US CHINA TRADE WAR—IMPACT ON US AND CHINESE COMPANIES
Introduction–US Companies are the first victims
This blog is the outgrowth of a newsletter that I have created to monitor US trade and other litigation against US and Chinese companies. I am an international trade lawyer. Before representing US and Chinese companies in international trade cases for more than 20 years, I used to work at the US International Trade Commission (“ITC”) and Commerce Department on various trade cases in Washington DC.
Based on my experience, I can categorically state that there is now an ongoing trade war between the United States and China. This trade war came into focus with the ongoing antidumping and countervailing duty case on Solar Cells from China In that case, in October 2011 US Solar Cell producers with the political help of Senator Ron Wyden from Oregon brought an antidumping and countervailing duty case targeting approximately $4 billion of imports of Chinese solar cells and Chinese solar cells in modules and panels from China. This US Solar Cells case resulted in the Chinese government initiating an antidumping and countervailing duty case against $2 billion of US made polysilicon exported from the US to be put into the Chinese solar cells imported into the US. This is truly a trade war.
As of September 4, 2012, when I am starting this blog, the US Solar Cell industry has been successful in stopping most of the imports from China. Despite all the noise about subsidies from the Chinese government to Chinese solar cell producers, in its mid March preliminary determination the Commerce Department found that those subsidies were equivalent to only 3.6% of the entered value, the countervailing duty rate to offset Chinese government subsidies on imports of solar cells from China.
But on May 25, 2012 the Commerce Department issued its preliminary determination in the antidumping case with antidumping rates ranging from 31% to 250% for Chinese companies that did not participate at the Commerce Department. By the way, these antidumping rates were not based on prices and costs in China.
Most US companies, politicians and individuals, however, do not understand that the real target of US antidumping and countervailing duty cases is not the Chinese companies. The real target is US companies that import products that are subject to antidumping and countervailing duty cases. In the case, a number of the US importers are subsidiaries of Chinese companies, but in addition, many US importers are small and medium independent US companies, in fact, US small business.
In the case, the US importers’ pain was very evident because Petitioners in their October 2011 petition had alleged critical circumstances. Under Critical Circumstances, antidumping and countervailing duties can be levied on imports 90 days prior to the preliminary determination if there is a surge in imports between the time the petition was filed and the Commerce Department’s preliminary determination. The Petitioners filed their Petition in October 2011, knowing that pursuant to US Department of Energy programs contracts had to be signed by December 31, 2011 for US installation companies to take advantage of the US subsidy programs for the installation of the solar cell panels.
Many US companies that import solar cells simply did not understand that they were the real target of the antidumping and countervailing case, and they negotiated contracts in late 2011 and continued to import up until the antidumping preliminary determination at the end of May. Those importers, many of which are small and medium size independent small businesses, now face an estimated liability for antidumping duties of $100 million and bankruptcy.
Thus, trade cases hurt US companies that import products into the United States so that is the first victim in a US China Trade War.
The next victim is US exporters. As stated above, in retaliation for the US antidumping and countervailing duty case against the Chinese government has initiated antidumping and countervailing duty cases against the United States on $2 billion of polysilicon being exported to China to be used to produce the Chinese solar cells imported back into the United States. Although many reporters have focused on the imports of solar cells from China, many have ignored the $2 billion in US polysilicon exports to China.
Thus, we truly have a trade war, and in Trade Wars both US and Chinese companies are hurt.