation, the United States International Trade Commission (Commission) determines, pursuant to section 421(b)(1) of the Trade Act of 1974,1 that certain passenger vehicle and light truck tires2 from the People’s Republic of China are being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products3 (74 FR 30321, June 25, 2009). RECOMMENDATION ON PROPOSED REMEDY4 Chairman Shara L. Aranoff and Commissioners Charlotte R. Lane, Irving A. Williamson, and Dean A. Pinkert propose that the President, for a three-year period, impose a duty, in addition to the current rate of duty, on imports of certain passenger vehicle and light truck tires from China as follows: 55 percent ad valorem in the first year, 45 percent ad valorem in the second year, and 35 percent ad valorem in the third year. They further propose that, if applications are filed, the President direct the U.S. Department of Labor and the U.S. Department of Commerce to provide expedited consideration of Trade Adjustment Assistance for firms and/or workers that are affected by subject imports. BACKGROUND The Commission instituted this investigation effective April 24, 2009 following receipt of a petition filed by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, Pittsburgh, PA. Notice of the institution of the Commission’s investigation and of the scheduling