Import Tariffs
Guizhou Tyre reportedly planed to raise 670 million yuan (£62.924 million; 74.624 million euros; US$102 million) through a rights issue of three shares for every 10 shares held at 6.86 yuan per share. According to Shanghai Securities News, which cited a company filing, the subscription period was 11 – 17 January 2011. The company has not yet released any details of the results of the issue.
While the majority of the 250,000 documents contained in the largest leak of government records in American history focus on diplomatic and political commentaries written by the US ambassadorial network, at least one of the wires published by the Wikileaks website sheds light on behind the scenes discussions on the Obama decision to impose import tariffs on Chinese-made tyres.
A document dated 29 September 2009 and classified as secret, reports that US deputy secretary of state James B Steinberg (Secretary of State Hilary Clinton’s chief adviser) discussed the tyre tariffs alongside policy objectives for Iran and North Korea with Chinese foreign minister He Yafei.
The United States claimed victory in a recent trade spat with China over anti-dumping charges placed on imports pipes, tubes, OTR tyres and sacks. US Trade Representative (USTR) Ron Kirk told the AFP news agency that the World Trade Organisation (WTO) had broadly upheld Washington's right to place duties on goods from China that were unfairly subsidised: "This is a significant win for American workers and businesses affected by unfairly traded imports.”
Nevertheless a report produced by China’s Xinhua news agency suggests the People’s Republic would like to present the 22 October WTO ruling as falling in its favour. China welcomed the fact that the WTO found that the US imposition of anti-dumping and countervailing duties on four types of Chinese imports was inconsistent with WTO regulations, the Chinese Ministry of Commerce (MOC) said a day after the ruling was published.
While most of the rainbow nation was preparing to welcome people from far and wide to the first World Cup on African turf, the country’s legal eagles were deliberating over whether or not to kick certain Chinese tyres out of the country with an anti-dumping investigation. On 4 June 2010 the South African press reported that the High Court of Pretoria’s Judge Willie Hartzenberg set aside an earlier ruling made in 2007 by the Trade and Industry Ministry (Itac), to terminate anti-dumping probes against Chinese tyre exporters. He further ordered that (Itac) complete an anti-dumping investigation within four months. The judgement was duly lauded as bringing "fair competition" to the tyre manufacturing industry by those who brought the case, namely Bridgestone South Africa, Continental Tyre South Africa, Dunlop Tyres International and Goodyear Tyre & Rubber Holdings through their representative body South African Tyre Manufacturers Conference.
Whether or not the Chinese tyre imports in question can accurately be described as dumping – and it would be prudent to let the courts decide that – the ruling is another sign that products manufactured in the People’s Republic are not the quick and easy sell they once were. As far as tyres are concerned, the combination of increasing natural rubber, oil and steel input prices, combined with an unstable shipping cost context and added to the increasingly inhospitable international trade climate mean the latest decision in South Africa may force some Chinese factories to rethink either the delivery strategy or destinations of their tyres.
The US government dropped the duty-free status for certain passenger tyres produced in Thailand, part of a group of imported products that were part of an annual tariff review of trade programmes involving emerging countries, reports Tire Review. With the change, Thailand-produced passenger tyres are now subject to a tariff if annual imports of those products exceed $140 million in value or represent 50 per cent of total passenger tyres imported into the US. No tariff has been set or planned for these tyres. The status change was made when US trade officials found the product to be ''sufficiently competitive'' in the US.
In 2009 the Russian market for various types of vehicle tyres (including industrial equipment, tractors and combined harvesters) totalled 33 million units, down a reported 36 per cent. According to a report published in the CRIA published magazine, China Rubber, the 2008 figure was 51.4 million. The fall in value of these tyres was even steeper, down 40 per cent at 95.14 billion rubles (2008: 157.7 billion rubles). According to the research, the main reason for the market decline is directly related to the economic crisis and its knock-on effects on the entire Russian vehicle transport sector.
A report on the Bloomberg Business Week website suggests that Continental AG will decide this year on building car-tyre plants in India and Russia to tap those countries' growth while avoiding import restrictions. In an interview, Nikolai Setzer, head of Continental's car-tyre unit, said: "It's obvious that we need to have local production in India and Russia if we want to be a strong player there. We are still evaluating different concepts and ideas, but we do want to have a decision this year."
