The Commerce Department in April approved a second round of preliminary tariffs on hardwood plywood imported from China——a decision that’s upsetting domestic industries that use the product.
The decision applies a preliminary tariff to more than 100 Chinese manufacturers who the International Trade Commission has not formally inspected in an effort to prove they've sold product in the U.S. at below-market rates. The duty assessment is part two of an ITC investigation based on allegations made in September by a group of U.S. hardwood ply makers, claiming Chinese producers were being paid by their country's government to sell their surplus in the U.S. at a price lower than domestic producers.
Critics say the ITC hasn't done its due diligence and that the blanket charges (22.14% to manufacturers who responded to the latest round of ITC inquiries but weren't visited by inspectors and 63.96% to all others) will likely raise raw material costs, leading to manufacturing and assembly job loss and higher consumer prices in industries that use the raw material. The decision follows a February ruling that applied another set of tariffs based on whether firms’ alleged dumping was subsidized by the Chinese government.
Five manufacturers escaped fees—two for antidumping and three for countervailing—after they were visited by inspectors who couldn't prove either allegation. Those were the only manufacturers the ITC formally investigated.
“Every time they've looked, the Chinese have been trading fairly,” says Jeffrey Grimson, counsel to the American Alliance for Hardwood Plywood, an industry group that formed last fall in response to the allegations.
Industries for which hardwood ply is a key raw material—one example is cabinetry—are wary of the fees' side effects. “Domestic manufacturers will have to do what importers are doing for cabinets right now and that is sending their production overseas,” says Barry Graboski, vice president of product and market development at York, Pa.-based distributor WOLF. He says more than 60% of the raw material used in his company’s cabinetry, sold to independent dealers, is sourced within the U.S. “Knock-down cabinetry could be given a substantial advantage in the marketplace when it comes to pricing,” he says.
Greg Simon, vice president at hardwood importer Far East American, Los Angeles, and AAHP co-chair, agrees. The tariffs have the potential to raise competitive pricing industry wide, he says, "to create a dominant kitchen cabinet industry based in China, not here."
U.S.-based hardwood ply makers disagree. Kip Howlett, president of the Hardwood Plywood and Veneer Association, Reston, Va., whose members filed the initial complaint against the Chinese producers last fall, expects further investigations of product manufacturers to show evidence of unfair trading practices. He thinks the domestic market will be able to adjust to the new rates.
“If you are being subsidized and you have the advantage of being able to dump, it makes products that otherwise could compete and could be made here priced out of the market,” he says.
The Commerce Department will review and finalize both sets of tariffs as early as July.