Chinese tyremakers are being forced to increase their prices on the back of record natural rubber highs and US import tariffs. Domestic Chinese tyre retail prices have jumped by up to 10 per cent per unit, China Daily reported. Hangzhou Zhongce Rubber Co, purportedly the largest rubber maker in China, raised its tyre prices 5 per cent, according to the company. Meanwhile China Daily reported that competitors South China Tire & Rubber Co Ltd and Qingdao Double Star Tire Co Ltd have raised prices by 5 and 10 per cent respectively.
While everyone has been focusing on the US-initiated anti-dumping tariffs against Chinese-made passenger car tyres, another anti-dumping investigation has escaped widespread coverage. On 13 August 2009 the European commission began an investigation into dumping allegations made against Chinese wheelmakers who allegedly sold products into the European markets beneath cost price. At the time 60 Chinese wheelmakers received notification of the impending investigation and most reportedly began cooperating straight away. Nevertheless, according to China’s Ministry of Commerce, the investigation is likely to cost Chinese wheel exporters an estimated US$390 million. There is still a chance that no tariffs will be implemented, but if they are they will apply across both the OE and replacement sectors and are predicted to be lie somewhere around the 30 per cent mark.
The European Commission’s investigation, which began just a day after the Chinese companies involved were informed of the allegations, followed a complaint made by the Association of European Wheel Manufacturers’ (EUWA) in June 2009. At the time the journal of the executive arm of the 27-nation European Union said the investigation was initiated “having determined that there is sufficient evidence to justify the…proceeding.” However, China's Ministry of Commerce denied the charges saying: “It raises the cost of repairs for customers, affects the recovery of the European auto sector from the global financial crisis, and hurts the interests of both China and Europe.” Either way, with Chinese produced wheels representing a significant proportion of replacement market products on offer, any kind of trade barriers that are implemented are likely to have a similarly significant effect on the shape of the market.
In the USA, the TIA says it is still working to either reduce or eliminate the added tariff placed on China-made consumer tyres by the Obama Administration last September, reports Tire Review. The three-year tariff adds 35 per cent to the price of consumer tyres exported to the US from China, dropping to 30 per cent in its second year and 25 per cent in the third.
US exporters have been hit with an additional tariff by Brazil, a WTO-backed retaliation for what it calls “illegal” subsidies to US cotton farmers, reports Tire Review. Brazil’s new tariff structure, set to engage in 30 days barring a last minute agreement between the two countries, hits a wide range of products, including cars (from 35 to 50 per cent), cotton and cotton products (a full 100 per cent increase) and – most importantly around these parts – tyres (jumping from 16 to 32 per cent). In all, some 100 goods are now subject to higher import rates by Brazil, and could total $830 million annually.
In the USA Lawmakers from Texas and Oklahoma called on Thursday for a government report on the economy-wide effects of the 35 per cent tariff that President Barack Obama imposed on tyre imports from China, reports Tire Review. “I am concerned that the administration's tyre tax will cost us jobs in the United States and raise prices for tyres for hardworking Americans,” representative Kevin Brady, a Texas Republican, said in a statement. “I want to make sure that the administration has all the facts so that it can best determine how and when to end that tax.”
The value of Chinese tyres exported to the US is nearing a four-year low after they plunged 37.5 per cent in October to $130 million as a result of swinging 35 per cent import tariffs imposed by the US government on 26 September 2009. According to the country's General Administration of Customs, China exported 240 million new tyres in the first 10 months of 2009, 9.6 per cent less than in the same period in 2008, sources reported. The export value of the tyres plummeted 10.5 per cent year-on-year, hitting $6.2 billion, and the average price for a tyre was said to be $25.40 (down 1 per cent year-on-year).
In a bid to find out what how one of the nation’s more modern tyre manufacturers has been fairing since the introduction of the ITC tariff, Tyres & Accessories initiated the following interview with Chinese tyre maker Sailun Tire. Surprisingly, T&A learnt that the company planned to continue selling a similar number of tyres into the US, despite the hefty new taxes, which they refer to as T421. Our first question was what is Sailun’s position on the US’s recent decision to impose 35 per cent import tariffs on Chinese tyres?
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